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, sir.

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 Slicer, 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 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 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. And now I'll turn it over to Charlie.

Thank you, Bob. And thanks to everyone for joining us today. Our second quarter financial results reflect the impact of macroeconomic environments, including the unusual confluence and magnitude of rising interest rates, widening credit spreads, and equity market declines. In addition, We strengthened our individual life reserves as part of our annual review of assumptions, which had a significant impact on our results. This was primarily driven by an increase in our guaranteed universal life reserves. As a reminder, we discontinued single life guaranteed universal life sales in 2020 as part of our strategy to de-risk our product mix, and we continue to make strategic progress in transforming our businesses to be less market sensitive and more nimble. We also made additional investments to enhance our long-term sustainable growth. We did this in several ways. First, we significantly reduced our market sensitivity by completing our planned divestitures. Second, we invested in growth businesses and partnerships to address customer needs and expand access to our products and solutions. And third, we continued to advance our cost savings program and now expect to reach our $750 million target one year ahead of schedule. We executed on these strategic initiatives with the support of our solid balance sheet. Our strong financial position provides us with the flexibility to navigate through the current macroeconomic conditions while continuing to invest in the long-term growth of our businesses and return capital to shareholders. We're also confident that a higher rate environment will benefit our businesses over time, despite the short-term impacts on our financial performance. I'll now provide an update on the progress of our strategic initiatives. Turning to slide three, we are executing on our plans to reposition the businesses by reducing market sensitivity and making investments to support long-term sustainable growth. We completed the sales of our full-service business and a portion of our traditional variable annuities in April. Together, these divestitures resulted in a $1.5 billion pre-tax gain and further reduce the overall market sensitivity of our businesses by approximately 20%. Moving to our growth investments, we are investing in programmatic acquisitions and partnerships that will help us grow in emerging markets and expand access to investing, insurance, and retirement security around the world. In Africa, we completed our acquisition of an initial minority stake in Alex Forbes, a leading provider of financial advice retirement, investment, and wealth management in South Africa. We are now in the process of increasing our stake in the company by up to an additional 18% through a tender offer. In June, we established a partnership with MercadoLibre, the largest e-commerce platform in Latin America with approximately 200 million users. This will enable us to deliver life insurance and accident and health products tailored to the platform's mass market customer base. At the same time, we are investing in the growth of our products that meet the evolving needs of our customers. Our FlexGuard buffered annuity product recently surpassed $10 billion in sales since launching two years ago. We are also experiencing strong sales from our more recently launched FlexGuard income offering. Turning to our cost savings initiative on slide four, we now expect to achieve our full $750 million cost savings target in 2022. one year ahead of schedule. We recorded $175 million in cost savings during the second quarter for a total of $725 million of run rate savings to date since 2019. We've also implemented a process of continuous improvement to identify and execute on additional cost savings opportunities in the future. Turning now to slide five, our robust balance sheet. is at the core of all our efforts to transform Prudential to be a leader in expanding access to investing insurance and retirement security around the world. This financial strength also provides the flexibility to balance investing in our businesses with delivering attractive returns to our shareholders. Our robust financial position includes a high-quality, well-diversified investment portfolio. Our capital position supports a AA financial strength rating And we had $7 billion in highly liquid assets at the end of the second quarter. During the second quarter, we returned over $800 million to shareholders. And since the beginning of 2021, we have returned a total of $6 billion towards our objective of $11 billion by the end of 2023. Finally, a comment on the environmental, social, and governance front. In June, we published our third annual sustainability report, which details the progress of our ESG initiatives, including information on our EEO-1 and pay equity disclosures, commitments to racial equity, and achieving net zero emissions. We believe in transparency and hold ourselves accountable to the commitments detailed in our report. With that, I'll turn it over to Rob for an update on our business performance.