Prudential Financial, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the Prudential Quarterly Earnings Call. At this time, all lines are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given to you at that time. If you need assistance during the call, press star and then zero, and an operator will assist you offline. And as a reminder, today's conference call is being recorded. I would now like to turn the conference over to 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 Thousand, 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 comments by Charlie, Rob, and Ken, and then we will take your questions. Today's presentation may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, this presentation may include references to non-GAAP measures. For reconciliation of such measures to the comparable GAAP 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-GAAP measures in the appendix to today's presentation, which can be found on our website at investor.credential.com. With that, I'll hand it over to Charlie.

Thank you, Darren. Good morning, everyone, and thank you for joining us today. To begin, I hope that you, your families, and colleagues remain safe and healthy. As the global health pandemic continues, we remain intently focused as a company on caring for our employees and the communities in which we live and work, as well as serving the evolving needs of our customers and other stakeholders in the current environment. We are also incredibly proud and grateful for the continued dedication and commitment that our employees have shown in fulfilling our company purpose of making lives better by solving the financial challenges of our changing world. I'd like to highlight a few of the ways in which we're serving the unique and evolving needs of our customers who, now more than ever, are relying on Prudential to address their financial challenges. Since the beginning of the pandemic, PGM has focused on providing clients with timely portfolio updates and asset allocation ideas. Our operational resilience, diversified global business model, and strong performance has allowed us to support our clients. One example of the success is the growth of our U.S. mutual funds, where we are one of the top-ranked companies based on net flows this year. In our U.S. businesses, we continue to pivot within annuities to our FlexGuard buffered annuity product, which offers downside protection and upside opportunity at a time when customers face new challenges in protecting and growing their retirement assets. Following its accelerated launch to market in the second quarter, FlexGuard continues to gain momentum, accounting for 38% of our annuity sales this quarter. And in Japan, our life planner model, with its highly personalized and customized approach to engaging customers, continues to be resilient, as demonstrated by our strong sales this quarter. During the third quarter, we continued to successfully execute on our strategic priorities for 2020, despite the challenging macroeconomic backdrop, including taking additional steps to expand our cost savings program. We also continue to benefit from the strength of our rock-solid balance sheet, which places us on sound financial footing to navigate changes in the current environment. Turning now to 2020 priorities on slide three, on last quarter's call we mentioned that we were exploring the potential to generate additional cost savings on top of our 2022 plan through the third quarter of this year we realized approximately 135 million of our 500 million dollar cost savings program based on our progress of accelerating the savings realized and creating new ways of working we now expect to generate an incremental 250 million dollars in efficiencies by the end of 2023 bringing our total cost savings program to $750 million. With respect to rotating the international earnings mix, during the quarter, we announced an agreement to sell Prudential of Taiwan to Taishan Financial Holding and expect the transaction to close in 2021, subject to all regulatory approvals. And we also closed on our transaction to the best Prudential of Korea and received proceeds of $1.6 billion U.S. dollars. And finally, we continue to take additional steps across the company to reduce our exposure to changes in markets and rates by shifting sales momentum to less interest rate-sensitive solutions, while aggressively repricing certain existing products. As an example in annuities, we are focusing on our efforts on delivering protected outcome solutions, like our FlexGuard product, and we're discontinuing all sales of our traditional variable annuities with guaranteed living benefits. We will also explore strategic opportunities for blocks of business, including reinsurance and other transactions. Turning to slide four, as we continue to execute against our strategic priorities, we remain grounded by our rock-solid balance sheet, including highly liquid assets of $6.1 billion at the end of the third quarter. Prudential Financial and its subsidiaries continue to hold capital that exceeds a double A financial strength level. The financial strength gives us the confidence and the flexibility to manage our business for long-term growth while navigating the current and future market environment. We also continue to closely monitor conditions in the credit markets. While they have been developing better than previously expected, we don't intend to restate buybacks this year. We believe this is prudent as the duration and severity of the pandemic and its effect on the economy remain highly uncertain. We'll provide more details on our 2021 capital deployment plans once they have been finalized and approved by the Board. Turning to slide five, I'll now take a moment to highlight our financial results for the third quarter. Pre-tax adjusted operating income was $1.6 billion in the quarter, and after-tax adjusted earnings per share was $3.21, which benefited in part from strong variable investment income across our businesses. Our U.S. businesses reported adjusted operating income of $873 million due to higher net investment spread, offset by lower net fee income in our individual annuities business and less favorable underwriting driven by COVID-19 related net mortality experience. PGM reported record adjusted operating income of $370 million, driven by record assets under management of $1.4 trillion and higher other related revenues. The 11% growth in assets under management reflects strong flows robust investment performance and market appreciation our international businesses reported adjusted operating income of 775 million dollars as businesses as business growth lower expenses and more favorable underwriting results were partially offset by lower earnings from joint venture investments and lower net investment spread with that i'll turn it over to rob for more specific details on our business performance during the third quarter Thank you all for your time this morning.