Prudential Financial, Inc.

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

Good morning, and thank you for joining our call. Representing credential on today's call are Charlie Lowry, Chairman and CEO, Rob Dalton, Vice Chairman, Andy Sullivan, Head of U.S. Businesses, Scott Slicer, 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 a 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 and the quarterly financial supplement, both of which can be found on our website at investor.prudential.com. With that, I'll hand it over to Charlie.

Thank you, Darren. Good morning, everyone, and thank you for joining us today. As we approach the one-year mark of the global pandemic, I hope that you, your families, and colleagues remain safe and healthy in this continuing difficult environment. As before, we remain deeply focused on the well-being of our employees, customers, communities, and other stakeholders and on addressing their evolving needs and challenges. Amid the extraordinary events of 2020, We continue to take steps to evolve our business for the future while living up to our purpose. Turning to slide two, we successfully executed on a number of our strategic initiatives in 2020 to reduce our market sensitivity and increase our growth potential, including the expansion of our cost savings program, while further solidifying our already robust financial position. We're now focused on building upon our achievements over the past year to further accelerate our strategy. I'll speak to this next phase of our transformation in more detail momentarily, but we'll start by recapping our accomplishments in 2020. Turning to slide three, we realized $215 million in cost savings during the year, exceeding our $140 million target. Recall that last quarter we increased our cost savings target to $750 million to be realized by the end of 2023. We also began to rotate our international earnings mix towards higher growth markets. During the year, we completed the sale of our Korea business and announced the sale of our Taiwan business. We also took significant steps to address the low interest rate environment with de-risking actions such as repricing products, and pivoting to less interest rate-sensitive solutions. This pivot included discontinuing sales of variable annuities with guaranteed living benefits and launching a buffered annuity product, FlexGuard, which is less sensitive to market fluctuations while continuing to serve our customer needs. Turning to slide four. As we look ahead, we're building upon the actions we've already taken as well as our competitive strengths to significantly transform the company over the medium term. To achieve this transformation, we expect to deliver on our cost savings program and to reallocate $5 to $10 billion in capital over the next three years as we pivot towards higher growth and less market-sensitive businesses. In parallel to this capital reallocation, we anticipate returning $10 billion of capital to shareholders over the next three years. This includes dividends as well as share repurchases that are resuming in the first quarter. under our new $1.5 billion authorization. As a result of these efforts, Prudential should emerge as a higher growth, less market sensitive, and more nimble business. It is positioned not only to deliver growth for shareholders, but also to make a more meaningful difference in the financial lives of more people around the world. Turning to slide five, as we transform to become a higher growth, less market sensitive business, We expect to double our growth businesses to more than 30% of earnings and have our individual annuities business to 10% or less of earnings. We will change our business mix primarily through organic growth and programmatic acquisitions for both our global asset manager, PGM, and in emerging markets within our international businesses. PGM manages $1.5 trillion of assets. which we have grown both organically and through acquisitions of talent and capabilities. In emerging markets, we have expanded with joint ventures and acquisitions in regions with large markets and favorable demographic tailwinds, such as Asia, Latin America, and Africa. We benefit from strong relationships with companies that have a large footprint and its significant local market expertise. In addition, we will remain focused on investing in our other businesses to expand our addressable market, as well as continue to improve expense and capital efficiency. Additional actions to change our business mix include de-risking and other transactions in conjunction with running off certain blocks of business. The $1.6 billion of capital generated from the sale of Korea business is included in the $5 to $10 billion we plan to reallocate into our growth businesses. Our change in business mix will obviously not be a straight line, but as we reallocate capital, we'll provide you with information to help you both understand and measure our progress. Turning to slide six, we are well positioned to execute this strategic plan with a rock-solid balance sheet. At the end of the fourth quarter, we had $5.6 billion in highly liquid assets, and our operating subsidiaries continue to hold capital to support AA financial strength ratings. Finally, let's turn to slide seven. During this time of change and transformation, our commitment to our company purpose and to supporting all our stakeholders remains as fundamental as ever. The importance of this work is reflected in the multiple environmental, social and governance initiatives that we advanced over the course of this quarter and throughout 2020. Here are some of the noteworthy accomplishments. We became the first U.S. insurer to ensure a green bond aligned with the United Nations Sustainable Development Goals. We furthered our commitment to environmental transparency and accountability. by disclosing our environmental impact through CBP, the world's leading environmental disclosure platform. Prudential scored an A- on CBP's 2020 Climate Change Survey. We introduced nine commitments to advance further the work we've been doing on racial equity, spanning our talent practices, our design and delivery of products, our investments and public policy work, and our support of community institutions working to remove persistent obstacles to black economic empowerment. I'm also pleased that we'll continue to tie inclusion and diversity with executive compensation. Three years ago, we added an inclusion and diversity performance modifier that factored into our 2020 compensation plan. Over this period, diverse representation among senior management has increased. We're including this type of modifier again to drive us to improve further our inclusion and diversity over the next three years. Before closing, I'd like to say thank you to all our employees around the world. It's through your hard work and dedication that we've been able to successfully help our customers and advance our transformation. With that, I'll turn it over to Rob for more specific details on our business performance. Thank you all for your time this morning.