The paragraph introduces a conference call for Prudential's Quarterly Earnings, led by Bob McLaughlin. Key executives, including Chairman and CEO Charlie Lowrey, participate in the call to discuss the company's financial performance. The discussion may involve forward-looking statements and non-GAAP measures, with relevant information available on their website. Charlie Lowrey highlights the company's strong third-quarter performance, noting growth in U.S. and international insurance and retirement sales, as well as strong investment results in their Global Investment Management division, PGIM.

The paragraph discusses the company's strategic focus on capital deployment and growth in retirement-related businesses. It highlights their leadership in pension risk transfer, citing a $6 billion transaction with IBM, and notes strong sales of annuity products as evidence of a successful diversification strategy. In Japan, retirement and savings product sales have increased by 30% year-to-date. PGIM, the company's investment management arm, manages nearly $0.5 trillion in assets and serves over half of the world's largest pension funds. The company continues to expand its product offerings and global distribution networks to enhance growth.

The paragraph outlines the company's strategic growth initiatives across various business segments. In Retirement Strategies, they are expanding annuity solutions and forming new partnerships, such as with JPMorgan Asset Management. The Group Insurance segment focuses on growing disability and supplemental health products, while Individual Life is launching capital-efficient products. Internationally, Japan and Brazil are seeing benefits from new products and distribution channels. PGIM is experiencing strong affiliated flows, with an increase in private alternatives capital deployment, and is positioned to meet retail demand for fixed-income products. Investments in technology are enhancing sales, service, and claims, aligning with their growth strategy. The company has reinsured a significant portion of its guaranteed universal life block with Wilton Re, reducing reserves to become more capital-efficient. Overall, over $700 million was returned to shareholders in the third quarter, supported by a disciplined capital deployment approach.

The paragraph highlights the company's strong financial position and strategic growth efforts, supported by a AA rating and over $4 billion in liquid assets. The company emphasizes a disciplined approach to asset-liability management and a diversified high-quality portfolio. The financial results for the third quarter of 2024 show a pretax adjusted operating income of $1.6 billion, translating to $3.48 per share after tax, and a year-to-date return-on-equity improvement to 13.7%. The growth is driven by increased spread and fee income, supported by strong sales and favorable interest rates and equity markets, despite increased expenses. Specifically, PGIM, the global investment manager, saw increased asset management fees due to favorable investment performance and a recent acquisition, partially offset by higher growth-supporting expenses.

The paragraph discusses improved business performance due to favorable underwriting results and higher spread income from business growth and increased interest rates, despite some setbacks from lower annuity fee income and higher business growth expenses. Internationally, less favorable underwriting results were noted due to U.S. dollar product surrenders and yen weakness, although joint-venture earnings in Chile and higher spread income helped offset this. PGIM, the company's global investment manager, showed strong investment performance, with a significant portion of assets exceeding benchmarks over one, five, and ten-year periods. Assets under management grew by 15% to $1.4 trillion due to market appreciation, investment performance, and net inflows, including substantial affiliated net flows driven by retirement strategy sales. Total net flows were positive, aided by institutional pension plan activity.

The paragraph highlights PGIM's role as Prudential's investment engine, supporting growth in retirement, asset management, and insurance through its investment expertise and access to capital. It emphasizes PGIM's competitive advantages, including private alternatives and recent acquisitions, which enhance solutions and create value for customers. The U.S. businesses benefit from diversified earnings and aim to expand their market through new financial solutions and improved distribution. Notable achievements include nearly $15 billion in retirement sales in the third quarter, significant institutional retirement sales, and major pension risk transfer transactions, including with IBM.

The paragraph highlights the company's strong financial performance in various sectors. Institutional retirement sales reached over $26 billion, capturing 40% of the PRT market, while individual retirement saw its best quarter in over a decade with $3.6 billion in sales. The success is attributed to product innovations and pivots, particularly in registered index-linked and fixed annuities, coupled with reduced market sensitivity through legacy variable annuities run-off. Group insurance sales rose by 3% year-to-date due to growth in supplemental health. The firm's strategy includes product and client diversification and technology use to boost efficiency and customer experience, achieving a benefits ratio of 83.4%. In individual life, sales grew by 13% from the prior quarter and 9% year-to-date, helped by distribution strengths and capital-efficient products like FlexGuard Life. Internationally, the focus is on high-quality service and market presence in Japan and emerging markets, employing a needs-based approach and broadening distribution and product offerings.

The article discusses the performance and strategy of Prudential in emerging markets, emphasizing the growth in sales, particularly in Japan and Brazil, due to product expansion and third-party distribution. The company aims to position itself as a leader in investing, insurance, and retirement security globally. It highlights a 25% increase in international sales and focuses on investing in markets that enhance customer experiences and develop innovative financial solutions. In terms of financial performance, Yanela Frias notes that the third quarter's pre-tax adjusted operating income was $1.6 billion, with earnings per share of $3.48. While variable investment income fell short by $50 million due to lower private equity returns, underwriting experience exceeded expectations by $15 million. Future reporting will include pre-announcements of estimated variable investment income results.

The paragraph discusses financial adjustments and expectations for the company's fourth quarter. It highlights a $100 million expense adjustment due to increased investments aimed at supporting growth. For the full year 2024, a projected loss of $1.8 billion in Corporate & Other segments is maintained. Seasonal decreases in international premiums are also anticipated. The baseline earnings per share (EPS) for the fourth quarter is projected at $3.34, but excluding specific items, it would be $3.67. The company's underlying earnings have improved, reflecting a strategic business shift and continued investments. Additional factors like new money rates, cash holdings, floating rate assets, and pension risk transfer transactions impact earnings. The runoff and elevated surrenders of legacy variable annuities are also noted, especially in Japan.

The paragraph discusses the financial outlook and strategic plans of a company in light of recent currency fluctuations, specifically the weakening yen against the U.S. dollar. It mentions that the exchange rate hit a 38-year low in the second quarter, which has impacted earnings, although there was some improvement in the third quarter. The company plans to introduce new intermediate-term financial targets to align with its long-term business nature, replacing quarterly baseline disclosures with the next quarterly earnings release. It highlights strong regulatory capital ratios and liquidity levels, with $4.3 billion in cash and liquid assets, exceeding a minimum target of $3 billion. The company is focused on maintaining financial strength, supporting organic growth, and returning capital to shareholders. It emphasizes its transformation into a higher-growth, more capital-efficient entity and concludes by opening the floor for questions, with Ryan Krueger from KBW asking for an update on Prismic and potential activities.

In the paragraph, Rob Falzon and Charlie Lowrey discuss their company's strategy for using capital freed up from reinsurance transactions. Rob emphasizes the company's ongoing efforts to optimize its balance sheet and pursue new sales financing, with a particular focus on Japan. The team in Tokyo will help facilitate third-party reinsurance transactions, particularly back-book transactions, which they see as a strategic opportunity. Rob expresses confidence in their ability to scale their business due to their visible pipeline, available capital, and the right expertise at Prismic. Charlie Lowrey is poised to further contribute to the discussion.

The paragraph discusses the company's approach to capital deployment, highlighting their commitment to being responsible with capital. They focus on maintaining a strong balance sheet, investing for organic growth and acquisitions, and returning excess capital to shareholders. Recently, they've supported sales and new product launches, returning over $700 million to shareholders. Following this, Suneet Kamath from Jefferies asks about the profitability of new retirement products in Japan compared to previous death protection products. Andy Sullivan responds positively, stating they are pleased with the sales profitability and do not anticipate any margin impacts due to the product mix shift.

The paragraph discusses the company's efforts to capitalize on opportunities in Japan's retirement market due to increasing demand for diverse retirement products amid low bank savings yields. The company has successfully expanded its product offerings, leading to a 30% year-to-date increase in retirement investment product sales, which constituted the majority of sales in Japan for the quarter. Suneet Kamath inquires about the reasons behind the predicted record annuity sales for 2024 and their sustainability into 2025. Caroline Feeney responds by highlighting their strong third-quarter performance, with over $3.5 billion in sales, attributing success to a diversified annuity portfolio that meets consumer needs for savings and income protection, marking their broadest range of individual products to date.

The paragraph discusses the growth and sustainability of a company's annuity franchise over recent years, highlighting that it now has five products generating over $1 billion in sales, compared to just one two years ago. The growth is attributed to aging demographics, with over 11,000 Americans turning 65 daily and 30 million Americans reaching that age by 2030. Additionally, there's an increasing demand for protected savings and income solutions, contributing to a strong industry performance with year-to-date sales exceeding the previous year by over 25%. The paragraph also briefly touches on Japan, where about 30% of sales in the third quarter are yen-based, noting a strategic increase in yen-based products driven by intentional actions to maintain a diversified product portfolio globally.

The paragraph discusses Japan's diversification strategy in life insurance, retirement, and savings products, emphasizing a balance between U.S. dollar and yen offerings. This approach has led to a significant 29% increase in year-over-year sales. The conversation shifts to a broader industry question about a Swiss Re Research Institute report predicting excess mortality to persist for 5 to 10 years, notably in the U.S. and Japan. Yanela Frias acknowledges this view aligns with their internal assumptions, which anticipate excess mortality until 2028 before returning to pre-pandemic levels. She highlights the company's diversified business mix and regular adjustments to mortality assumptions, providing natural hedges against mortality risks.

The paragraph discusses the current state and expectations for institutional fixed income flows at PGIM, following a question from Nick Annitto. Andy Sullivan explains that there is near-term variability due to overfunded defined benefit (DB) plans derisking, which causes money movement. However, he anticipates that as interest rates normalize, more consistent money flow will return to institutional fixed income, benefitting their business. Sullivan emphasizes the importance of evaluating flows over a longer timeframe, including affiliated flows from pension risk transfer transactions and asset-intensive annuities and life insurance.

The paragraph discusses the performance of PGIM's pension management and retail activities. It notes that positive institutional flows from third-party and affiliated sources have contributed significantly to their assets under management in 2024. Retail inflows are also strong, particularly in fixed income strategies, with expectations for continued growth due to anticipated Federal Reserve policy changes. In response to a question from Nick Annitto, Charlie Lowrey explains that the company has focused on becoming more capital efficient and capturing high-growth market opportunities. He highlights significant reductions in their traditional variable annuities portfolio and guaranteed universal life reserves, mentioning a transaction with Wilton Re to illustrate these strategic shifts.

The paragraph discusses a company's strategic focus on balancing capital efficiency and growth by investing in market-leading businesses. They are open to exploring additional opportunities that align with their strategic and financial goals. During a conference call, John Barnidge from Piper Sandler inquires about variable investment income disclosures, which Yanela Frias confirms will be included in the AUM disclosures. Barnidge also asks about growth opportunities in Workplace Solutions, to which Caroline Feeney responds that they are optimistic due to strategic partnerships aimed at enhancing customer enrollment and claims management experiences, including one with a technology firm improving the benefits experience for many.

The paragraph discusses a company's innovative platforms and partnerships aimed at improving operations and customer outcomes. One platform enhances employee enrollment through personalized support, while another, in collaboration with Evolution IQ, uses AI to streamline claim evaluations for disability cases, reducing manual work and improving customer results. The company is experiencing growth driven by strong fundamentals, diversification strategy, and strategic investments. John Barnidge and Wes Carmichael participate in the discussion, where Yanela Frias announces plans to introduce new financial targets for 2025 to offer better insights into the company's financial outlook and align with its long-term business nature.

The paragraph discusses changes in business strategy and introduces a new business venture. The company plans to replace its quarterly baseline and pre-announce updates beginning with the fourth quarter earnings results. Wes Carmichael asks about the company's entry into the stop-loss business, to which Caroline Feeney responds. She explains that by entering the medical stop loss market, the company aims to diversify its portfolio and better serve mid-market clients. The offering will complement other group products, benefiting from the company's existing customer and broker relationships. Initially, the company will proceed cautiously, ensuring sustainable growth through disciplined underwriting and reinsurance strategies. Though the stop-loss business will initially be a small part of their portfolio, they have a long-term plan to expand strategically. The conversation ends with the operator opening the floor to another question from Wilma Burdis of Raymond James.

Rob Falzon discusses the establishment of the Prismic Japan team to capitalize on reinsurance opportunities in Japan. To operate effectively, they need an agency license for Prismic in Japan, driven by the potential large market opportunity. The new economic solvency regime (ESR) in Japan poses challenges for long-duration and foreign-currency-denominated liabilities, particularly affecting insurers selling U.S. dollar products. There's strong customer interest in these products due to their returns, and Prismic aims to offer solutions that align with economic financing demands while maintaining attractive propositions for Japanese consumers. Their established brand and scale provide credibility in partnering with other insurers for optimization opportunities.

The paragraph is a conversation between Wilma Burdis and Caroline Feeney about the attractiveness of the U.K. market for longevity reinsurance, particularly in pension risk transfers. Caroline explains that the company sees strong funding levels in the U.K., with expectations of a $70 billion market size for pension risk transfer, much of which will require reinsurance solutions. The company is a leader in this field in both the U.S. and the U.K., and also focuses on the Netherlands. Subsequently, Alex Scott from Barclays asks about elevated surrenders in foreign currency products, particularly in Japan, leading to earnings pressure. Andy Sullivan explains that the weaker yen is causing increased U.S. dollar policy surrenders due to affordability issues for U.S. dollar recurring premium products as it now requires more yen to pay the premium.

The paragraph discusses the impact of customers monetizing gains from U.S. dollar investment products, leading to reduced coverage or policy surrender, affecting sales and earnings growth in Pru's PII business segment. Alex Scott inquires about reinsurance in Japan and potential effects on capital and solvency, with Rob Falzon responding that reinsurance is seen as a strategy to derisk, grow the portfolio, and optimize the backbook in response to economic solvency regimes.

The paragraph discusses the strategic use of reinsurance for optimizing economic and business outcomes. It highlights different scenarios where reinsurance might be leveraged: enhancing product offerings with compelling value, optimizing capital based on changing regulatory regimes, and capitalizing on market valuation discrepancies for better returns. Yanela Frias adds an example, noting that they have reinsured $3 billion of U.S. dollar-denominated products from Japan to their Bermuda affiliate and executed further transactions to stabilize capital across entities, including Japan. A follow-up question from Wes Carmichael deals with comments on the economic impact of regulations on long-duration liabilities.

The paragraph involves a discussion between Wes Carmichael, Andy Sullivan, and Yanela Frias about the impact of transitioning to the ESR framework on Prudential's capital position and the Japanese insurance market. Yanela Frias assures that Prudential's Japan businesses are well-capitalized and are expected to maintain strong financial strength ratings under the new ESR standards. Andy Sullivan adds that Prudential has experience managing changing capital regimes and emphasizes their diverse product portfolio and capabilities in Japan, which position them well for continued growth. Wes Carmichael asks about the outlook for the pension risk transfer market into the fourth quarter and beyond, referencing a significant third quarter deal with IBM. Caroline Feeney is prepared to respond to this query.

In the paragraph, Caroline discusses Prudential's strong market leadership in the Pension Risk Transfer (PRT) market, with over $16 billion in sales and a 40% market share. She highlights the attractiveness of the U.S. PRT market, citing $3 trillion in outstanding corporate pension liabilities and a strong pipeline of opportunities. Despite competition, Prudential's scale, underwriting experience, and asset origination capabilities allow them to price competitively and achieve good returns. Around half of their transactions are with existing clients, showcasing their expertise. Yanela then clarifies that Prudential will eliminate quarterly baseline disclosures, replacing them with intermediate-term financial targets starting in 2025, and will pre-announce variable investment income.

The paragraph discusses the potential impact of executing a backbook deal with Prismic involving a block of business from Japan. Suneet Kamath from Jefferies questions if such a deal would initially cause earnings per share (EPS) pressure, as the company would give up some earnings to Prismic partners, despite owning 100% currently. While the deal would free up capital for new investments, there might be a lag between losing earnings and deploying the freed capital. Rob Falzon confirms Kamath's understanding, explaining that such impacts aren't unique to Japan and occur with all their reinsurance deals. Reinsuring unlocks capital by releasing reserves and embedded value, particularly given the high margins of Japanese products. Although it removes associated earnings, the company's analysis focuses on how free capital can be optimally redeployed.

In the paragraph, Rob Falzon discusses the management of assets backing Japanese liabilities, stating that the vast majority are managed by PGIM. There are only a few instances where third-party managers are involved in areas outside PGIM's focus. When these liabilities are transferred into Prismic, PGIM will continue to manage them, benefiting from a different economic arrangement that is generally accretive to PGIM. Suneet Kamath acknowledges this explanation. The session concludes with Charlie Lowrey expressing satisfaction with the company's progress towards becoming a higher-growth, more capital-efficient entity and emphasizes the company's readiness to meet its global customers' needs. The teleconference and webcast session then ends.

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