The operator welcomes participants to Prudential's Quarterly Earnings Conference Call, where they will hear from various representatives of the company. The call will include forward-looking statements and references to non-GAAP measures. The CEO, Vice Chairman, and CFO will provide prepared comments before taking questions. The company's results for the quarter show positive momentum in all businesses, with significant net flows in PGIM and strong sales in US and International Insurance.

In the quarter, we successfully shifted our business mix and focused on growing our market-leading businesses. Our disciplined approach to capital management allowed us to make investments and return capital to shareholders. Our strong balance sheet, strategic business mix, and distinct strategy position us for long-term growth. Examples of our success include robust net flows in our PGIM fixed income business, strong sales and record account values in our Institutional Retirement Strategies and Individual Retirement Strategies businesses, and increased sales in our group insurance and individual life insurance businesses. We have also seen success in diversifying our product offerings and shifting towards more capital efficient products, such as FlexGuard Life.

Prudential has seen success in expanding their product portfolio in Japan and reaching new customers in emerging markets. They have also made strategic moves to reduce market sensitivity and increase capital efficiency, such as closing a reinsurance transaction and selling off non-core businesses. The company is also focused on improving their operating model through technology and partnerships. They have been recognized for their customer satisfaction, and their disciplined approach to capital deployment allows them to invest in their businesses and return capital to shareholders. In the first quarter, they returned over $700 million to shareholders and increased their quarterly dividend for the 16th consecutive year.

In this paragraph, the speaker discusses the company's focus on creating sustainable and profitable growth, supported by their strong balance sheet and risk management framework. They express confidence in their strategy to expand access to investing, insurance, and retirement security globally. The financial results for the first quarter of 2024 show a 16% increase in pre-tax adjusted operating income, driven by strong sales and net inflows, higher interest rates and equity markets, and diversified sources of earnings. The performance of their PGIM investment management business was particularly strong, with higher asset management fees and positive net inflows.

The increase in other related revenues was due to higher incentive fees and seed and co-investment income, but this was partially offset by higher expenses. The earnings growth in the U.S. businesses was driven by higher spread income and more favorable underwriting results, but also offset by higher expenses and lower legacy traditional variable annuity fee income. The international businesses also saw earnings growth, mainly from higher spread income and joint venture earnings, but offset by less favorable underwriting results. PGIM, the global investment manager, has diversified capabilities and strong investment performance, with 80% of assets under management exceeding their benchmarks over the past year. Assets under management increased by 6% driven by market appreciation and positive third-party net flows. Institutional and retail inflows were strong, with a large fixed income client mandate and positive momentum in public fixed income.

In the first quarter, Prudential experienced strong affiliated flows due to retirement strategy sales and the success of PGIM and their insurance and retirement businesses. PGIM's asset origination capabilities and investment management expertise, along with access to private capital, contribute to the growth of their businesses. The US businesses also saw diversified earnings from fees, net investment spread, and underwriting income. Prudential continues to focus on growing their market-leading businesses by improving customer experiences and expanding their addressable market. Retirement strategies generated strong sales of $14.3 billion in the first quarter, including two large US funded pension risk transfer transactions. Individual Retirement sales were the best in over a decade.

The company has experienced strong sales growth in their FlexGuard and FlexCard Income products, as well as in their fixed annuities. They are also diversifying their products and client segments and utilizing technology to increase efficiency and improve customer experience. In their International businesses, they are focused on expanding their presence in Japan and targeted high-growth emerging markets through a needs-based approach and protection product focus. Sales in their International businesses have increased by 5% compared to the previous year.

The company's higher sales in Japan and emerging markets are driving growth, and they are focused on expanding access to investing, insurance, and retirement security. The pre-tax adjusted operating income for the first quarter was $1.5 billion, resulting in earnings per share of $3.12. For the second quarter, adjustments for underwriting experience and expenses are expected to bring earnings per share to $3.43, or $3.50 if excluding second quarter-specific items.

The company is focused on driving earnings power momentum by investing in its market-leading businesses and shifting away from less profitable ones. They have a strong capital position and are maintaining a disciplined approach to capital deployment. The company is becoming more efficient and nimble, with a solid balance sheet to support its growth. They are also looking to reinsure additional in-force blocks to Prismic and have an active pipeline for future transactions.

The company is pursuing new sales and partnerships across its businesses, which require time and coordination. These opportunities are unique and driven by various considerations such as commercial priorities, regulatory requirements, and financial implications. The company sees potential for growth at the intersection of asset management and insurance, and believes its brand and scale give it a competitive advantage. G&A expenses were up 7% year-over-year.

Yanela Frias and Caroline Feeney discuss the increase in G&A expenses in the first quarter and attribute it to supporting growth and one-time expenses. They also mention strong sales in retirement strategies, with $14 billion in sales and $11 billion in pension risk transfer. They highlight the company's leadership in the market and mention that individual sales have nearly doubled from the previous year.

The company's success is attributed to their efforts to diversify their annuity portfolio and expand their distribution. This has allowed them to meet more consumer needs and increase core earnings. They recently received a large mandate from a key pension client for a high-quality fixed income portfolio, which contributed to their positive net flows. The fee rate for this mandate is lower than their overall average. The company is pleased with their overall flows and their position as a leading partner in the marketplace.

The company has been consistently adding new clients on the institutional side and saw positive flows on the retail side. They had significant positive affiliated flows this quarter driven by pension risk transfer. The company is confident in their outlook and believes they will be a net winner and grower over time. The investors in Prismic have indicated a desire to put a significant amount of capital to work in the strategy outlined by the company.

The company has seen strong growth in fixed annuity sales, which is part of a larger trend in the industry. This growth is attributed to the company's expansion of their product portfolio and ability to meet customer needs.

The company attributes their success in meeting increased market demand to their brand, distribution strength, and dynamic pricing process. They see their new product as a core offering and are pleased with its potential to complement their existing solutions. They had a strong start to the year in their pension risk transfer business, with two large transactions totaling $9 billion. They expect to see continued growth in this area due to a healthy pipeline and their expertise in handling large and complex transactions.

Caroline Feeney, Prudential's CEO, discusses the capital strain from growing the business and the company's appetite for overall growth after a successful first quarter. She mentions that large transactions consume a significant amount of capital but are effective in deploying it and generating returns. Feeney also emphasizes the benefits of the company's PRT business and its strong pipeline of opportunities. In response to a question about the regulatory environment in Bermuda, Rob Axel, Prudential's CFO, mentions the need for regulatory coordination in transactions and gives an update on the regulatory landscape.

The company has been actively involved in the consultation process for the Bermuda Monetary Authority's (BMA) updates to their regulatory regime. While the updates will generally result in a more conservative level of capital required and reserving, the impact will vary depending on the type of product. The BMA is committed to maintaining a principles-based and economically-driven regime, which, along with its status as a reciprocal jurisdiction in the US and equivalent in Europe, makes it an attractive place for insurers to do business. PRT can be done economically within both the US and Bermuda regimes, and the company's decision to use one over the other is more driven by the source of investors.

The speaker discusses the reasons for funding the PRT through the Bermuda framework rather than a US framework, citing institutions that provide capital to enter jurisdictions like Barbuda as the primary driver. They also provide an update on the transition to ESR in Japan, mentioning strategies to adapt to potential new regulations. The speaker then answers a question about the pipeline of potential M&A opportunities.

Charlie Lowrey, speaking on the impact of exiting Assurance IQ, states that the company has learned from past acquisitions and will now focus on acquiring more established businesses to expand their capabilities and scale. Caroline Feeney adds that the group business had good results in the first quarter, with strong sales influenced by their strategy to maintain core product leadership and grow in smaller markets and in disability and supplemental health.

The company's disability marketplace saw a 15% increase in earned premiums compared to the previous year. This success is attributed to their focus on enhancing the customer experience and streamlining the claims process. They also maintain strong pricing discipline and only accept cases that make economic sense. The majority of new business premiums will be seen in the first quarter, with continued growth in the under 5,000 lives market. The group underwriting results for the first quarter were strong, with a benefit ratio of just under 85%. This is the company's best first quarter benefit ratio ever and falls within their target range. The success in disability underwriting is due to effective claims management, strong employment, and a high interest rate environment.

Suneet Kamath asks Caroline Feeney about the strong sales in Individual Retirement and where the demand is coming from. Feeney explains that it is a combination of more people turning 65 and realizing the importance of protected income and savings in retirement. She also mentions that the industry is able to offer broader solutions and that they are on track for a third consecutive record year of sales. Later, Rob is asked about the $48 billion of insurance margins mentioned in the script and he explains that it is a significant number and they are looking for ways to monetize it rather than just waiting for it to flow through the income statement.

Rob Falzon and Yanela Frias discuss the changes in accounting for long duration under LDTI and the ability to calculate and share margins. These margins represent present value of profits in individual products and can be accelerated through reinsurance. Yanela also mentions a recent hybrid issuance and redemption of previously issued hybrids.

The company has decided to wind down its Assurance IQ business and has moved its results to divested businesses. This decision will not have a significant impact on earnings and all wind-down costs have been accrued in the current quarter. The company also has assets on its balance sheet that will convert to cash over time.

The company will assess the value of its assets during the wind-down process and try to monetize any incremental value. The exit from Assurance IQ is not expected to have a significant impact on earnings. The commercial mortgage loan portfolio remains stable and resilient, with no material changes since year-end. The portfolio is well-diversified and benefits from PGIM's expertise in origination and local markets.

The LTVs and debt service coverage ratios for the mortgage portfolio did not change significantly from the end of the year to the first quarter. The office sector showed negative trends, with LTVs increasing from 71% to 74%, but coverage ratios remaining stable. Reserves in the real estate portfolio increased modestly, and the overall portfolio is expected to be resilient despite potential further declines in value. There were four modifications and favorable resolutions for $2 billion of maturities in 2023, and $2 billion or 4% of the portfolio is maturing in 2024.

Caroline Feeney, speaking on behalf of the company, discusses the competition levels in annuity and life products. She notes that the company is pleased with their first quarter results, which saw an increase in sales of over 10%. They continue to write new business at healthy returns and see positive momentum for their portfolio, including core products like variable universal life and term. The company is also staying ahead of competition by rolling out new solutions, such as their FlexGuard Life indexed variable universal life product, which achieved its highest quarterly sales in the past quarter.

The company is confident in their products, pricing discipline, and distribution strength, which will allow them to remain a leader in the life market. While there is increased competition in the annuities market, the company's strong brand, execution, and distribution partnerships have allowed them to achieve strong results. They also plan to focus on select high-growth geographies in their emerging market strategy and remain committed to Latin America. The sale of Argentina will not have any direct implications on the rest of their portfolio. The company is also open to programmatic bolt-on acquisitions.

The speaker discusses the company's focus on organic growth and their approach to potential acquisitions, emphasizing patience and discipline. They express satisfaction with the progress made in expanding their businesses and their commitment to providing access to investing, insurance, and retirement security. The speaker concludes by thanking the audience and ending the call.

This summary was generated with AI and may contain some inaccuracies.