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 this 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 Balson, 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 that 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 a 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 Charles.

Thank you, Bob, and thanks to everyone for joining us today. Our third quarter financial results reflect the impact of market conditions, including the variability in alternative investment returns and lower fee income, as well as an elevated level of COVID-19 hospitalization claims in Japan, partially offset by underlying business growth including the benefit from rising interest rates. We continue to transform our businesses to be less market sensitive and better positioned to deliver sustainable long-term growth. This includes investing in products and solutions that meet the evolving needs of our customers and achieving our $750 million cost savings target one year ahead of schedule. Our rock-solid balance sheet provides the financial strength to navigate the current macroeconomic environment and support our customers, shareholders, employees, and other stakeholders. Turning to slide three, I'll start off today with an update on how we are investing in long-term growth opportunities that meet the evolving needs of our customers and support our vision to be a global leader in expanding access to investing, insurance, and retirement security. Prudential was selected by IBM for a 50% participation in the second largest pension risk transfer transaction in U.S. market history, with a total value of over $16 billion. This transaction builds upon our leadership role in this market, where we have helped employers safeguard their workers' retirements since pioneering the first jumbo PRT transaction a decade ago. We are well positioned to continue to benefit from the growing PRT market, which is expected to have over $50 billion of total industry transactions in 2022. In the individual retirement market, our FlexGuard suite continues to grow in both sales volume and product scope, with an additional $1 billion in sales, bringing the total to nearly $12 billion since its launch in 2020. Building upon FlexGard's tremendous success, we plan to introduce FlexGard Life, an index variable universal life product, later this month. We expect our businesses will benefit from the increased demand for retirement decumulation products over the next decade, as we strengthen our role as a leader in the $300 billion annuities market. We're making similar growth investments on behalf of our international customers as well. During the third quarter, We expanded into Argentina, our partnership with MercadoLibre, Latin America's largest e-commerce platform with approximately 200 million users. Our expanded partnership follows our initial launch with MercadoLibre in Brazil earlier this year, which delivers life insurance and accident and health products tailored to the platform's mass market customer base. Moving to slide four. As I noted earlier, we have now achieved $765 million of annual run rate cost savings, exceeding our target of $750 million, and completed this one year ahead of schedule. This includes $180 million realized in the third quarter. To achieve these cost savings, we carefully assessed all aspects of our business and operations, from our physical office space, to how we leverage technology to deliver more efficient customer experiences. For example, by embracing a hybrid work model, we reduced our office space footprint in the US by approximately 50%, which results in an annual run rate savings of about $50 million. On the customer experience front, our use of artificial intelligence accelerated our individual life underwriting from 22 days to 22 seconds. And our new digital claims processing capability can now deliver funds to most customers in six hours as opposed to six days. We also automated and reduced the timing of fund verification and processing on about one third of new annuity sales from what was two to three weeks to now two to three days. And our group insurance claims processing is now three times faster thanks to new data systems we have installed. Turning now to slide five, our rock solid balance sheet and disciplined approach to capital deployment has helped Prudential navigate financial and macroeconomic challenges for nearly 150 years. Consistent with our AA financial strength rating, we have a strong capital position, a high quality, well diversified investment portfolio, and approximately $5 billion in highly liquid assets at the end of the third quarter. We continue to balance, Investing in our businesses for long-term growth with shareholder distributions. In addition to the investments in our businesses that I previously mentioned, we also returned over $800 million to shareholders during the third quarter through dividends and share repurchases for a total of $7 billion since the beginning of 2021. Looking ahead, we expect higher interest rates will economically benefit our business over time. We have the financial strength to continue to navigate the current economic and market environment. As we monitor developments, we will maintain our disciplined approach to capital management and redeployment, and our board will review our 2023 capital plan early next year. Before turning it over to Rob, I'd like to touch upon the leadership transition we announced last week as part of our thoughtful approach to creating a sustainable long-term leadership structure. Beginning early next year, Andy Sullivan will move from his current role as head of our U.S. businesses, including PGM, to lead our international businesses and PGM. Caroline Feeney, who currently leads our U.S. retirement and insurance businesses, will take on an expanded role as head of our business portfolio in the U.S. and will join our executive leadership team. Scott Fleister, who currently leads our international businesses. We'll retire in the first quarter of 2023. We thank Scott for his tremendous contributions to Prudential over the course of his 35-year career with the company and look forward to working closely with Andy and Caroline in their new roles. I'll now turn it over to Rob for an update on our business performance.