Q1 2024 Prudential Financial Inc Earnings Call

May 1, 2024

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. If you should require any assistance during the call. Please press star zero and an operator.

Operator: 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. 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: 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. 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.

Her 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.

Robert 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 teach them, our global investment manager Caroline Feeney head of U S businesses, No free as Chief Financial Officer, and Rob Axel controller.

Robert 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 PGIM, our Global Investment Manager, Caroline Feeney, Head of U.S. Businesses, Janella Frias, Chief Financial Officer, and Rob Axel, Controller and Principal Accounting Officer.

Robert 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 PGIM, our Global Investment Manager, Caroline Feeney, Head of U.S. Businesses, Yanela Frias, Chief Financial Officer, and Rob Axel, Controller and Principal Accounting Officer.

Robert McLaughlin: And principal accounting officer, who will start with prepared comments by Charlie Robbins in L. A and then we will take your questions. Today's discussion may include forward looking statements as possible that actual results may differ materially from the predictions. We make today. In addition, our presentation includes references to non-GAAP measures for a reconciliation of such measures.

Robert McLaughlin: We will start with prepared comments by Charlie, Rob, and Yanela, and then we will take your questions. Today's discussion may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, our presentation includes references to non-GAAP measures. For a reconciliation of such measures to the comparable GAAP measures and a discussion of the 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-GAAP 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.com.

Robert McLaughlin: We will start with prepared comments by Charlie, Rob, and Janella, and then we will take your questions. Today's discussion may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, our presentation includes references to non-GAAP measures. For a reconciliation of such measures to the comparable GAAP measures and a discussion of the 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-GAAP 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.com.

So the comparable GAAP measures and a discussion of the 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 Prudential Dotcom.

Robert McLaughlin: And now, I'll turn it over to Charlie.

Charles Frederick Lowrey: And now, I'll turn it over to Charlie.

Robert McLaughlin: And now I'll turn it over to Charlie.

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

Charles Frederick Lowrey: Thank you, Bob. And thanks to everyone for joining us today. Our results for the quarter reflect accelerating momentum across all our businesses, including significant positive net flows in PGIM, our global asset manager, and strong sales in our U.S. and international insurance business. During the quarter, we've made substantial progress in shifting our business and growing our market-leading businesses to become a higher growth, more capital efficient, and nimble company. We also maintained our disciplined approach to capital management by making further investments in our businesses and returning additional capital to shareholders. Our rock-solid balance sheet, business mix, and distinct strategy position us to deliver long-term growth for our stakeholders. Turning to slide three.

Charles Frederick Lowrey: Thank you, Bob. And thanks to everyone for joining us today. Our results for the quarter reflect accelerating momentum across all our businesses, including significant positive net flows in PGEM, our global asset manager, and strong sales in our US and international insurance business. During the quarter, we've made substantial progress in shifting our business and growing our market-leading businesses to become a higher growth, more capital efficient, and nimble company. We also maintained our disciplined approach to capital management by making further investments in our businesses and returning additional capital to shareholders. Our rock-solid balance sheet, business mix, and distinct strategy position us to deliver long-term growth for our stakeholders. Turning to slide three.

Charlie: Our results for the quarter reflect the accelerating momentum across all our businesses, including significant positive net flows in PJM are global asset manager and strong sales in our U S and international insurance businesses.

Charlie: During the quarter, we made substantial progress in shifting our business mix and growing our market leading businesses to become a higher growth more capital efficient and nimble company.

Robert McLaughlin: We also maintained our disciplined approach to capital management by making further investments in our businesses and returning additional capital to shareholders.

Robert McLaughlin: Our rock solid balance sheet businessman and distinct strategy position us to deliver long term growth for our stakeholders.

Robert McLaughlin: Turning to slide three.

Charles Frederick Lowrey: I'll now begin this morning with a few recent examples to demonstrate how we are growing our market-leading business. PGEM achieved robust third-party and affiliated net flows in the quarter, notably in our fixed income business, underpinned by continued strong investment performance. These flows reinforce the benefits of our large and strategic global client relationships and the power of our mutually reinforcing business system to grow our asset management business. Our Institutional Retirement Strategies business reported strong sales and record account values, including the benefits of two large pension risk transfer transactions in the quarter. As a result, we delivered a record first quarter of PRT sales. Meanwhile, our Individual Retirement Strategies business recorded its best sales quarter in more than a decade.

Robert McLaughlin: I'll now I'll begin this morning with a few recent examples that demonstrate how we are growing our market leading businesses.

Robert McLaughlin: Did you Jim achieved robust third party and affiliated net flows in the quarter, notably in our fixed income business underpinned by continued strong investment performance. These flows reinforced the benefits of our large and strategic global client relationships and the power of our mutually reinforcing business system to grow our asset management fees.

Robert McLaughlin: Our institutional retirement strategies business reported strong sales and record account values, including the benefits of two large pension risk transfer transactions in the quarter. As a result, we delivered a record first quarter a P. R T cells.

Robert McLaughlin: Meanwhile, our individual retirement strategies business recorded its best sales quarter in more than a decade.

Charles Frederick Lowrey: This reflects the continued diversification and expansion of our product offerings, as well as strong demand in the market. John Groth and our group insurance selected our product and segment diversification strategy, leading to increased sales across life, disability, and supplemental health. Meanwhile, our individual life insurance business continues to shift toward more capital efficient products and broaden solutions through newer offerings like Flexiguard Life, which had its highest sales quarter since launching in 2022.

Charles Frederick Lowrey: This reflects the continued diversification and expansion of our product offerings, as well as strong demand in the market. John Groth and our group insurance selected our product and segment diversification strategy, leading to increased sales across life, disability, and supplemental health. Meanwhile, our individual life insurance business continues to shift towards more capital efficient products and broaden solutions through newer offerings like flex guard life, which had its highest sales quarter since launching in 2022.

Robert McLaughlin: This reflects the continued diversification and expansion of our product offerings as well as strong demand in the market.

Robert McLaughlin: Strong growth in our group insurance lifted our product and segment diversification strategy, leading to increased sales across life disability and supplemental health mean.

Robert McLaughlin: Meanwhile, our individual life insurance business continues to shift towards more capital efficient products and broaden solutions through newer offerings like Flex guard life, which had its highest sales quarter since launching in 2022.

Charles Frederick Lowrey: Internationally, we continue to benefit from our broadening product portfolio in Japan and from our actions to expand our distribution to new customers in emerging markets. Prudential of Brazil saw strong momentum across all distribution channels, most notably in our Life Planner channel, which reported record sales for the quarter.

Robert McLaughlin: Internationally, we continue to benefit from our broadening product portfolio in Japan and from our actions to expand our distribution to new customers in emerging markets Prudential of Brazil saw strong momentum across all distribution channels, most notably in our life planner channel, which reported record sales for the quarter.

Robert McLaughlin: We achieved these milestones while continuing to pivot away from more capital intensive and lower growth businesses. We successfully closed a reinsurance transaction for a portion of our guaranteed universal life block further advancing our strategy to reduce market sensitivity and increase capital efficiency.

Charles Frederick Lowrey: We achieved these milestones while continuing to pivot away from more capital-intensive and lower growth businesses. We successfully closed a reinsurance transaction for a portion of our guaranteed universal lifeblock, further advancing our strategy to reduce market sensitivity and increase capital efficiency. We also announced an agreement to sell Prudential of Argentina, a move aligned with our strategy of focusing on fewer high-growth emerging markets where we have an opportunity to achieve scale. And finally, we initiated the process to exit our assurance business so that we can focus our efforts and resources on core businesses and capabilities.

Charles Frederick Lowrey: We achieved these milestones while continuing to pivot away from more capital-intensive and lower growth businesses. We successfully closed a reinsurance transaction for a portion of our guaranteed universal lifeblock, further advancing our strategy to reduce market sensitivity and increase capital efficiency. We also announced an agreement to sell Prudential of Argentina, a move aligned with our strategy of focusing on fewer, high-growth emerging markets where we have an opportunity to achieve scale. And finally, we initiated the process to exit our assurance business so that we can focus our efforts and resources on core businesses and capabilities.

Robert McLaughlin: We also announced an agreement to sell Prudential of Argentina, a move aligned with our strategy of focusing on fewer high growth emerging markets, where we have an opportunity to achieve scale and finally, we initiated a process to exit our assurance business. So that we can focus our efforts and resources on core businesses.

Robert McLaughlin: And capabilities.

Charles Frederick Lowrey: We also continue to strengthen our operating model through technology and strategic partnerships to generate efficiencies that can be reinvested to fuel growth and deliver exceptional sales, service, and claims experiences. This ongoing focus on improving the ways we work and supporting our customers continues to be recognized outside the company. As just one example, Prudential of Japan recently ranked number one for life insurance service in a JD Power customer satisfaction survey for the ninth year in a row. We are proud to be recognized for the value we provide to our customers. Turning now to slide four.

Charles Frederick Lowrey: We also continue to strengthen our operating model through technology and strategic partnerships to generate efficiencies that can be reinvested to fuel growth and deliver exceptional sales, service, and claims experiences. This ongoing focus on improving the ways we work and supporting our customers continues to be recognized outside the company. As just one example, Prudential of Japan recently ranked number one for life insurance services in a JD Power Customer Satisfaction Survey for the ninth year in a row. We are proud to be recognized for the value we provide to our customers. Turning now to slide four.

Robert McLaughlin: We also continue to strengthen our operating model through technology and strategic partnerships to generate efficiencies that can be reinvested to fuel growth and deliver exceptional sales service and claims experiences.

Robert McLaughlin: This ongoing focus on improving the ways, we work and supporting our customers continues to be recognized outside the company.

Robert McLaughlin: Just one example, Prudential, Japan recently ranked number one for life insurance service and a J D power customer satisfaction survey for the ninth year in a row, we were proud to be recognized for the value we provide to our customers.

Robert McLaughlin: Turning now to slide four.

Charles Frederick Lowrey: Our disciplined approach to capital deployment enables us to invest in our market-leading businesses to support long-term growth and return capital to shareholders. In the first quarter, we returned over $700 million to shareholders and increased the quarterly dividend by 4%, our 16th consecutive annual dividend increase. We will continue to focus on creating sustainable, profitable growth that will benefit all stakeholders. Moving to slide five.

Robert McLaughlin: Our disciplined approach to capital deployment enables us to invest in our market leading businesses to support long term growth and return capital to shareholders in the first quarter, we returned over $700 million to shareholders and increased the quarterly dividend by 4% our 16th consecutive annual dividend increase.

Robert McLaughlin: We will continue to focus on creating sustainable profitable growth that will benefit all stakeholders.

Robert McLaughlin: Moving to slide five.

Charles Frederick Lowrey: Our growth strategy is supported by Prudential's rock-solid balance sheet and robust risk and capital management framework. Our AA-rated financial strength represents a strong capital position, including approximately $48 billion of unrealized insurance margins, over $4 billion in highly liquid assets at the end of the first quarter, a high-quality, well-diversified investment portfolio, and a disciplined approach to asset liability management. We've entered the second quarter with confidence in our strategy to be a global leader in expanding access to investing, insurance, and retirement security for people around the world. And with that, I'll turn it over to Rob to provide more details on our first quarter business performance.

Robert McLaughlin: Our growth strategy is supported by Prudential's rock solid balance sheet, and robust risk and capital management framework or double a rated financial strength represents a strong capital position, including approximately $48 billion of unrealized insurance margins over $4 billion in highly liquid assets at the end of the first quarter.

Robert McLaughlin: <unk>, a high quality, well diversified investment portfolio and a disciplined approach to asset liability management.

Robert McLaughlin: We've entered the second quarter with confidence in our strategy to be a global leader in expanding access to investing insurance and retirement security for people around the world and with that I'll turn it over to Rob to provide more details on our first quarter business performance.

Rob: Thanks Charlie. I'll provide an overview of our financial results and business performance for our PGIM, U.S., and international businesses. I'll begin on slide 6 with our financial results for the first quarter of 2024. Our pre-tax adjusted operating income was $1.5 billion, or $3.12 per share, on an after-tax basis, up 16% from the year-ago quarter. These results reflect the continued execution of our strategy to grow our market-leading business. Strong sales and robust net inflows and the benefit of higher interest rates and equity markets have resulted in higher spread income, fee income, and underwriting results.

Rob: Thanks, Charlie I will provide an overview of our financial results and business performance for our PGM U S and international businesses.

Robert Michael Falzon: Thanks, Charlie. I'll provide an overview of our financial results and business performance for our PGM, US, and international businesses. I'll begin on slide six with our financial results for the first quarter of 2024. Our pre-tax adjusted operating income was $1.5 billion, or $3.12 per share, on an after-tax basis, up 16% from the year-ago quarter. These results reflect the continued execution of our strategy to grow our market-leading business. Strong sales and robust net inflows and the benefit of higher interest rates and equity markets have resulted in higher spread income, fee income, and underwriting results.

Rob: On slide six with our financial results for the first quarter of 2024.

Rob: Our pre tax adjusted operating income was $1 5 billion or $3 12 per share on an after tax basis up 16% from the year ago quarter.

Rob: These results reflect the continued execution of our strategy to grow our market, leading businesses strong sales and robust net inflows and the benefit of higher interest rates and equity markets have resulted in higher spread income fee income and underwriting results. These diversified sources of earnings were partially offset by higher expenses to support business growth and one time.

Robert Michael Falzon: These diversified sources of earnings were partially offset by higher expenses to support business growth and one-time costs of closing the guaranteed universal life reinsurance transaction. Turning to the operating results of our businesses compared to the year-ago quarter,

Rob: Costs of closing the guaranteed universal life reinsurance transaction.

Rob: These diversified sources of earnings were partially offset by higher expenses to support business growth and one-time costs of closing the guaranteed universal life reinsurance transaction. Turning to the operating results of our businesses compared to the year-ago quarter,

Rob: Turning to the operating results from our businesses compared to the year ago quarter.

Rob: PGIM, our global investment manager, had higher asset management fees driven by equity market appreciation, positive third-party net inflows, and contributions from the DeerPath capital acquisition. Additionally, higher incentive fees and seed and co-investment income resulted in an increase in other related revenues. This was partially offset by higher expenses to support business growth. Earnings growth in our U.S. businesses reflected higher spread income driven by business growth and the benefit of higher interest rates and variable investment income, as well as more favorable underwriting results.

Robert Michael Falzon: PGIM, our global investment manager, had higher asset management fees driven by equity market appreciation, positive third-party net inflows, and contributions from the DeerPath capital acquisition. Additionally, higher incentive fees and seed and co-investment income resulted in an increase in other related revenues. This was partially offset by higher expenses to support business growth. Earnings growth in our U.S. businesses reflected higher spread income driven by business growth and the benefit of higher interest rates and variable investment income, as well as more favorable underwriting results.

Rob: <unk>, our global investment manager had higher asset management fees, driven by equity market appreciation positive third party net inflows and contributions from the Deere past capital acquisition. Additionally, higher incentive fees and seed and co investment income resulted in an increase in other related revenues.

Rob: This was partially offset by higher expenses to support business growth earnings growth in our U S businesses reflected higher spread income driven by business growth and the benefit of higher interest rates or variable investment income as well as more favorable underwriting results. This was partially offset by higher expenses, including the onetime charges associated with the closing of the guaranteed universal life reinsurance.

Rob: This was partially offset by higher expenses, including the one-time charges associated with the closing of the guaranteed universal life reinsurance transaction and by lower legacy traditional variable annuity fee income as we intentionally continue our pivot to less market-sensitive products. Earnings growth in our international businesses was primarily driven by higher spread income, including the benefit of higher interest rates and more favorable variable investment income, and higher joint venture earnings due to the favorable NCAJE performance in Chile. This was partially offset by less favorable underwriting results, primarily reflecting policyholder behavior.

Robert Michael Falzon: This was partially offset by higher expenses, including the one-time charges associated with the closing of the guaranteed universal life reinsurance transaction and by lower legacy traditional variable annuity fee income as we intentionally continue our pivot to less market-sensitive products. Earnings growth in our international businesses was primarily driven by higher spread income, including the benefit of higher interest rates and more favorable variable investment income, and higher joint venture earnings due to the favorable NCAJE performance in Chile. This was partially offset by less favorable underwriting results, primarily reflecting policyholder behavior.

Rob: Lawrence transaction and by lower legacy traditional variable annuity fee income as we intentionally continue our pivot to less market sensitive products.

Rob: Earnings growth at our international businesses was primarily driven by higher spread income, including the benefit of higher interest rates and more favorable variable investment income and higher joint venture earnings due to the favorable in coffee performance in Chile. This was partially offset by less favorable underwriting results, primarily reflect reflecting policyholder behavior.

Rob: Turning to slide 7, PGEM, our global investment manager, has diversified capabilities in both public and private asset classes across fixed income, equities, and alternatives. PGIM's strong investment performance continues to improve, with 80% of assets under management exceeding their benchmarks over the past year. This has contributed favorably to attractive long-term performance, with over 80% of assets under management outperforming their benchmarks over the last 5 and 10-year periods. PGIM's assets under management increased by 6% to $1.3 trillion from the year-ago quarter, driven by market appreciation and positive third-party net flows. Robust third-party net inflows in the quarter totaled $26.6 billion.

Robert Michael Falzon: Turning to slide 7, PGEM, our global investment manager, has diversified capabilities in both public and private asset classes across fixed income, equities, and alternatives. PGIM's strong investment performance continues to improve, with 80% of assets under management exceeding their benchmarks over the past year. This has contributed favorably to attractive long-term performance, with over 80% of assets under management outperforming their benchmarks over the last 5 and 10-year periods. PGIM's assets under management increased by 6% to $1.3 trillion from the year-ago quarter, driven by market appreciation and positive third-party net flows. Robust third-party net inflows in the quarter totaled $26.6 billion.

Rob: Turning to slide seven P M. Our global investment manager has diversified capabilities in both public and private asset classes across fixed income equities and alternatives P. Just strong investment performance continues to improve with 80% of assets under management exceeding their benchmarks over the past year. This has contributed favorably to attractive long term.

Rob: Performance with over 80% of assets under management outperforming their benchmarks over the last five and 10 year periods <unk> assets under management increased by 6% to $1 three trillion.

Rob: From the year ago quarter, driven by market appreciation and positive third party net flows robust third party net inflows in the quarter totaled $26.6 billion.

Robert Michael Falzon: Institutional inflows of $26 billion included a large fixed income client mandate, and retail flows also turned positive, reflecting building momentum in public fixed income. Additionally, strong affiliated flows were driven by retirement strategy sales during the quarter. As the investment engine of Prudential, the success and growth of PGIM 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 bring enhanced solutions and create more value for our customers.

Rob: Institutional inflows of $26 billion included a large fixed-income client mandate, and retail flows also turned positive, reflecting building momentum in public fixed income. Additionally, strong affiliated flows were driven by retirement strategy sales during the quarter. As the investment engine of Prudential, the success and growth of PGIM 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 bring enhanced solutions and create more value for our customers.

Rob: Institutional inflows of 26 billion included a large fixed income client mandate.

Rob: And retail flows also turn positive reflecting the building momentum in public fixed income.

Rob: Additionally, strong affiliated flows were driven by retirement strategy sales during the quarter as the investment engine of Prudential, the success and growth of PGM and of our U S and international insurance and retirement businesses are mutually reinforcing.

Rob: <unk> asset origination capabilities investment management expertise and access to institutional and other sources of private capital, including through the recently launched reinsurer of preserving our competitive advantage, helping our businesses bring enhanced solutions and create more value for our customers our insurance and retirement businesses in turn provide a source of growth for PGM through affiliated net flows.

Rob: 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 liability. In addition, our diversified PGIM private alternatives platform, which has assets under management of approximately $240 billion, experienced strong private credit activity driven by our organic growth and the first full quarter benefit from acquiring DeerPath Capital.

Robert Michael Falzon: 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 liability. In addition, our diversified PGEM private alternatives platform, which has assets under management of approximately $240 billion, experienced strong private credit activity driven by our organic growth and the first full quarter benefit from acquiring DeerPath Capital.

Rob: As well as unique access to insurance liabilities.

Rob: In addition, our diversified teach them private alternatives platform, which has assets under management of approximately 240 billion experienced strong private credit activity driven by our organic growth and the first full quarter benefit from acquiring gear path capital.

Caroline Ann Feeney: Turning to slide 8, 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 businesses. We continue to focus on growing our market-leading businesses 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 $14.3 billion in the first quarter across its institutional and individual lines of business.

Robert Michael Falzon: Turning to slide 8, 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 businesses. We continue to focus on growing our market-leading businesses 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 $14.3 billion in the first quarter across its institutional and individual lines of business.

Rob: Turning to slide eight 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 focus on growing our market leading businesses by transforming our capabilities to improve customer experiences and expanding our addressable market with new financial solutions lever.

Rob: Aging the capabilities across Prudential retirement strategies generated strong sales of $14 $3 billion in the first quarter across its institutional and individual lines of business.

Robert Michael Falzon: Institutional retirement sales of $11 billion in the first quarter included two large U.S.-funded pension risk transfer transactions of nearly $9 billion, driving the strongest first quarter in market history. We have now completed six of the ten largest transactions on record. Individual retirement posted $3.3 billion in sales, its best quarter in sales in over a decade.

Caroline Ann Feeney: Institutional retirement sales of $11 billion in the first quarter included two large U.S.-funded pension risk transfer transactions of nearly $9 billion, driving the strongest first quarter in market history. We have now completed six of the ten largest transactions on record. Individual retirement posted $3.3 billion in sales, its best quarter in sales in over a decade.

Rob: Institutional retirement sales of $11 billion in the first quarter included two large U S funded pension risk transfer transactions of nearly $9 billion driving the strongest first quarter in market history. We have now completed six of the 10 largest transactions on record.

Rob: Individual retirement posted $3 3 billion in sales, our best quarter and sales in over a decade. Our productivity have resulted in continued strong sales of flex started flex card income, which increased nearly 60% from the year ago quarter and fixed annuity sales have nearly tripled while we continued to reduced market sensitivity by running off our legacy variable annuities.

Caroline Ann Feeney: Our product pivots have resulted in contingent strong sales of Flexcard and Flexcard Income, which increased nearly 60% from the year-ago quarter, and fixed annuity sales have nearly tripled, while we continue to reduce market sensitivity by running off our legacy variable annuities. Group insurance sales increased 18% compared to the prior year, driven by growth in life, disability, and supplemental health. We are executing our strategy of both product and client segment diversification while leveraging technology to increase operating efficiency and enhance the customer experience.

Robert Michael Falzon: Our product pivots have resulted in contingent strong sales of Flexcard and Flexcard Income, which increased nearly 60% from the year-ago quarter, and fixed annuity sales have nearly tripled, while we continue to reduce market sensitivity by running off our legacy variable annuities. Group insurance sales increased 18% compared to the prior year, driven by growth in life, disability, and supplemental health. We are executing our strategy of both product and client segment diversification while leveraging technology to increase operating efficiency and enhance the customer experience.

Rob: Group insurance sales increased 18% compared to the prior year driven by growth in life disability and supplemental health, we're executing our strategy of both product and client segment diversification, while leveraging technology to increase operating efficiency and enhance the customer experience.

Caroline Ann Feeney: In individual life, we continue to execute our strategic pivot to more capital efficient products with the closing of the guaranteed universal life reinsurance transaction. Total sales and individual life increased 12% from the year-ago quarter, including the benefit from the recently launched FlexCar Life product. Variable Life Products represented approximately 70% of sales for the quarter.

Robert Michael Falzon: In individual life, we continue to execute our strategic pivot to more capital efficient products with the closing of the guaranteed universal life reinsurance transaction. Total sales and individual life increased 12% from the year-ago quarter, including the benefit from the recently launched FlexScar Life product. Variable Life Products represented approximately 70% of sales for the quarter.

Rob: In individual life, we continue to execute our strategic pivot to more capital efficient products with the closing of the guaranteed universal life reinsurance transaction.

Rob: Sales in individual life increased 12% from the year ago quarter, including the benefit from the recently launched Flex Guard life product.

Rob: Variable life products represented approximately 70% of sales for the quarter turning to slide nine.

Yanela del Carmen Frias: 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're focused on providing high-quality service and expanding our distribution and product offering. 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: 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're focused on providing high-quality service and expanding our distribution and product offering. 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.

Rob: 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 and Japan, we're focused on providing high quality service and expanding our distribution and product offerings, our needs based approach of protection.

Rob: Focus continue to provide important value to our customers as we expand our product offerings to meet their evolving needs and emerging markets. We're focused on creating a selective portfolio of businesses and regions, where our customer needs are growing where there are compelling opportunities to build market, leading businesses and where the prudential enterprise can add value.

Yanela del Carmen Frias: In emerging markets, we're 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 5% compared to the year-ago quarter. Higher sales in Japan are benefiting from recent product launches, including a new yen-denominated Variable Life product offered through our Life Consultant and Independent Agency channels beginning in the first quarter.

Robert Michael Falzon: In emerging markets, we're 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 5% compared to the year-ago quarter. Higher sales in Japan are benefiting from recent product launches, including a new yen-denominated Variable Life product offered through our Life Consultant and Independent Agency channels beginning in the first quarter.

Rob: Sales in our international businesses were up 5% compared to the year ago quarter higher sales in Japan are benefiting from the recent product launches, including a new yen denominated variable life product offered through our life consultant and independent agency channels, beginning in the first quarter and.

Yanela del Carmen Frias: In addition, emerging market sales were higher, driven by growth in Brazil, as we continue to expand third-party distribution and benefit from the strong performance of our world-class life planners. 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: In addition, emerging market sales were higher, driven by growth in Brazil, as we continue to expand third-party distribution and benefit from the strong performance of our world-class life planners. 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.

Rob: In addition, emerging market sales were higher driven by growth in Brazil, as we continue to expand third party distribution and benefit from the strong performance of our World class life players.

Rob: 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.

Rob: 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 and with that I'll now hand, it over to janella.

Janella: Thank you Rob I'll begin on slide 10, which provides insight into earnings for the second quarter of 2024 relative to our first quarter results.

Yanela del Carmen Frias: Thank you, Rob. I will begin with slide 10, which provides insight into earnings for the second quarter of 2024 relative to our first quarter results. As noted, pre-tax adjusted operating income for the first quarter was $1.5 billion and resulted in earnings per share of $3.12 on an after-tax basis. To get a sense of how our second quarter results might develop, we suggest making adjustments for the following items. Underwriting experience was below expectations by $85 million in the first quarter, and we expect $10 million of favorable seasonality in the second quarter.

Janella Frias: Thank you, Rob. I will begin on slide 10, which provides insight into earnings for the second quarter of 2024 relative to our first quarter results. As noted, pre-tax adjusted operating income for the first quarter was $1.5 billion and resulted in earnings per share of $3.12 on an after-tax basis. To get a sense of how our second quarter results might develop, we suggest adjustments for the following items. Underwriting experience was below expectations by $85 million in the first quarter, and we expect $10 million of favorable seasonality in the second quarter.

Janella: Pretax adjusted operating income for the first quarter with $1.5 billion and resulted in earnings per share of $3.12 on an after tax basis.

Janella: To get a sense of how our second quarter results might develop we suggest adjustments for the following items.

Yanela del Carmen Frias: We also include an adjustment of $50 million for expenses and other items. This includes adjustments for the typical seasonality of expenses and premiums, as well as one-time expenses related to our Guaranteed Universal Life Reinsurance transaction. These adjustments combined get us to a baseline of $3.43 per share for the second quarter. I will note that if you exclude items specific to the second quarter, earnings per share would be $3.50. The key takeaway is that we continue to drive underlying earnings power momentum as we invest in the growth of our market-leading businesses and pivot away from capital-intensive and lower-growth businesses. While we have provided these items to consider, please note that there may be other factors that affect earnings per share in the second... Turning to slide 11.

Janella: Underwriting experience was below expectations by $85 million in the first quarter, and we expect $10 million of favorable seasonality in the second quarter.

Janella: We also included an adjustment of $50 million for expenses and other items. This includes adjustments for typical seasonality of expenses and premiums as well as the one time expenses related to our guaranteed universal life reinsurance transaction.

Janella: These adjustments combined get us to a baseline of $3 43 per share for the second quarter.

Janella: I will note that if you exclude items specific to the second quarter earnings per share would be $3.50.

Rob: The key takeaways that we continue to drive underlying earnings power of momentum as we invest in the growth of our market, leading businesses and pivot away from capital intensive and lower growth businesses.

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

Rob: Turning to slide 11.

Yanela del Carmen Frias: Our capital position continues to support our AA financial strength rating, and our regulatory capital ratios are in excess of our AA objectives. Our cash and liquid assets were $4.2 billion, within our liquidity target range of $3-5 billion, and we have substantial off-balance sheet resources. We remain thoughtful in our capital deployment, investing in our businesses for long-term growth and returning capital to shareholders. Turning to slide 12, and in summary, we are becoming a higher growth, more capital efficient, and nimble company. We are maintaining a disciplined approach to capital deployment, and our growth is supported by a rock solid balance.

Rob: Capital position continues to support our double AA financial strength rating.

Rob: Our regulatory capital ratios are in excess of our double a objective.

Rob: Our cash and liquid assets were $4 $2 billion within our liquidity target range of $3 billion to $5 billion and.

Rob: And we have substantial off balance sheet resources.

Rob: We remain thoughtful in our capital deployment investing in our businesses for long term growth and returning capital to shareholders.

Rob: Turning to slide 12, and in summary, we are becoming a higher growth more capital efficient and nimble company. We are maintaining a disciplined approach to capital deployment and our growth is supported by a rock solid balance sheet.

Operator: And with that, we will be happy to take your questions. Thank you. We'll now be conducting a question and answer session. If you'd like to be placed in the question queue, please press star 1 on your...

Speaker Change: And with that we will be happy to take your questions.

Speaker Change: Thank you, we'll now be conducting a question and answer session. If that can 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'd like to move or question from the queue for participants using speaker equipment. It may be necessary to pick up your handset.

Operator: Thank you. We'll now be conducting a question and answer session. If you'd 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Speaker Change: Before pressing the star keys, and we do ask that you ask one question and one follow up.

Operator: And we do ask that you ask one question and one follow-up. Q&A Q&A, Our first question is coming from Ryan Krueger from KBW. Your line is now live. Hey, good morning. My first question was on PRISNIC. Can you talk about the outlook for re-insuring enforced blocks and additional enforced blocks?

Speaker Change: Once again Thats star one to be placed in the question queue.

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

Ryan Joel Krueger: Hey, Good morning. My first question was on prison. There can you talk about the outlook for reentering enforced blocks. Additionally, enforced blocks the prismatic and do you expect more activity on this in 2024.

Ryan Joel Krueger: Hey, Ryan it's Rob I'll take your question.

Rob: Hey, Ryan, it's Rob. I'll take your question. As we've shared before, we and our Prismic investors, who are a group of very large global institutional investors that operate at scale, have aspirations that go well beyond the initial $10 billion transaction that we completed last year. We're continuing work on an active pipeline. That pipeline includes ongoing balance sheet optimization, flow or new sales that are solutions across our businesses, and working on third-party blocks, where we believe we can provide our reinsurance and asset management capabilities to other insurers. To maybe state the obvious, these transactions are complex.

Rob: We've shared before.

Rob: We and our prismatic investors, who are a group of very large global institutional investors that operate and scale.

Rob: Have aspirations that go well beyond the initial 10 billion dollar transaction that we completed just last year.

Rob: We're continuing work on an active pipeline that pipeline includes ongoing balance sheet optimization and includes flow of new sales now that are solutions across our businesses.

Rob: And and working on third party blocks, where we believe we can provide a reinsurance and asset management capabilities to other insurers.

Rob: Maybe state the hobbyists. These transactions are complex, there's the spoke to each situation and they require regulatory coordination and all of that takes time.

Rob: Our decision to use precedent for this pipeline as contrasted to the opportunity to also use our own balance sheet or to partner or reinsure with other third parties is unique to each of the opportunities and it's driven by looking at the at through a lens of of commercial priority statutory considerations GAAP outcomes and economic.

Rob: They're bespoke to each situation, and they require regulatory coordination, and all of that takes time. Our decision to use Prismic for this pipeline, as contrasted to the opportunity to also use our own balance sheet or to partner or reinsure with other third parties, is unique to each of the opportunities, and it's driven by looking at, through a lens of commercial priorities, statutory considerations, gap outcomes, and economic considerations, including implications on earnings, ROE, capital, and liquidity.

Rob: And that includes implications to earnings or are we capital and liquidity.

Rob: If I could step back and more broadly address it, we see extraordinarily interesting growth opportunities at the intersection of what we're calling the intersection of asset management and insurance. Private institutional capital is coming into the insurance space, and the retirement sector. It helps to finance growth and to meet customer needs, as well as client and customer needs. In addition, the investment options that are available to the industry are expanding, and they're providing opportunities to grow investment capabilities while enhancing portfolio diversification and generating greater alpha from our portfolio as well.

Speaker Change: If I could step back and sort of more broadly.

Speaker Change: Dress it we see extraordinarily interesting growth opportunities at the intersection of what we're calling the intersection of asset management and insurance.

Speaker Change: Private institutional capital is coming into the insurance space insurance and retirement sector. It helps to finance the growth and to meet customer needs customer and client needs and in addition, the investment options that are available to the industry are expanding and they are providing opportunities to grow investment capabilities well.

Speaker Change: Enhancing portfolio diversification and generating greater alpha from our portfolio as well we're excited about what this implies for our ability to create avenues of growth across our insurance retirement and asset management businesses.

Rob: We're excited about what this implies for our ability to create avenues of growth across our insurance, retirement, and asset management businesses. We believe that our brand, scale, and quality across our businesses give us a highly competitive platform to execute against this opportunity, and Prismic is an important expansion of that platform.

Speaker Change: And we believe that our brand scale and the quality across our businesses gives us a highly competitive platform to execute against the opportunity and prismatic is an important expansion of that platform.

Speaker Change: Great. Thank you and then separately on I had a question on G&A expenses I think they were up around 7% year over year on a consolidated basis and previously you had talked about taking expense actions that could keep G&A relatively flat in the near term so.

Speaker Change: I was hoping for an update.

Speaker Change: On that.

To Know: Hi, Ryan this is to know and I will take your question are we are committed to keeping expenses flat, while investing in our businesses and as you noted we did.

Yanela del Carmen Frias: Hi Ryan, this is Yanela, and I will take your question. We are committed to keeping expenses flat while investing in our businesses, and, as you noted, we did see an increase in G&A this quarter, but keep in mind that G&A includes expenses to support growth, including non-deferrable sales expenses in support of our very strong sales this quarter, as well as one-time expenses like the costs related to the GUL transaction. So that's what you're seeing in terms of the increase.

To Know: Did see an increase in G&A this quarter, but keep in mind that G&A includes expenses to support growth, including non deferrable sales expenses in support of our very strong sales this quarter as well as one time expenses like the costs related to Vicki you all transaction.

To Know: So that's what you're seeing in terms of the increase with regards to the strong sales, especially in retirement strategies. Please note that the incremental earnings from those sales are not all fully reflected in the quarter and there's two reasons the timing of those sales as well as the fact that we like into the final asset portfolio supporting the state the P. R T cells.

Yanela del Carmen Frias: With regard to the strong sales, especially in retirement strategies, please note that the incremental earnings from those sales are not all fully reflected in the quarter. And there are two reasons. The timing of those sales, as well as the fact that we are lagging into the final asset portfolio supporting the PRT sales over a period of time. As a result, we expect the full incremental earnings benefit to emerge in subsequent quarters. And Caroline, I don't know if you wanted to spend a minute on retirement strategies fundamentally. Yeah, sure.

Speaker Change: Over a period of time, so as a result, we expect that the full incremental earnings benefit to emerge in subsequent quarters and Caroline I don't know if you wanted to spend a minute on retirement strategies fundamentals.

Caroline Ann Feeney: Yeah, sure, of course, Yanela, thanks. And Ryan, clearly, Yanela just went through some of the earnings drivers. So now, let me share with you how we're thinking about the fundamentals in our growth story. So overall, we're very pleased with strong sales growth across our retirement strategies business, with over $14 billion in sales this past quarter. In institutional, we achieved $11 billion in sales, led by nearly $9 billion in pension risk transfer.

Caroline Ann Feeney: Sure of course been our thanks, and and Ryan clearly Janella just went through some of the earnings drivers. So now let me share with you how we're thinking about the fundamentals in our great story. So overall, we're very pleased with the strong sales growth across our retirement strategies business went to over 14 billion in sales this past quarter and institutional we achieved.

Caroline Ann Feeney: 11 billion in sales led by nearly 9 billion of pension risk transfer not only our best first quarter, Ryan, but I'll say that the first quarter in market history further demonstrating our leadership in the market and then on the individual side, we had our best quarter in over a decade with almost three and a half billion in sales nearly doubling our volume.

Caroline Ann Feeney: Not only our best first quarter, Ryan, but also the best first quarter in market history, further demonstrating our leadership in the market. And then, on the individual side, we had our best quarter in over a decade, with almost $3.5 billion in sales, nearly doubling our volume from the year-ago quarter. And that success comes from our work over the past few years to diversify our annuity portfolio and broaden our distribution, which allows us to meet more of the consumer need for protected savings and for income than ever before. And, as Yanela mentioned, these strong sales will continue to increase core earnings over time as we realize the full impact of these sales.

Speaker Change: In the year ago quarter and that success comes from our work over the past few years to diversify our annuity portfolio and broaden our distribution, which allows us to meet more of the consumer need for protecting savings and for income than than ever before and as Gino mentioned. These strong sales will continue to increase core earnings over time.

Speaker Change: We realize the full impact of the south.

Speaker Change: Yeah.

Speaker Change: Thank you. Our next question today is coming from Tom Gallagher from Evercore ISI. Your line is now live.

Operator: Thank you. Our next question today is coming from Tom Gallagher from Evercore ISI. Your line is now live.

Thomas George Gallagher: Good morning first question is just on the I think what we said jumbo PGM inflow that you got from a single client this quarter thinking that might've been 25 or 26 billion.

Operator: Good morning. My first question is just on the

Operator: I think what was a jumbo PGM inflow that you got from a single client.

Operator: This quarter, I think it might have been 25 or 26.

Operator: Billion. And if that's not right, can you please sort of clarify what that amount was? And then what was the mandate in? Was that a public fixed income, and made any kind of sense for what kind of fee rate you would have had on that? Hey, Tom, it's Andy. Good morning.

Thomas George Gallagher: And if that's not right can you. Please clarify what that amount was and then what what was the mandate in was that public fixed income and any any kind of sense for for what kind of fee rate you would have had on that.

Andrew Francis Sullivan: Hey, Tom It's Andy Guy Good morning. So this mandate was a significant portion of the 26 billion that.

Andrew Francis Sullivan: So this mandate was a significant portion of the $26 billion that we saw in institutional positive net flows. Obviously, we don't disclose the fee rates on individual mandates. That said, this is a large mandate from a key pension client for a high-quality fixed income portfolio, so the fee rate is lower than our overall average fee rate across our asset classes. We were very pleased with our flows overall this quarter, and we're obviously very proud that we have so many large clients that place their trust in us. And Andy, just as a follow-up, how does the pipeline look? Any other sizable, large mandates you think might get funded this year?

Andrew Francis Sullivan: That we saw in institutional positive net flows.

Andrew Francis Sullivan: Obviously, we don't disclose fee rate on individual mandates that said this is a large mandate from a key pension client for a high quality fixed income portfolio.

Andrew Francis Sullivan: So the fee rates lower than our overall average fee rate across our asset classes.

Andrew Francis Sullivan: We were very pleased with our flows overall this quarter and we're obviously very proud that we have so many large clients that place their trust in us.

Speaker Change: And Andy just as a follow up any how does the pipeline look any any other sizable large mandates you think might get funded this year.

Andrew Francis Sullivan: Yeah, so maybe, Tom, let me just bring this up, and I'll end with the outcome. So overall, on the institutional side, we

Andrew Francis Sullivan: Yeah, So maybe Tom let me just bring it up and I'll I'll end with the outcome. So overall on the institutional side, where we're obviously very pleased given that large mandate, we feel that reinforces our position as a leading partner in the marketplace and I'd also add that we've been consistently adding new clients to our roster.

Andrew Francis Sullivan: We're obviously very pleased given that large mandate. We feel that it reinforces our position as a leading partner in the marketplace. And I'd also add that we've been consistently adding new clients to our roster on the institutional side every quarter, every year. On the retail side, we saw positive flows of about a half billion.

Andrew Francis Sullivan: Institutional side.

Andrew Francis Sullivan: Every quarter every year on the retail side, we saw positive flows of about a half billion.

Andrew Francis Sullivan: We're beginning to see early momentum in the retail fixed income space consistent with industry trends and improving client sentiment.

Andrew Francis Sullivan: We're beginning to see early momentum in the retail fixed income space, consistent with industry trends and improving client sentiment. I would reiterate what Rob said at the top of the script as well, that we had significant positive affiliated flows this quarter driven by pension risk transfer, showing the strength and importance of the synergies in the business system. As far as specific to your question, the outlook looking forward, we like the fundamentals that we're seeing as the environment is clearly improving, and our investment performance is very, very strong. But we also know that a sticky inflationary environment will keep money on the sidelines for a little while longer, and that our large client flows can remain episodic.

Thomas George Gallagher: I would reiterate what Rob said at the top of the of the script as well that we had significant positive affiliated flows this quarter driven by pension risk transfer showing the strength and importance of the synergies in the business system.

Thomas George Gallagher: As far as specific to your question the outlook looking forward, we like the fundamentals that we're seeing as the environment is clearly improving.

Thomas George Gallagher: And our investment performance is very very strong, but we also know that a sticky inflationary environment, we'll keep money on the sidelines, a little while longer and that our large client flows can remain episodic, but the key punch line is overtime. We are very confident that we'll be a net winner in that grower.

Andrew Francis Sullivan: But the key punchline is that over time, we are very confident that we'll be a net winner and a net grower. Great. Thanks. Thanks for the color. And Rob, just if I could slip one more in about a follow-up to what Ryan asked about Prismic, have you guys done any additional fundraising beyond the first billion for Prismic?

Speaker Change: Great. Thanks, Thanks for the color on that he brought up just if I could slip one more ran about a follow up to what Ryan asked about prismatic.

Speaker Change: Have you guys done any additional fund raising beyond the first billion for prismatic.

Rob: and if you haven't had any thoughts on how much you would be looking to raise and in a potential next

Speaker Change: And and if you're having any any thoughts on how much you would be looking to raise and and and a potential next fundraising.

Rob: be looking to raise in a potential next round of funding. Yeah, Tom, the investors that we have in Prismic and our conversations with them have indicated their desire to put a significant amount of capital to work in the strategy that we've outlined to them. And so expectations are that, you know, these are firms that deal in billions, not millions or hundreds of millions. And they've indicated that their desire is to scale the initial investment that they've made, which is, frankly, small by their standards and would be uneconomic if it were not for their anticipation that it was going to be followed by investments that would be multiples of what they've contributed up front. That having been said, this is not a fund. It is a group of investors that have committed to working with us in this strategy. And they will fund us as we develop and execute against Pipeline.

Speaker Change: Tom.

Speaker Change: The investors that we havent prismatic and our conversations with them have indicated their desire to put a significant amount of capital to work in the strategy that we've outlined to them.

Speaker Change: And so our expectations are that the.

Speaker Change: These are firms that deal in the billions not millions or hundreds of millions.

Speaker Change: And as.

Speaker Change: They've indicated that their desire is to is to scale. The initial investment that they've made which is frankly.

Speaker Change: Small by their standards and would be uneconomic, if it were not for their anticipation that it was going to be followed by investments that would be multiples of what they've they've contributed upfront.

Speaker Change: That having been said this is not a fund a it is a it is a collaborative of investors that are committed to working with us in this strategy and and they will fund as we are as we develop and execute against pipeline.

Speaker Change: Okay. Thanks.

Speaker Change: Okay.

Speaker Change: Thank you. Your next question today is coming from Joel Horowitz from Dowling <unk> partners. Your line is now live.

Joel Horowitz: Hey, good morning, So I wanted to go back to the individual retirement sales. So very strong quarter included including sizable growth in our fixed annuity sales can you just talk about the pivot to fixed annuities and I guess, what's your plan to grow in this product line.

Operator: Hey, good morning. So I want to go back to the individual retirement sales. So, very strong quarters include sizable growth in six.

Speaker Change: Yeah of course, Joel and good morning, It's Caroline and I will take your question. So first of all the individual annuities market had a record year last year with about 380 billion of sales and fixed annuities were a key piece of that given the rapid rises that we did see an interest rates we're.

Operator: Yeah, of course, Joel. Good morning. It's Caroline, and I'll take your question.

Caroline Ann Feeney: So first of all, the individual annuities market had a record year last year with about $380 billion in sales. And fixed annuities were a key piece of that, given the rapid rises that we did see in interest rates. We're seeing continued momentum for fixed annuities this year as the value proposition remains strong, driving industry sales of over $100 billion in the first quarter, putting the industry on track for another record year.

Caroline Ann Feeney: We're seeing continued momentum for fixed annuities. This year as the value proposition remains strong driving industry sales have over 100 billion in the first quarter, putting the industry on track for another record year in <unk>.

Caroline Ann Feeney: In terms of our own growth, Joel, fixed annuities represented almost half of our sales last quarter, mirroring the broader market shift we've seen over the past few years – or past year, excuse me. Our sales growth is a testament to three things. First, our successful expansion of our product portfolio to include more fixed annuity solutions, such as our WealthGuard MIGA, allowing us to meet more customer needs across a broader set of channels.

Caroline Ann Feeney: Terms of our own growth Joel fixed annuities represented almost half of our sales last quarter.

Caroline Ann Feeney: Mirroring the broader market shift we've seen over the past few years, our Pascal escapes me on our sales growth is a testament to three things.

Caroline Ann Feeney: Second, our brand and our distribution strength, which enables us to scale quickly to meet increasing market demand. We continue to expand our partnerships across multiple channels and platforms, which also had a significant impact on our business this past quarter. And finally, our dynamic and proactive pricing process, which allows us to react quickly to changing market conditions to maintain competitive pricing while maximizing shareholder value. So overall, Joe, we're pleased with our ability to meet increased demand while maintaining favorable returns. We like the diversification these products bring to our business mix and the role they can play as a strong complement to our FlexGuard suite of solutions.

Caroline Ann Feeney: First our successful expansion of our product portfolio to include more of a fixed annuity installations.

Caroline Ann Feeney: Such as our wealth guard maiga, allowing us to meet more customer needs across a broader set of channels a.

Caroline Ann Feeney: Second our brand and our distribution strength, which enables us to scale quickly to meet increasing market demand, we continue to expand our partnerships across multiple channels and platforms.

Caroline Ann Feeney: <unk>, which also had a significant impact on our business this past quarter, and finally, our dynamic and proactive pricing process, which allows us to react quickly to changing market conditions to maintain competitive pricing a while maximizing shareholder value. So overall, Joe we're pleased with our ability to meet the increased demand.

Caroline Ann Feeney: While maintaining favorable returns we liked the diversification these products bring to our business mix and the role they can play.

Caroline Ann Feeney: A strong complement to our Frac Flex guard suite installations.

Caroline Ann Feeney: Okay, so it sounds like this will be a core product in your line of fillings for us. Absolutely.

Caroline Ann Feeney: Okay. So it sounds like this will be a core product and in your lineup going forward then absolutely Joe Yes, we see it as a core product as we brought in our archiving fall out.

Caroline Ann Feeney: Absolutely, Jill. Yes, we see it as a core product as we broaden our portfolio.

Joe: Okay, and then and then just moving over to pension risk transfer just any update on your outlook and obviously, a very strong start to the year I guess, how should we think about.

Caroline Ann Feeney: Okay. And then, just moving over to pension risk transfer, just any update on your outlook and, obviously, a very strong start to the year. How should we think about your desire to grow this business, you know, year in, year out?

Joe: Your desire to grow this business you know yeah.

Caroline Ann Feeney: Yes, as you said, Joel, and rightly so, we had a very strong start here. We finished the strongest first quarter ever in PRT, leading the market, including two transactions with Shell and Verizon totaling nearly $9 billion. In terms of our outlook on growth, last year's market volume was roughly $45 billion, and we expect to see that healthy pipeline continue this year, supported by favorable funding positions of over 100%. And although the market is highly competitive, very few carriers have actually executed transactions exceeding $1 billion, and I should call out that our expertise and our ability to handle large, complex transactions, along with our financial strength, position us to continue to be a leader in this space.

Speaker Change: Yes, and so as you said Joel and rightly so.

Speaker Change: We we had a very strong start here will be finished actually the strongest first quarter ever in PRT are leading the market, including two transactions with shell and Verizon totaling nearly 9 billion.

Caroline Ann Feeney: In terms of our outlook on growth.

Caroline Ann Feeney: Last year's market volume was roughly 45 billion and we expect to see that healthy pipeline continue this year supported by favorable funding positions have over 100% and although the market is highly competitive very few carriers have actually executed transactions exceeding $1 billion and and I should call out.

Janella Frias: That our expertise and our ability to handle large complex transactions, along with our financial strength position us to continue to be a leader in the space.

Speaker Change: Okay, I guess, just how do you balance the capital strain from from growing that business just how should we think about your your appetite for overall growth. This year after doing 9 billion in Q1.

Caroline Ann Feeney: Okay, I guess just how do you balance the capital strain from growing that business? Just how should we think about your appetite for overall growth this year after doing $9 billion in Q1? Um, yeah, so

Caroline Ann Feeney: Yes, so I'd say in general, Joel, obviously, each large transaction naturally consumes its appropriate share of capital. We believe these deals are a very effective way of deploying capital, and we like the returns that we're generating. First, PRT remains a great source for organic growth. It represents one of the few products that can allow us to originate billions of insurance liabilities in a single transaction, and as a market leader in the space, we continue to see, as I mentioned, a strong pipeline of those large-size opportunities.

Rob: Yeah. So so I'd say in general Joel obviously, each large transaction naturally consumes its appropriate share up capital. We believe these deals are a very effective way of deploying capital and we like the returns that we're generating.

Caroline Ann Feeney: First P. R. T remains a great source for organic growth. It represents one of the few products that can allow us to originate billions of insurance liabilities in a single transaction and as a market leader in this space. We continue to see as I as I mentioned, a strong pipeline of large size opportunities I'll also add that the success of our Pea.

Caroline Ann Feeney: I'll also add that the success of our PRT business benefits PGIM. As we continue to originate these deals, PGIM can match our insurance liabilities with a high-quality portfolio of assets. So, with all that being said, Joel, we do expect to continue to opportunistically deploy capital in this space, and we feel good about the returns as well as the benefits PRT brings to Prudential.

Caroline Ann Feeney: Our tea business benefits teach them as we continue to originate these deals PJM can match, our insurance liabilities with a high quality portfolio of assets. So.

Caroline Ann Feeney: With all that being said Joel we do expect to continue to Opportunistically deploy capital in that space and we feel good about the returns as well as the benefits P. R. T brings to Prudential.

Rob: Makes sense. Thank you.

Caroline Ann Feeney: Thank you next question today is coming from Wes Carmichael from Autonomous your line is now live.

Caroline Ann Feeney: Thank you. The next question today is coming from Wes Carmichael from Autonomous Rewind. It is now live.

Rob: Hey, good morning, Thanks for taking my question.

Operator: Hey, good morning. Thanks for taking my question. Rob, in your answer to Prismic, you mentioned that transactions require regulatory coordination as one of the considerations here. I'm just wondering if you can give us an update on the regulatory environment in Bermuda and how that's changed, you know, if at all, over the past year, if the CMA is more involved in approving potential deals or influencing the structure of transactions.

Janella Frias: On your answer on Prism, Nick you mentioned the transactions you know require regulatory coordination is one of the considerations here I'm just wonder if you can give us an update on the regulatory environment in Bermuda and how that changed if at all over the past year.

Caroline Ann Feeney: <unk> is more involved in improving potential deals are influencing the structure a transaction.

Janella Frias: Yeah.

Rob: Yeah, Wes, I'm happy to do so. We've actually been highly engaged with the BMA throughout the consultation process that it recently went through and provided feedback on the proposed enhancements to their regime directly with the BMA as well as in coordination with the broader industry. I think what I would characterize is that while the BMA's updates to its regulatory regime are generally going to result in a more conservative level of capital required and reserves than what they had prior to their consultation process, that is going to vary significantly by product type.

Rob: Happy to do so.

Janella Frias: So we've actually been highly engaged with the DNA throughout the consultation process that it recently went through them provided feedback on the proposed enhancements to their regime.

Janella Frias: Directly with the BMA as well as in coordination with the broader industry.

Speaker Change: I think what I would characterize is that while the bma's updates to the triggers regulatory regime are generally going to result in a more conservative level of capital capital required and reserving than what they had prior to their consultation process that is going to vary significantly by product type.

Rob: And the BMA is committed to continuing to maintain a principles-based, economically driven regime, and we believe that the combination of that approach to managing insurance assets and liabilities along with its status with reciprocal jurisdiction in the US and equivalency in Europe is going to continue to make it a very attractive jurisdiction to do business for insurers.

Janella Frias: And the BMA has can tip is committed to continuing.

Janella Frias: To maintain a principles based economically driven regime and we believe that the combination of that approach.

Janella Frias: To managing.

Caroline Ann Feeney: Insurance assets and liabilities along with its status with reciprocal jurisdiction in the U S and equivalents here in Europe is going to continue to make it a very attractive jurisdiction to two to do business for insurers.

Rob: Thanks, and maybe just a quick follow-up on that, but do you think PRT is a good liability for PRISMA? Does that make sense there?

Rob: Thanks, and maybe just a quick follow up on that but do you think PRT is a good liability for me because that makes sense there.

Rob: PRT can be done economically both within the U.S. statutory regime and within the Bermuda statutory regime. There is, we've advanced, and adopted a set of principles that are under consideration for pension risk transfer type liabilities in coordination with our New Jersey supervisor. And so our ability or desire to use Bermuda versus the U.S. statutory regime is less driven by differences in the regimes per se and more driven by the source of investors coming into it.

Caroline Ann Feeney:

Caroline Ann Feeney: PRT it can be done economically both within the U S statutory regime and are within the a Bermuda statutory regime.

Janella Frias: There is a wee bit advanced adopted a set of principles that are under consideration for.

Caroline Ann Feeney: Hum.

Caroline Ann Feeney: Pension risk transfer type liabilities.

Caroline Ann Feeney: With in coordination with our.

Janella Frias: New Jersey supervisor.

Caroline Ann Feeney: And so our ability or desire to use Bermuda versus United The U S for such a regime is less driven by differences in the in the regimes per se and more driven by the source of investors coming into it. So obviously for our own balance sheet operating within the U S. Statutory regime works well for us but to the extent, we want to bring third party capital into that.

Rob: So obviously for our own balance sheet, operating within the U.S. statutory regime works well for us, but to the extent we want to bring third party capital into that, that capital has a desire for, you know, for a number of reasons, those institutions providing that capital to come into jurisdictions like Bermuda, and that would be more of the primary driver as to why we would be funding some of PRT through a Bermuda framework as contrasted to a U.S. framework.

Janella Frias: That capital has a desire for for a number of reasons.

Janella Frias: Those institutions, providing that capital to come into jurisdictions like Bermuda and that would be more of the primary driver as to why would we be funding.

Janella Frias: Some of PRT through our Bermuda framework as contrasted to a U S framework.

Yanela del Carmen Frias: No, thanks. That's really helpful. And then maybe just one more on the regulatory front, but can you give us just an update on the transition to ESR in Japan? We're getting closer to the implementation date here. So, has there been any movement, particularly on how long-duration FX products are treated or anything else? Any other color might be helpful.

Speaker Change: No. Thanks, that's really helpful. And then maybe just one more on the regulatory front, but can you give us just an update on the transition to ESR in Japan, we're getting closer to implementation date years. So is there had been any movement, particularly on how long duration ethics products are treated or anything else any other color might be helpful.

Operator: Thanks, that's really

Speaker Change: I was just and I'll I'll, let me give you an update on where we are with ESR ESR.

Yanela del Carmen Frias: Hi Wes, it's Yanela. Let me give you an update on where we are with ESR. On ESR, we believe our Japan businesses are well capitalized and financially strong, and that would be evident under any reasonable capital standard. We have been working with regulators and advocating for reasonable and responsible standards, and we have strategies to adapt to the potential new regime and to better match the economics of our business. And these strategies include reinsuring business internally in the U.S. or Bermuda or reinsuring externally.

Janella Frias: <unk>, we believe our Japan businesses are well capitalized and financially strong and that would be evident under any reasonable capital standards.

Caroline Ann Feeney: We have been working with regulators and advocating for reasonable and responsible standards and we have strategies to adapt to the potential new regime and to better match, the economics of our business.

Speaker Change: These strategies include reinsurance business internally in the U S or Bermuda or reassuring externally and is an example of these strategies during the first quarter, we reinsured $3 billion of U S. Dollar denominated whole life products from Japan to our Bermuda affiliate Gibraltar V, which allows us to manage capital.

Yanela del Carmen Frias: And as an example of these strategies, during the first quarter, we reinsured $3 billion of U.S. dollar-denominated whole life products from Japan to our Bermuda affiliate, Gibraltar Re, which allows us to manage capital for that block on a more economical basis. So we're looking at this very carefully. The proposed regulations are still subject to change but are expected to be finalized later this quarter ahead of being effective on April 1, 2025.

Janella Frias: For that block on a more economic basis. So we were looking at this very carefully the proposed regulations are still subject to change.

Janella Frias: But are expected to be finalized later this quarter ahead of being effective on April one 2025.

Rob: Thank you.

Janella Frias: Thank you as a reminder, that star one to be placed in the question queue. Our next question today is coming from Elyse Greenspan from Wells Fargo. Your line is now live.

Operator: Thank you. As a reminder, that's star number one to be placed in the question queue. Our next question today is coming from Elyse Greenspan from Wells Fargo. Your line is now live.

Operator: Hi, thanks. Good morning.

Speaker Change: Hi, Thanks. Good morning, My first question I guess is on the M&A side right can you just give us an update on the pipeline of things that you're looking at and and given you know the action to exit our assurance IQ how is that going to impact future.

Charles Frederick Lowrey: My first question, I guess, is on the M&A side, right? Can you just give us an update on the pipeline and things that you're looking at? And given the action to exit Assurance IQ, how is that going to impact future M&A decisions?

Janella Frias: Our M&A decisions.

Caroline Ann Feeney: Sure Elyse. This is Charlie Thanks for the question you know we've executed on many transactions over time that will significantly grow the company.

Charles Frederick Lowrey: Sure, Elyse, this is Charlie. Thanks for the question. You know, we've executed on many transactions over time that have significantly grown the company. And we have pursued these transactions or acquisitions for a variety of reasons, such as expanding our capabilities, broadening our distribution, increasing scale, and adding key talent. In every acquisition, there are things that have gone right, as well as lessons we have learned. And certainly, we anticipated a different outcome when we purchased Assurance.

Caroline Ann Feeney: And we pursue these trends these transactions or acquisitions for a variety of reasons such as.

Rob Falzon: Expanding our capabilities broadening our distribution increasing scale or <unk>, adding key talent in every acquisition. There are things that have gone right as well as lessons, we have learned and certainly we anticipated a different outcome when we purchase insurance and we've incorporated these lessons into our M&A approach, which gets to your question.

Charles Frederick Lowrey: And we've incorporated these lessons into our M&A approach, which answers your question. As we look forward, we will focus on acquisitions of more established businesses that present opportunities to expand our capabilities and scale in our existing market-leading businesses, and you've seen us do that with Deer Path Capital, Montana Capital Partners, and Green Harvest as three examples. And we're going to continue to be really thoughtful and very disciplined about how we execute with the goal of creating value for our shareholders.

Janella Frias: As we look forward, we'll we will focus on acquisitions of more established businesses that prevent present opportunities.

Janella Frias: Opportunities to expand our capabilities and scale in our existing market, leading businesses and you've seen that we've seen us do that with Deere paths capital Montana capital partners in Green harvest is as three examples.

Janella Frias: We're going to continue to be really thoughtful and very disciplined about how we execute with the goal of creating value for our shareholders.

Rob: Thanks, and then my second question you know within a group you know good results in the quarter you guys work towards he does the lower end of the target range for that business for the year. How do you just anything you want to point out you know, especially in disability side was all seem good.

Operator: Thanks. And then my second question, you know, within the group, you know, good results in the quarter, you guys were, you know, towards the lower end of the target range for that business for the year. How do you just anything you want to point out, you know, especially the disability side results seem good in the quarter and how you expect the benefits ratio in that business to trend over the other three quarters of the year? Sure, of course.

Janella Frias: In the quarter and how you expect the.

Janella Frias: The benefits ratio in that business to trend over the other three quarters of the year.

Speaker Change: Sure of course at least that's Caroline and I will take your question.

Caroline Ann Feeney: Sure, of course. Elyse, it's Caroline, and I'll take your question.

Speaker Change: So first of all where we're very pleased with our first quarter sales for group overall, which are influenced by the momentum we've seen in executing on our strategy to maintain our core product leadership, while growing in the under 5000 lives and association markets and further diversifying and disability and supplemental health and our capabilities.

Caroline Ann Feeney: So first of all, we're very pleased with our first quarter sales for the group overall, which are influenced by the momentum we've seen and executed on our strategy to maintain our core product leadership while growing in the under 5,000 lives and association markets and further diversifying in disability and supplemental health. Our capabilities continue to resonate in the disability marketplace, where our earned premiums were up nearly 15% compared to the prior year quarter.

Janella Frias: Continue to resonate in the disability marketplace, where our earned premiums were up nearly 15% compared to the prior year quarter.

Caroline Ann Feeney: In terms of drivers of our success, we're continuing to expand our value proposition by enhancing our customer experience by streamlining our claims process with simplified language and more efficient technology. That outcome is enabling customers to better understand their benefits. And then, beyond these investments, Elyse, in our core capabilities, we also remain highly focused on maintaining strong pricing discipline, only accepting those cases that make economic sense.

Janella Frias: In terms of drivers of our success, we're continuing to expand our value proposition by enhancing our customer experience, including streamlining our claims process with simplified language with more efficient technology.

Janella Frias: That all kind of enabling customers to better understand their benefits and then beyond these investments at least in our core capabilities. We also remain highly focused on maintaining strong pricing discipline them only accepting those cases that make economic sense. So looking ahead at this year as you know.

Caroline Ann Feeney: So looking ahead to this year, as you know, most of our new business premiums are effective in the first quarter. So, in general, the first quarter is when you will see the majority of the impact from new sales, renewals, and enrollment on existing business. However, as we continue to grow in the under 5,000 life and association market, we will see that sales season extend more into the second half of the year, with business growth consistent with what we saw last year.

Janella Frias: Most of our new business premiums are effective in the first quarter and so in general the first quarter is when you will see the majority of the impact from new sales, where Knowles and enrollment on existing business. However, we continue to grow in the under 5000 lives in association market, we will see that sales season extend.

Janella Frias: More into the second half of the year with business growth consistent with what we saw last year.

Caroline Ann Feeney: So overall, we're very excited about the growth trajectory that we're seeing, not just in disability, but across the board in our group business. And you asked about the benefits ratio, Elyse, and so I'll just finally add that our overall, our group underwriting results this past quarter were strong. We recorded a total benefit ratio of just under 85%, which is our best first quarter benefit ratio ever and is within our recently lowered target range of 83 to 87. Specifically, with regard to the disability underwriting results, it does reflect our focus on effective claims management and the continued tailwinds of strong employment, as well as a high interest rate environment.

Janella Frias: So overall.

Janella Frias: We're very excited about the growth trajectory that we're seeing not just in disability, but across the board and in our grid business and you asked about benefits ratio at least and so I'll just finally add that or overall our group underwriting results. This past quarter were strong we recorded a total benefit ratio of just <unk>.

Operator: Thank you. Our next question is coming from Suneet Kamath of Jeffries. Your line is now live.

Janella Frias: 85%.

Janella Frias: <unk>, which is our best first quarter benefit ratio ever and is within our recently lowered our target range of 83 to 87 mm specifically with regards to the disability underwriting results.

Janella Frias: It does reflect our focus on effective claims management and continued tailwind of a strong strong employment as well as a high interest rate environment.

Rob: Thank you.

Rob: Thanks Elyse.

Speaker Change: Thank you. Our next question is coming from Sony come off from Jefferies. Your line is now live.

Operator: Thanks. Good morning.

Caroline Ann Feeney: I want to start with individual retirement. Caroline, you mentioned the strong sales, and I think you're expecting that to persist going forward for you in the industry. I just want to get a sense of where that money is coming from. Is this new money coming into the industry, maybe from the qualified market, or are we seeing 1035 exchanges from existing annuities? I just wanted to get a sense of where that demand is coming from.

Rob: Thanks, Good morning, I wanted to start with individual retirement Carolina you'd mentioned the strong sales and I think you were expecting that will persist going forward for you and the industry I just wanted to get a sense of where that money is coming from is this new money coming to the industry maybe from the qualified market or are we seeing 10 35 exchanges from existing annuities.

Speaker Change: I wanted to get a sense of where that demand is coming from yes. That's a great question. Thanks, So much and I don't think it's really one thing I think that's the dynamic of individuals thinking more clearly as we have over 11000 individuals turning 65 every single year over the next several years and 30 million Americans.

Caroline Ann Feeney: Individuals are thinking more clearly as we have over 11,000 individuals turning 65 every single year over the next several years and 30 million Americans going to be turning 65 between now and 2030, and I think, unfortunately, many are realizing that they have more work to do on retirement and understanding that protected income and protected savings is now increasingly more important to them and a priority. We're seeing that, and I think that is why we've seen two consecutive record years in the annuities market.

Janella Frias: Ricans I'm going to be turning 65 between now and 'twenty 30, and I think unfortunately, many realizing that.

Janella Frias: They have more work to do on retirement and understanding that protect it and kind of protected savings is now increasingly more important to them in a priority. We're seeing that and I think that is why we have seen two consecutive record years in the annuities market. It's also why as I mentioned earlier, we very much see that we're on track.

Caroline Ann Feeney: It's also why as I mentioned earlier, we very much see that we're on track for now a third consecutive record year of sales and so I think it's really customer need and broader solutions that we as an industry are able to offer and certainly we're very proud of the work that we've done in terms of expanding our portfolio, the strength of our distribution and our brand that continues to resonate very well and positions us to be able to help many of these consumers with this growing need.

Janella Frias: For now a third consecutive record year of sales and so I think it's really customer need.

Janella Frias: Need and broader solutions that we have an industry are able to offer and certainly we're very proud of the work that we've done in terms of.

Janella Frias: Expanding our portfolio.

Janella Frias: The strength of our distribution and our brand that continues to resonate very well and positions us to be able to help many of these consumers with this growing need.

Janella Frias: Right.

Rob: Got it. Okay, that makes sense. And then, I guess one for Rob, if I could, I think in your script, Rob, you keep referencing this $48 billion in insurance margins. I don't know what that means. Like, how is that calculated? And if that's such a big number, is there a way that you can start to monetize that rather than just wait for it to flow through the income statement?

Speaker Change: Got it okay that makes sense and then I guess, one for Rob if I could I think in your script, Rob you keep referencing thats $48 billion of insurance margins.

Speaker Change: I don't know what that means like how is that calculated and if that's such a big number is there a way that you can start to monetize that rather than just wait for it to flow through the income statement.

Janella Frias: Yeah.

Rob: I'll take a first stab at that, Suneet, and then I'll answer, and then I'll ask Yanela to jump in if she wants to clarify anything I'm about to say. So with the change in accounting for long duration under LDTI, we now have the ability to actually calculate and share those margins, and that's what we've been doing since the adoption of those updated GAAP standards. Think about that as the present value of profits in the individual products that we have over the remaining life of those products on a gross basis.

Speaker Change: I'll take a first stab at that so need and then I'll answer and then let Gino will jump in if she wants to clarify anything I'm about to say so.

Janella Frias: With the change in accounting for long duration.

Janella Frias: L D T I.

Janella Frias: Now have the ability to actually calculate and share of those margins and that's what we've been doing since the adoption of those updated GAAP standards think about that as the present value of our profits.

Janella Frias: In the individual products that we have over the remaining life of those products on a gross basis. It doesn't include sort of net of expenses. So think of that as sort of just on a product basis before expenses corporate expenses that might be associated with continuing to maintain and administer those blocks.

Rob: It doesn't include sort of net expenses, so think of that as sort of just on a product basis before corporate expenses that might be associated with continuing to maintain and administer those blocks. As we think of that, that will naturally manifest over the life of the product as our experience then shows that those margins become realized net income over the remaining period of time. There are opportunities to accelerate that. Reinsurance generally is a tool which we can use to do that.

Janella Frias: As we think about that that will naturally manifest over the life of the product as our experience then shows that those are those margins become realized net income over the remaining period of time there.

Janella Frias: There are opportunities to accelerate that reinsurance generally as tool, which we can use to do that a large percentage of that of those margins and reserve that we have exist within our Japan businesses and within those Japan businesses is as we look to do reinsure some of that business out of Japan and into either the U S and Bermuda as we ready.

Rob: A large percentage of those margins in reserve that we have exist within our Japan businesses, and within those Japan businesses, as we look to reinsure some of that business out of Japan and into either the U.S. or Bermuda, as we regularly do, that gives us opportunities to accelerate the realization of some of that margin, but Janelle, I don't know if you would like to add anything to that.

Speaker Change: Really do that gives us opportunities to accelerate the realization of some of that margin, but you know I don't know if he would like to add anything to that.

Yanela del Carmen Frias: No Rob, that was a great explanation. I have nothing to add.

Speaker Change: No Rob that was a great explanation nothing to add.

Operator: Got it. If I could just sneak one more in for Yanela, on Holdco Cash, are there any big movements that you're expecting as we move through the year in terms of capital structure, either issuances or repayments, or are we kind of at a steady state at this point?

Speaker Change: Got it if I could just sneak one more in for janella on Holdco cash.

Rob: Are there any big movements that you're expecting as we move through the year in terms of capital structure, either issuances or repayments or are we kind of at a steady state at this point.

Janella Frias: Yeah.

Speaker Change: No. We we had the hybrid issuance in the first quarter that was a pre funding of 2025 maturity. So we issued 1 billion. We also did a redeemed 500 million of of a previously issued hybrid so from an issuance perspective.

Yanela del Carmen Frias: No, we had the hybrid issuance in the first quarter that was a pre-funding of a 2025 maturity. So we issued a billion, and we also did redeem 500 million of a previously issued hybrid. So from an issuance perspective, there was nothing more expected.

Yanela del Carmen Frias: Our HLA balance did increase modestly during the quarter. As you saw, we did have net positive cash flows from our businesses after funding very strong growth, as you noted and as we talked about, and the net proceeds of this hybrid issuance. These inflows were offset by shareholder distributions and net interest expense. Also important to note is that due to the timing of the closing of the GUL reinsurance transaction, those proceeds are in PICA, and they have been factored into our capital plans for the year. That's worth about eight RBC points. So again, from an HLA perspective and from a holdco cash perspective, we had strong inflows, we had the expected outflows, and we are at $4.2 billion, well within our liquidity objective of $3 to $5 billion.

Speaker Change: Nothing more expected.

Janella Frias: HLA balance did increase modestly during the quarter as you saw we did have net positive cash flows from our businesses. After funding very strong growth as as you noted.

Janella Frias: Talked about and the net proceeds of this hybrid issuance. These inflows flows were offset by shareholder distributions and net interest expense.

Janella Frias: Important to note is that due to the timing of the closing of the G O L reinsurance transaction.

Janella Frias: These proceeds are in pica and they have been factored into our capital plans for the year and that's worth about eight RBC points. So again from an HLA perspective, and a holdco cash perspective.

Janella Frias: We had strong inflows we had the expected outflows and we are at $4 2 billion well within our liquidity objective of $3 billion to $5 billion.

Rob: Okay. Thank you.

Janella Frias: Yes.

Janella Frias: Thank you next question today is coming from Jimmy Mueller from J P. Morgan Your line is now live.

Operator: Thank you. The next question today is coming from Jimmy Buhler from J.P. Morgan. Your line is now live.

Operator: First question, just on the Assurance IQ business. Should we just assume that you're shutting down the business, or is it reasonable to assume that you'll be able to sell it for like a decent consideration?

Speaker Change: Hi, first question just on the assurance IQ business.

Speaker Change: Should we just assume that they're shutting down the business or is it reasonable to assume that you'll be able to sell it for.

Speaker Change: A decent consideration.

Janella Frias: Hi, Jamie It's gene I'll I'll take your question and I see US. We've stated we've begun to wind down process for assurance and have moved the results two divested businesses first of all let me acknowledge that these decisions are always difficult in our utmost focus is caring for the people involved that said this wind.

Yanela del Carmen Frias: Hi Jimmy. It's Yanela.

Yanela del Carmen Frias: I'll take your question. And, as we stated, we've begun a wind-down process for Assurance and have moved the results to divested businesses. First of all, let me acknowledge that these decisions are always difficult, and our utmost focus is caring for the people involved. That said, this wind-down will not have a material impact on earnings. Assurance has not been material to our results. We have accrued all wind-down costs this quarter for divested businesses, and we do have assets on the balance sheet, such as commission receivables, which we'll convert to cash over time.

Janella Frias: Down will not have a material impact on earnings assurance has not been material to our results. We have accrued all wind down costs. This quarter in divested businesses and we do have assets on the balance sheet, such as commission receivables, which will convert to cash over time and beyond that as we go through the wind down process we serve.

Janella Frias: We will assess whether there is any incremental value to the assets and to the extent that there is we will seek to monetize that value.

Operator: And I would have thought that the exit would be slightly accretive to earnings given that Assurance IQ wasn't really making much money, and in most of the years when you were reporting it standalone, it was actually losing money. But is that not correct?

Rob: And I would've thought that it would be the exit would be slightly accretive to earnings given the assurance IQ it wasn't really making much money in most of the years. When you were reporting it standalone it was actually losing money, but is that not correct.

Yanela del Carmen Frias: Well, that's the point. We had moved it to Corporate Another because it was not material. Now it's divested, and it's just not material to the bottom line.

Rob: Well, that's the point, we had moved it to corporate and other because it was not material now its end and diverse it and it's just not material to the bottom line.

Speaker Change: And then on the CRE portfolio. It seems like on commercial mortgage loans most of the credit Mark Ah metrics are fairly stable.

Operator: And then on the CRE portfolio, it seems like on commercial mortgage loans, most of the credit mark metrics are fairly stable with what they've been recently. But if you just talk about what's going on there and give us some insight into the percentage of loans or the number of loans that are maturing this year and what's happened with loans that have matured, like are you having to extend more of them or are they just paying down or just anything to give us more color on how the portfolio has been performing.

Speaker Change: What they had been recently, but if you just talk about what's going on there and give us some insight into the percentage of loans or the number of loans that are maturing this year and what's happened with loans that have matured like are you having to extend them more of them or are they just being down or just anything to them.

Janella Frias: US more color on how the portfolio has been performing.

Operator: Okay, Jimmy, let me start at a high level and then end with your specific question on maturity. So actually, there has not been a material change from year end. We've got a $51 billion portfolio; it's about 14% of our investments. The portfolio remains resilient, it's high quality, and it's broadly diversified, looking at both geography and underlying property types. And, as we pointed out before, we benefit significantly from PGEM's direct origination of these loans, their deep knowledge of local markets, and the proven track record they've had through prior cycles. It's a management team with over 25 years of average industry experience.

Rob: Okay, Jimmy let me start at a high level and then end with your specific question on the on maturity. So after there has not been a material change from year end, we've got a $51 billion portfolio. It's about 14% of our investments are the portfolio remains resilient. It's high quality, it's broadly diversified looking at both geography and end.

Operator: Okay, Jimmy, let me start on a high note.

Janella Frias: Underlying property types.

Janella Frias: And as we pointed out before we benefit significantly from <unk> direct origination of these loans their deep knowledge of local markets and the proven track record they've had some prior cycles.

Janella Frias: Management team with over 25 years of average industry experience L.

Operator: LTVs and debt service coverage ratios really did not change on a portfolio-wide basis. From the end of the year through the first quarter, we're at 58% on a loan-to-value basis and almost two and a half times on a debt service coverage ratio. The office, as you might expect, Jimmy, had some negative trends.

Janella Frias: Ltvs and Oh depths.

Janella Frias: Debt service coverage ratios really did not change for the entire on a portfolio wide basis from.

Janella Frias: From the end of year until the through through the first quarter with 58% on a loan to value basis.

Janella Frias: And almost two five times on a debt service coverage ratio.

Operator: Just pointing out, that's about $7 billion of our portfolio or about 14% of the mortgage portfolio. LTVs there were up, but it gets lost in the rounding and the overall numbers. So while our LTV for the overall portfolio didn't rise within the office sector, we went up from 71% at year end to 74%. But our coverage ratios remained the same at just over two and a half times.

Janella Frias: The office as you might expect.

Janella Frias: Jimmy yet.

Janella Frias: Some negative trends.

Janella Frias: It's.

Janella Frias: Just pointing out that's about 7 billion of our portfolio of about 14% of the mortgage portfolio Ltvs. There were up it gets lost in the rounding of new overall, so our LTE our LTV for the overall portfolio didn't rise within the office sector. We went up from 71% at year end to 74%, but our coverage.

Janella Frias: Ratios remained the same at just over two and a half times so feel good.

Speaker Change: Good about where we are.

Operator: So feel good about where we are in the overall portfolio. From an outlook standpoint, and I'm sorry, I'm not sure if you asked the question before, but reserves in the real estate portfolio have added modestly to those from the first quarter experience. So they're up; they're at 414 million, up from about 370 plus million as of year end. So a modest increase there. As we're looking forward, the expectation across the industry is that there'll be another 5% to 10% valuation decline across the industry. Office is a subsector to that, so it will probably be more like around 15% decline.

Janella Frias: In the overall portfolio from an outlook standpoint, and I'm, sorry, I'm not sure. If you asked the question up reserves.

Janella Frias: In the real estate portfolio.

Janella Frias: We added modestly to those from the first quarter experience so they're up.

Janella Frias: There at 414 million up from about 370 plus million as of as of year end. So a modest increase there as we're looking forward.

Janella Frias: Expectation across the industry sort of across industry is that.

Janella Frias: There'll be another 5% to 10% valuation decline across the industry our office as a sub sector of that will probably be more like around 15% decline and a buy you know are well our portfolio won't be immune to further declines in value. We do expect it to continue to be resilient given its construction of institutional quality of underlying <unk>.

Operator: And while our portfolio won't be immune to further declines in value, we do expect it to continue to be resilient given its construction, the institutional quality of our underlying properties, and the conservative loan underwriting that we've got in those LTVs and debt service coverage ratios that I shared with you. With respect to loan maturities, during 2023, we had about $2 billion worth of maturities. There were four modifications for under $400 million, of which, two with long-term extensions.

Janella Frias: Properties and the conservative loan underwriting that we've got in those ltvs and debt service coverage ratios.

Janella Frias: That I shared with you.

Janella Frias: With respect to loan maturities. During 2023, we had about $2 billion worth of maturities. There were four modifications for under $400 million of that with long term extensions.

Janella Frias: The remainder were resolved favorably through refinancings payoffs or short term extensions, which will then subsequently paid off.

Operator: The remainder were resolved favorably through refinancings, payoffs, or short-term extensions, which were then subsequently paid off. For the remainder of 2024, we've got $2 billion, or about 4% of the portfolio that's maturing. And then years after that, think of it as about being plus or minus 10% per year, so around $5.5 billion a year through 2028. We expect that there'll be episodic issues that we'll need to deal with in the way of ongoing loan modifications and extensions. But overall, we are quite comfortable with the quality and resilience of the portfolio. Thank you. Thank you. The next question is coming from Wilma Burdis from Raymond James. Your line is online.

Speaker Change: Got a for the remainder of 2024, we've got $2 billion or about 4% of the portfolio that's maturing.

Janella Frias: And then years after that think of it as about being plus or minus 10% per year, so around five and a half a.

Janella Frias: Billion a year.

Janella Frias: Through 'twenty 'twenty eight.

Janella Frias: We are expect that there'll be episodic issues that will need to deal with in the way of our ongoing loan modifications and extensions, but overall, we are quite comfortable with the quality and resilience of the portfolio.

Rob: Thank you.

Janella Frias: Thank you next question is coming from woman Virtus from Raymond James Your line is that what.

Speaker Change: Hey, good morning, given the high level of retail sales could you talk about the competition competition levels in annuity and life products we.

Operator: Jane, good morning. Given the high level of retail sales, could you talk about the competition levels and annuities in life products?

Speaker Change: We would expect pricing to rationalize somewhat this year given regulatory changes in Bermuda. So have you seen any evidence of this and maybe give us some broader color. Thanks.

Janella Frias: Yeah. So good morning, well not it's Caroline so I'll I'll take your question.

Caroline Ann Feeney: Yes, so good morning, Wilma, it's Caroline. So I'll take your question. So if I think about life for a moment and our sales results and our outlook going forward, I'll take that first. We are very pleased, Wilma, with our first quarter results of over $165 million in sales, an increase of more than 10% from the prior year quarter. That's driven by our term and variable products.

Speaker Change: And so if I, if I think about life for a moment and our our sales results and our outlook going forward I'll take that first and we are very pleased with our first quarter results with over $165 million in sales an increase of more than 10% from the prior year quarter, and that's driven by our term and variable products and we continue to.

Caroline Ann Feeney: And we continue to write that new business at healthy returns, continuing the trend we saw throughout the year. In spite of competition, as we look to this year, we continue to see positive momentum for our portfolio. That does include core products like variable universal life and term, where we are already a market leader. In addition, Wilma, and I think this is part of how we're staying ahead and continuing our market leadership position with competition, we've rolled out new solutions like our FlexGuard Life indexed variable universal life product to further penetrate the accumulation market and be able to reach new customers.

Janella Frias: You're right that new business at healthy returns continuing the trend we saw throughout the year and in spite of competition as we look to this year, we continue to see positive momentum for our portfolio.

Janella Frias: That does include core products like variable universal life and term.

Janella Frias: Where we are already a market leader.

Janella Frias: In addition, well now and I think that's just part of how where we're staying ahead in and continuing our market leadership position with competition as we've rolled out new solutions like our flex guard life indexed variable universal life product.

Speaker Change: To further penetrate the accumulation market and be able to reach new customers and we achieved our highest quarterly sales at flex guard life This past quarter.

Caroline Ann Feeney: And we achieved our highest quarterly sales of FlexGuard Life this past quarter. So we're very confident that with these products, our pricing disability discipline, excuse me, and our distribution strength, we will remain and continue to be a leader in the life market. In terms of the annuities market, yes, certainly there is significant growth across the annuities space and increasing competition with the record industry sales that we've seen in each of the past two years.

Janella Frias: So that where we're very confident that with these products are pricing disability disciplined excuse me and our distribution strength, we will remain and continue to be a leader in the life market in terms of the annuities market. Yes, certainly there is a significant run up that cross the annuity space and increasing competition.

Janella Frias: Titian with a record industry sales that we've seen in each of the past two years.

Caroline Ann Feeney: But as I shared earlier, and I think this is important to reiterate, we've been able to achieve strong results thanks to our brand and our industry-leading execution and distribution. We've maintained a distinct focus on our end-to-end customer and advisor experiences, using automation and process enhancement to make it easier than ever to buy a prudential policy. We also have deep and expanding partnerships across multiple distribution channels, and this enables us to scale quickly to meet increased market demand and allows us to expand distribution.

Janella Frias: But that's as I shared earlier and I think that's it's important to reiterate.

Janella Frias: We've been able to achieve the strong results thanks to our brand.

Janella Frias: And our industry, leading execution and distribution.

Janella Frias: Maintained a distinct focus on our end to end customer and adviser experiences using automation and process enhancements to make it easier than ever to buy a prudential policy policy, we also have deep and expanding partnerships.

Janella Frias: Cross multiple distribution channels and this enables us to scale quickly to meet increased market demand and allows us to expand our distribution and finally, we combine all of that with our world class asset management capabilities to your PJM. So we believe we're in a very strong position to continue to be.

Caroline Ann Feeney: And finally, we combine all of that with our world-class asset management capabilities through PGEM. So we believe we're in a very strong position to continue to build on our growth and meet market demand even with rising competition in the space.

Janella Frias: On our growth and meet the market demand, even with rising competition in the space.

Janella Frias: Yeah.

Rob: Okay. Thank you and given the exit in Argentina could you discuss which reasons youre thinking about scaling.

Speaker Change: And more broadly could you give us an update on the market for bolt on opportunities. Thanks.

Janella Frias: So well, it's Andy so our emerging market strategy is to focus on a few select high growth geographies.

Andrew Francis Sullivan: So, Wilma, it's Andy. Our emerging market strategy is to focus on a few select high-growth geographies that offer us the opportunity for significant scale. So, at this point, what I would tell you is that we're in the countries that we want to be in, you know, so there really are no direct implications from the sale of Argentina for the rest of our portfolio. And we remain highly committed to Latin America as part of our emerging market growth strategy.

Janella Frias: That offer us the opportunity for significant scale. So at this point what I would tell you is we're in the countries that we want to be and you know so there really are no direct implications from the sale of Argentina for the rest of our portfolio and we remain highly committed to Latin America as part of our emerging market.

Janella Frias: Strategy.

Andrew Francis Sullivan: You know, I think the second part of your question was around programmatic bolt-on acquisitions. You know, job one is always organic growth for us, so that's where the majority of our focus is, but we will always be in the know and in the flow of potential acquisition opportunities, but, as always, we'll be patient and we'll be disciplined.

Janella Frias: I think the second part of your question was Ah was around programmatic our bolt on acquisitions. You know are job. One is always organic growth for us. So that's where the majority of our focus is but we will always be and they know when they're in the flow of potential acquisition opportunities, but as always we'll be patient and we'll be disciplined.

Rob: Thank you.

Speaker Change: Thank you we've reached end of our question and answer session I'd like to turn the floor back over to Mr. Allowing for any further or closing comments.

Charles Frederick Lowrey: 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.

Speaker Change: Okay. Thank you again for joining us today we.

Operator: Okay, thank you again for joining us today. We are pleased by the progress we've made in growing our market-leading businesses, including leveraging our mutually reinforcing business system and optimizing capital to deliver sustainable long-term growth. We will continue to lead the way in expanding access to investing, insurance, and retirement security across the globe, as we help current and future generations live better lives for longer. Thank you again for joining us, and have a good day.

Janella Frias: We are pleased by the progress we've made in growing our market, leading businesses, including leveraging our mutually reinforcing business system and optimizing capital to deliver sustainable long term growth.

Janella Frias: We will continue to lead the way in expanding access to investing insurance and retirement security across the globe as we help current and future generations live better lives longer.

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

Operator: 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 today.

Speaker Change: 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 today.

Q1 2024 Prudential Financial Inc Earnings Call

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