Prudential Financial, Inc.

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 will conduct a question and answer session. Instructions will be given at that time. If you should require any assistance during the call, please press star zero and an operator will assist you offline. As a reminder, today's call is being recorded. I will now turn the call over to Mr. Bob McLaughlin. 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 Fausen, Vice Chairman, Andy Sullivan, Head of U.S. Businesses, Scott Fleister, Head of International Businesses, Ken Tangy, 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's 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 comparable GAAP measures and a discussion of factors that could cause actual results to differ materially from those in the forward-looking statements, please see the slide titled Forward-Looking Statements and Non-GAAP Measures in the appendix to today's presentation and the quarterly financial supplement both of which can be found on our website at investor.prudential.com. And with that, I'll turn it over to Charlie.

Thank you, Bob. And thanks to everyone for joining us today. As always, we hope you and your families remain safe and healthy. Prudential delivered solid financial results for the third quarter, reflecting our strong investment performance and high demand for the products we've introduced to support our customers. as they solve their financial challenges in a changing world. We also made significant progress executing on our transformation strategy to become a higher growth, less market sensitive, and more nimble company. First, we reached agreements to divest our full service record keeping business and to sell a portion of our traditional variable annuities, advancing our pivot towards less market sensitive and higher growth businesses. Second, We continue to advance our cost savings program and remain on track to achieve $750 million of savings by the end of 2023. And third, with the support of our rock solid balance sheet, we're maintaining a disciplined and balanced approach to redeploying capital. I'll provide an update on each of these transformation initiatives before turning it over to Rob and Ken. Turning to slide three, in September, We reached an agreement to sell a block of our traditional variable annuities to Fortitude RE. This divestiture, which is expected to close in the first half of 2022, represents approximately 20% of our traditional individual annuities account values and significantly advances our goal of cutting in half the earnings contribution of legacy variable annuities products through a mix of strategic transactions and natural runoff. This transaction expands upon our prior divestiture activity, including the agreement we announced in July to sell our full-service recordkeeping business and the successful completion of the sales of our Taiwan and Korea insurance businesses. As a result of these divestitures to date, we expect to generate net proceeds of approximately $6 billion by the first half of 2022, and we continue to explore additional opportunities to de-risk in-force blocks of business. With a pending sale of our full service record keeping business and our annuities block transaction, we have combined our individual annuities and retirement businesses to better serve the retirement needs of both individuals and institutions and support our growth strategy. Turning next to our cost savings program on slide four, we are progressing well and remain on track to achieve our $750 million cost savings target by the end of 2023. as we look to reduce expenses while improving both the customer and employee experience. To date, we have achieved $590 million in run rate cost savings, exceeding our $500 million target for the full year. These savings include $145 million achieved in the third quarter for a total of $385 million this year. Turning to slide five. We continue to demonstrate a disciplined and balanced approach to capital deployment by enhancing returns to shareholders, reducing leverage, and investing in the growth of our businesses, all supported by our rock-solid balance sheet. Year to date, we've returned $3.5 billion to shareholders, including $2.1 billion of share buybacks and $1.4 billion in dividend payments, reflecting a 5% increase in our quarterly dividend compared to last year. and we're targeting to return $11 billion of capital to shareholders by the end of 2023. During the third quarter, we also took steps to enhance our financial flexibility by redeeming $900 million of outstanding debt. This reduced financial leverage and generated $30 million in annual interest savings going forward. We also continue to deploy capital in our businesses to drive long-term growth. For example, This quarter we completed a $5 billion funded pension risk transfer transaction, which is the fourth largest transaction in the history of the PRT market and demonstrates our expertise, ability to execute at scale, and commitment to this market. We also deployed capital to support our ongoing pivot to less interest rate sensitive and higher growth products, including our FlexGuard and Variable Life products. Our capital deployment is supported by our balance sheet strength, including highly liquid assets of $3.8 billion at the end of the third quarter and a capital position that continues to support a AA financial strength rating. Turning to slide six, I'm pleased to report a meaningful expansion of our environmental, social, and governance commitments. Earlier this week, we announced our commitment to achieve a net zero emissions across our primary global home office operations by 2050, with an interim goal of becoming carbon neutral by 2040. We're also carefully assessing the emissions impact of our investment portfolio. As an immediate action, we will restrict new direct investments in companies that derive a material portion of their revenues from thermal coal. Separately, on the social front, the Prudential Foundation achieved an important milestone during the quarter. reaching $1 billion in funding to partners aimed at eliminating barriers to financial and social mobility around the world since making its first grant in 1978. These investments include funding aligned with our racial equity commitments to support organizations such as those supporting minority-owned small businesses and historically black colleges and universities that foster black economic empowerment and address the racial wealth gap. This milestone by the foundation follows the $1 billion investment mark achieved in our impact investing portfolio in 2020. We are confident these actions taken alongside of our strategic transformation will help us build a more sustainable company on behalf of all our stakeholders. Thank you for your time this morning. And with that, I'll turn it over to Rob.