Prudential Financial, Inc.

conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session with instructions being given at that time. If you should require assistance during the call, you may press star then zero, and an operator will assist you offline. As a reminder, today's conference is being recorded. I would now like to turn the conference over to our host, Mr. Darren Arita. Please go ahead.

Good morning, and thank you for joining our call. Representing Prudential on today's call are Charlie Lowry, Chairman and CEO, Rob Falzon, Vice Chairman, Andy Sullivan, Head of US Businesses, Scott Slyster, Head of International Businesses, Ken Tanji, Chief Financial Officer, and Rob Axel, Controller and Principal Accounting Officer. We will start with prepared remarks by Charlie, Rob, and Ken, and then we will take your questions. Today's presentation may include forward-looking statements. it is possible that actual results may differ materially from the predictions we make today. In addition, this presentation may include references to non-GATT measures. For reconciliation of such measures to the comparable GATT measures and the discussion of factors that could cause actual results to differ materially from those in the forward-looking statements, please see the slide titled forward-looking statements and non-GATT measures in the appendix to today's presentation. which can be found on our website at investor.prudential.com. Also, due to circumstances created by the COVID-19 pandemic, we have decided to cancel our Tokyo Investor Day that was scheduled for September. With that, I'll hand it over to Charlie.

Thank you, Darren. Good morning, everyone, and thank you for joining us today. I would like to start this morning by recognizing the extraordinary circumstances created by the COVID-19 pandemic. and by expressing our gratitude to all of those on the front lines who are fighting this crisis around the world. For those individuals and their families directly affected by the pandemic, and particularly those who have lost loved ones, we extend our deepest sympathies. At Prudential, we're guided by our purpose to make lives better by solving the financial challenges of our changing world. And that includes being there for our employees, our customers, and our communities. especially in times like these. We are completely focused on ensuring that we take the right course of action for the business, mitigating the impact of COVID-19 while investing for the future in order to emerge from this crisis stronger than before. The strength of our balance sheet enables us to manage our business for the long-term growth while dealing with short-term business realities. Before we get into the first quarter performance, I'll cover some of the key steps we have taken as a company to support our employees, customers, and communities in response to COVID-19. First, turning to slide three, ensuring the health and well-being of our employees and their families is our top priority. As the pandemic emerged, we initiated new policies and actions to ensure their safety and security, including additional family care support. This included implementing a wide-scale remote work environment with approximately 98% of our employees and most of our international employees now working remotely. I'm pleased to report that all our businesses and operational functions continue to run smoothly. Prioritizing the well-being of our employees enables us to address the evolving health and financial needs of our customers as the pandemic and its economic impact reverberate more broadly. We've also provided customers with assistance, such as premium deferrals and fee waivers, as well as enhanced digital tools. I'm also incredibly proud of the work our employees have done to support our local communities, including in Newark, El Paso, Hartford, and multiple international locations. These efforts include the donation of more than 150,000 face masks, including 75,000 N95 respirators for healthcare workers in New Jersey. In addition, the American Nurses Association and Prudential recently entered into an agreement for Prudential to sponsor ANA events and outreach initiatives in 2020. This agreement will include offering Prudential's financial wellness services and solutions to ANA members and the broader nursing community. We're pleased to be of assistance to those serving on the front lines of this pandemic. Turning to our financial strength on slide four, our rock solid balance sheet provides the foundation for our employees to serve our customers and our communities. We're confident in our ability to successfully manage in this environment, in large part due to the robust operational and financial risk framework that we put into place after the Great Recession of 2008. This framework prepared us with a playbook to address multiple stress scenarios, including pandemics and economic conditions that are more severe than what we are currently experiencing. In addition, we benefit from our recurring revenue model and mix of complementary businesses, which offset risk and produce capital benefits, giving us confidence about credentials to navigate the current environment. We began 2020 with a strong capital and liquidity position, and our capital ended the quarter exceeding AA financial strength levels. As the pandemic unfolded, and in light of uncertainty in the global markets, we executed our playbook. We successfully issued a $1.5 billion of senior debt in early March while spreads were still attractive. This included a $500 million green bond issuance. the first of its kind for a U.S. company in our sector. These actions pre-funded our expertise through the end of 2021 and enhanced the liquidity of our businesses. As part of the playbook, we further enhanced liquidity of our businesses and also paused share repurchases at the end of the first quarter to see how the economic environment develops. During the quarter, our variable annuity hedging performed extremely well with a 99% effective rate Our approach to hedging the economic risk resulted in significant gains on our equity market and interest rate hedges to offset the increased liability. We feel comfortable about our ability to manage equity market fluctuations and continued low interest rates over time. We're also highly confident about the quality of our investment portfolio, which Rob will cover in more detail shortly. The strength of our financial position means our dividends to shareholders remain well covered by our income and free cash flow. Turning to slide five, we are on track to accomplish our strategic initiatives for the year and, in fact, are accelerating their execution in some cases. First, we are repricing our products more quickly and pivoting towards lower risk and less capital-intensive products. Second, with respect to rotating our international earnings mix to higher growth markets, in April, we reached an agreement to sell our Prudential of Korea business. We also continue to pursue strategic alternatives for our Taiwan business. Finally, we continue to make progress on achieving our goal of $500 million in cost savings, 140 million of which should be achieved this year. We realized 30 million in the first quarter through actions we completed before the start of 2020. Turning to slide six, while it seems like a lifetime ago, I'd like to spend a moment on our first quarter performance. We've reported pre-tax adjusted operating income of $1.2 billion, or $2.32 per share. The gap net loss was 70 cents per share, driven largely by non-economic factors. Our US and international business earned lower variable investment income in the quarter. We also generated lower underwriting income in our US businesses. Higher asset management fees at TGEM were offset by lower other related revenues. While the severity and duration of the pandemic and related economic impact remains unknown, we are confident about the strength of our company. Credential has survived pandemics, wars, recessions, and the depression, among other events in its 145-year history. We are resilient, we are strong, and we will continue to move forward to deliver sustainable value for all our stakeholders. With that, I'll turn it over to Rob for a detailed look at our business performance for the quarter.