Ladies and gentlemen, thank you for standing by. And welcome to the Prudential Second Quarter 2010 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Mr. Eric Durant. Please go ahead.

Thank you very much, Cynthia. In order to help you to understand Prudential Financial, we will make some forward-looking statements in the following presentation. It is possible that actual results may differ materially from the predictions we make today. Additional information regarding factors that could cause such a difference appears in the section titled Forward-Looking Statements and Non-GAAP Measures of our earnings press release for the second quarter of 2010, which can be found on our website at www.investor.prudential.com. In addition, in managing our businesses, we use a non-GAAP measure we call adjusted operating income to measure the performance of our Financial Services businesses. Adjusted operating income excludes net investment gains and losses as adjusted, and related charges and adjustments as well as results from divested businesses. Adjusted operating income also excludes recorded changes in asset values that are expected to ultimately accrue to contract holders and recorded changes in contract holder liabilities resulting from changes in related asset values. The comparable GAAP presentation and the reconciliation between the two for the second quarter are set out in our earnings press release on our website. Additional historical information relating to the company's financial performance is also located on our website. Well, with that behind us, thank you very much for joining us. John Strangfeld, Rich Carbone and Mark Grier have some prepared comments. And then we will welcome your questions. John?

Thank you, Eric. Good morning, everyone. Thanks for joining us. I'll be brief. Our earnings performance in the second quarter continued to be solid. Based on adjusted operating income, earnings per share were $1.51. This is down from last year's result, which reflected a greater benefit from items such as DAC and reserve unlockings that are largely market-driven. Taking these items out of both the current year and year-ago’s quarters, would produce an EPS increase of about 11%. We achieved an ROE of 11% for both the second quarter and the first half, based on annualized after-tax adjusted operating income of the Financial Services businesses. Excluding the impact of market-driven and other discrete items, ROE would be roughly 10%. Our all-in measures were also strong this quarter. Net income was $798 million or $1.70 per share. Our investment portfolio is performing well. And our general account fixed maturities are in a $5.8 billion net unrealized gain position at the end of the quarter. Our GAAP book value per share reached nearly $60 at the end of the quarter, roughly 50% higher than a year ago. And excluding the impact of unrealized gains and losses on investments and pension and post-retirement benefits, book value increased by $4.3 billion or 19%. Most importantly, our business momentum continues apace, as is demonstrated by strong flows and sales in many of our businesses. Sales in individual annuities remained exceptionally robust. Full Service Retirement recorded its 11th consecutive quarter of net additions. Our Asset Management business continues to enjoy extraordinary net flows in both institutional and retail AUM. And finally, International Insurance sales again reached a new high based on constant dollars. This success reflects our high-quality products, expanding distribution, financial strength and strong leadership across our businesses. We are focused on adding high-quality business that can contribute appropriate returns over the market cycles. We will also consider acquisitions, but will evaluate opportunities with our customary care. To sum up, our financial results are solid. Sales and flows continue to be very strong. Our businesses are competitive in their markets, well led and well positioned for the future. We like our overall balance and mix of businesses. We would like to do acquisitions, but we don't need to do them to change our business mix or to address a problem. As we've said before, we view M&A as like to do, not have to do. Now Rich and Mark will take you through the second quarter. And then we welcome your questions. Rich?

Thanks, John, and good morning, everyone. As you've seen from yesterday’s release and as you’ve just heard from John, we reported common stock earnings per share of $1.51 for the second quarter, and that's, of course, based on adjusted operating income for the Financial Services businesses. This compares to $1.87 per share in the year-ago quarter. ROE was roughly 11% for both the second quarter and the first half of the year. And that is, of course, based on adjusted operating incomes. Let me start with some high-level comments on the current quarter. We're benefiting from account value growth in our Annuity Retirement businesses, driven by strong sales and net flows as well as cumulative market value increases over the past year. In our Asset Management business, credit-related charges have declined, with commercial real estate value showing signs of improvement. And we are benefiting from higher Asset Management fees driven by strong growth in our assets under management. Lower results from our U.S. Protection business were driven by the equity market decline in the quarter and less favorable underwriting in Group Insurance. Our international businesses are continuing to perform well, and International Insurance sales are benefiting from our expanded distribution platform that Mark will discuss later on. Operating results for some of our businesses were affected in the quarter by market-driven or discrete items, and I'll go through them now. In the Annuity business, mark-to-market of hedging positions earning better derivatives associated with our living benefit guarantees, together with the hedge we put on to help protect our capital from adverse swings in financial markets, had a favorable impact of $0.65 per share. The vast majority of this impact came from the market-based measure of our own non-performance risk that we are required to apply to the embedded derivative liability…

Thank you, John and Rich. And thank you all for joining the call today. Credit market conditions were essentially benign in the quarter. As Rich mentioned, total general account credit losses and impairments this quarter were $169 million. This is the lowest quarterly level we have seen since 2007. U.S. interest rates have trended down during the quarter, driven by lower treasury rates, with a partial offset from some widening of credit spreads in most asset classes. While this has created downward pressure on some long-term re-investment rates, our domestic general account blended fixed income new money rate for the quarter has actually moved up about 30 basis points from the first quarter. While a prolonged period of low interest rates would be generally unfavorable for products with fixed rates and long guarantee periods, our exposure is mitigated by our business mix, duration matching strategies and hedging programs and risk management at the product level including low crediting rate floors and experience rating on our $38 billion of Full Service Retirement stable value balances. In our general account fixed maturity portfolio, declines in base interest rates both in the U.S. and Japan have increased our net unrealized gain position to $5.8 billion at the end of the second quarter, up from $1 billion at year end. This compares to net unrealized losses of $4.4 billion a year ago. Gross unrealized losses on fixed maturities in our general account stood at $3.3 billion at the end of the quarter. This represents a recovery of $4.5 billion from $7.8 billion a year earlier. About 6.2% of our $138 billion general account fixed maturity portfolio ranks below high and highest quality, based on amortized costs and NAIC categories as of the end of the second quarter. This compares to roughly 7% as of…

[Operator Instructions] The first question will be from Andrew Kligerman from UBS.

I'll ask a question on variable annuities. But $5.3 billion in variable annuity sales, that's a 57% year-over-year increase. And you mentioned all the different channels where you're getting that pickup. When do you think that kind of comes off a bit? Or when do you think the competition comes up with an HD competing product? It just seems kind of too strong to last for a long time. So maybe an outlook, where you see yourself going, I think that's like a 20% market share.

Andrew, why don’t we have Bernard Winograd take that.

Morning, Andrew. I think that it's hard for us to predict where the momentum stops for a couple of reasons. One is we do not see competition on the HD front. And while there may be people that work on products that would enable them to imitate or compete more directly with the HD format, as we've discussed many times before, there's both a time and a resources expenditure that's required in order to build the system's capability to do that. The second thing is that clearly we still are the position we have been in for some time now, where a lot of the growth is coming from the opening of new distribution relationships rather than the existing distribution relationships selling more. That was true again in this quarter, particularly noticeable in the bank channel. And so we haven't, so to speak, annualized fully the impact on the business system of all that new distribution. Having said that, it's hard to argue with the premise of your question. At some point, people will respond in ways that we will not choose to or be able to compete with and the market share will level off. Where that is, is very hard for us to estimate.

Andrew, it’s Mark. One other comment, which is there’s a micro dynamic here around our access to channels and success with new distributors. There’s also the issue of product attributes and value proposition. But remember the broad context of a really big shakeup in the market. And business is moving around, players have exited or significantly reduced their level of aggressiveness in the market, new players are entering. So part of this is there's just a big shakeup. And to reiterate Bernard's point, I'm not sure how long it’s going to continue, but there's a macro force that kind of says the business is going to go somewhere, and I think you have to separate that notion from some of the micro points about how we execute. But this market’s being going through a big shakeup.

Interesting stuff. And then just to follow up on the Group Disability benefit ratio picking up to 93% in the quarter versus 89% last year, I think, Mark, you mentioned a termination being partly responsible for that. But maybe a little color around incidence and what you're seeing there. And whether you need to take any pricing up in the long term disability area.

Andrew, it's Bernard. Let me try to address that. The disability ratio did go up. Incidence and severity were both in play here. And I think first of all, we’d have to say, acknowledge that we're watching this closely. But I think everybody would say that the volatility around disability on a quarterly basis is pretty high, and we are not inclined to overreact to any one quarter’s views. In general, for some period of time now the disability business has held up much better than I think we would have anticipated in a recession scenario and there were some one-off features in the numbers this quarter that don’t give us any real reason to believe that the spike here is the new normal, to borrow a phrase that's currently over-used in another context. The comment you made about the one-off item that Mark alluded to, however, was in the life business, not in the disability.

Okay, got it. And so then it doesn't sound like you’re going to rush to take any pricing then?

No. These businesses are very competitive on a pricing basis. And that hasn't changed. But we don't have big initiatives in mind in that regard, no.

Our next question comes from the line of Suneet Kamath from Sanford Bernstein.

Two questions. First I was just wondering what the rationale was for taking the, I think it was $2.4 billion dividend out of PICA to the holding company. If I just kind of go through what Rich was talking about in terms of cash at the holding company, I think he said $5 billion sort of net of CP. Even if you back out a billion and a half dollars of maturities and another $1 billion for the liquidity cushion, you still have $2.5 billion of cash up there. Just wondering what the rationale was for that.

Yes, Suneet, it’s Mark. I'm going to make a brief comment and then hand it over to Rich. We have a routine annually of assessing where the capital sits and a general theme around the insurance companies to appropriate RBC levels and trying to maintain financial flexibility at the parent level. And so I would consider this very much to be the ordinary course of business and consistent with our past practice. And I’ll ask Rich to comment on cash holdings and other holding company issues.

I don't think I can add much to that, Suneet. It's our practice. And we'd rather have financial flexibility at the mother ship, so that it can use it to fund capital needs of all of the subs rather than have to have it buried in one of the subsidiaries.

I understand the flexibility point. But I mean are any of your subsidiaries in need of capital right now, International, et cetera? I mean, I would imagine that most of the subs are pretty much self-funding at this point.

All of the subs are well capitalized. And, Suneet, you said self-funding, that may be a bit of an overstatement because we’re funding DAC and we’re funding XXX with operating debt that's coming down from the holding company.

The answer is this is not in response to a pretty specific need in any particular sub. Everything’s well capitalized and producing good earnings and all of our balance sheets are very strong from a credit perspective, but it’s good housekeeping to manage the financial flexibility at the holding company level as opposed to in the regulated entities. And again, business as usual for us and consistent with past practice.

So given that comment, I guess is it fair just to think that, that cash that you pulled out could be used for something like an acquisition at some point, if you find something?

Well that cash tracks, right? The cash in the holding company tracks the holding company's component of capital capacity. So the holding company’s got $2.5 billion of unencumbered cash, $5 billion in total, and you reconciled down to the $2.5 billion a moment ago when you talked about the cushion and the remaining year’s cash needs. So the holding company’s capital capacity is about 2.5, its cash is about 2.5. The rest of the capital capacity of 3.5 to 4 sits in the operating subs because their regulatory capital exceeds our targeted levels.

Okay, I think I got it. And then the second question is just on the return on equity. I mean, if I look over the past six quarters and I go through the typical exercise of normalizing for some of the noise, it just seems like the ROE has been sort of in this 9% to 10% range. Obviously, growth in the business has been pretty strong pretty much across the board. So I guess I’m wondering at what point do we start to see that growth sort of translate into some ROE improvement. And do we need to see some capital redeployment in terms of buybacks in order for the company to hit its, I guess, 2012 target of 12% to 13% ROE?

Going in reverse order with respect to the emerging influence on ROE. The headline answer is, “Yes, we will need to deploy capital in order to have further accretion in ROE.” Right now we have both excess capital and excess liquidity, and each of those has a negative influence on ROE so that will play out over time as we deploy capital either in acquisitions or longer-term investments or otherwise deploy to our shareholders. So capital is a big issue. You hear big numbers here and don't forget that there's a lot of liquidity earning a very, very low rate of return. The second emerging influence, and I guess I’m saying emerging just looking forward because these are ben [ph 44:52] influences, is the recovery in the asset-sensitive businesses. And the markets were down in the second quarter, and so while we had some improvement in asset management, we had some other drags on earnings from those market influences on things like Annuities and Individual Life. So the market-sensitive components of the income statement, while broadly will be improving as markets improve, fluctuate quarter-to-quarter. And then the third piece of it is the contribution that our very solid businesses make that produce attractive returns and growth. And you hear some noise in the quarter with respect to some of the elements of those earnings’ pictures, but again over time, things like International will grow and will be very, very strong contributors to accretion and ROE. So I think the ROE framework is made up of those components: capital and liquidity, market-sensitive businesses and strong solid businesses. And that's what's going to play out to determine how fast it moves up.

Suneet, it’s Rich again. I also don't want to lose sight of the fact that in our types of businesses, first-year sales don't deliver the average ROE. So first-year sales because not all expenses are DAC-able. In Annuities and in Retirement, et cetera, we are going to have a dearth in ROE in the first year of the sale, and the true ROE will not emerge ’til the first full year of that sale is on the books. That's weighing us down this year as well.

Okay. So we should probably see some of that improvement as we get into next year. I got it.

Our next question comes from the line of Nigel Dally from Morgan Stanley.

First question is where is interest rates? I know we should probably expect some spare compression in Retirement in the back half of the year. Hoping you can also discuss how the low interest rates is going to be impacting your other operations as well, both the near-term and looking out longer-term. Second with the new Financial Services regulations, not a lot yet to be determined, but if you can provide your initial assessment as to what type of impact that could potentially have on your businesses, especially interested in hedging costs and variable annuities. And whether that has the potential to change your gross profitability assumptions for that business going forward.

Well, Nigel, it's Bernard Winograd. Let me try to address the interest rate question. And then I'll let Mark comment on it as well and the other question you’ve asked about the environment. All other things being equal, a low interest rate environment is never good news. But our business mix and our business practices do, as we indicated in the commentary, give us a lot of cushion and comfort around that. We don't have a lot in some of the products where the existing book is adversely affected by a low interest rate environment. And we've got a good deal of cushion in the places where we do between where rates are now and what minimum return rates would be. So there's some risk in the long-term, certainly. We don't see a lot of risk in the short-term. However, I think we're saying that it’s something we will have to address in pricing. And we'll have to be thinking about that in pricing because while the effects on the existing book is a manageable thing, the impact of a low-interest rate environment on the way in which we estimate our returns over the long haul is a factor that we need to take into account as we do our pricing discussion.

Nigel, it’s Mark. On the derivatives question. While the passage and signing of the bill represented a pretty discrete climax to the whole process of fixing everything, there's a lot of work to do in terms of interpretation and writing rules and implementation. And there are a lot of uncertainties for us around how we’re affected overall by the broad landscape of regulatory reform. On the specific issue that you mentioned, which is derivatives and hedging costs, I would anticipate that the providers of the long-term long-dated equity-linked derivatives that we use in our Annuity business may be required to hold more capital, and we may, as a result of that, see a more expensive environment in which to use those derivative products. However, on the other side of it, there's the combination of clearing and possibly exchange rating with respect to a lot of the other kinds of derivatives we use particularly the more plain vanilla interest-rate derivatives may drive the cost of those derivatives down somewhat. So I think we’re going to have things going two different directions. Some may be more transparent and less expensive, others may carry higher capital requirements on providers and, as a result of that, more expensive. And I think it's too early to tell which way it's going to go.

Our next question comes from the line of Thomas Gallagher with Crédit Suisse. Thomas Gallagher - Crédit Suisse AG: First one for Rich. So you have $4 billion of on-balance sheet capital capacity. I'm sorry I missed the comment earlier. What's your debt capacity?

I didn't give you a debt capacity. What I feed off was that right now, with the change coming from Moody's, the debt capacity is going to be deal-specific. So depending upon the acquisition, we'll lever the deal appropriate to the creditworthiness of the deal and the deal’s ability to finance the leverage. Thomas Gallagher - Crédit Suisse AG: So is it fair to say, Rich, you're about where you need to be from a leverage standpoint as it stands for Pru itself today without a deal?

Yes, we’re just below our 25% limit measured on a Moody's basis, the 24-point-something. Thomas Gallagher - Crédit Suisse AG: Got it. Then the other question I had was really just a follow-up on the Variable Annuity business. So I believe you switched from an HD 7 to an HD 6 August of '09. Interest rates have come down a bunch since then. Any thoughts to re-designing that product? Should we think about HD 5 in response to low interest rates? And maybe you could just comment more broadly on how you feel about your variable annuity guarantees in lieu of the low rate environment?

Tom, it's Bernard again. I can't say much more than what I've said, so let me just repeat it in this context. You're correct in your timing about when we introduced HD 6. And we made changes to it in both design and pricing earlier this year. Every time we do that, we make an estimate of the market environment and conditions and that all feeds into the assumption and that gets us to our -- against our pricing objective of a mid-teens kind of return. What immediately happens thereafter is markets move, and sometimes they move in our favor and sometimes they move against us and more than interest rates change. Everything else being equal, a change in interest rates is not helpful. A lowering of interest rates is not helpful for the product we’ve just sold, but it’s not the only thing that's changed. And all I can say to you about it is that our process of looking at the pricing of HD 6 or the features of the current product offering is a continuous one, and with a limit to the number of times that can be adjusted every year in the marketplace. And we have been, as you note, changing things in response to market conditions. And we'll keep on doing so. But I don't think it would be right to single out the low-interest rate environment and say, “That's the thing that's going to drive us next.” Thomas Gallagher - Crédit Suisse AG: Fair enough, Bernard. But is it fair to say that the product cycle last August -- is this August also a normal product cycle? Or is that not necessarily the case?

No, it's not necessarily the case. We will evaluate it continuously. And we will react when we think the combination of our market activity and the financial environment makes it necessary for us to tweak things. Thomas Gallagher - Crédit Suisse AG: Okay. Mark, you had referenced, I think, changing your hedge strategy a little bit, moving to more of a tail focus. Can you just comment practically what that means?

Yes. We had, as we’ve mentioned in previous calls, a pretty plain vanilla short on with respect to what we call the capital hedge. And we said repeatedly that we would be assessing that and looking for opportunities to change it. And so we took that opportunity. We closed that hedge out during the quarter. We’ve talked about the $55 million gain that we took when we closed that out at a level of the market somewhat below where it is today. And we added a hedge that's got more structural complexity and will pay off in a greater amount at lower levels of the market. We can talk about it more off-line. It's a little more complicated but it's designed to produce higher returns as the market goes down and help us in the stressed and extreme environments, but have much less of an influence around the current level of the market and as markets fluctuate within normal ranges.

Our next question comes from the line of John Nadel from Sterne Agee. John Nadel - Sterne Agee & Leach Inc.: I have a question on the dividend as well. And it's more of a math one. Rich, you said that you took the $2.4 billion dividend. If I assume the denominator of your RBC ratio was relatively static, and that may be a faulty assumption, but if I did that, the $2.4 billion dividend would reduce RBC by about 100 points, by my math. And you're saying that RBC, which was 577 at year-end '09 is comfortably above 400%. I know you don't want to give us an exact number, but does comfortably above, does that comfortably above mean really comfortably above? Or has something else changed in the math?

John, to use your terminology, it means really comfortably above. But remember there are some market-sensitive components in that. The mark-to-market on derivatives, for example. But when Rich said, “Comfortably above” the answer is, “Yes, really comfortably above.” John Nadel - Sterne Agee & Leach Inc.: Okay, that’s helpful. And then just going back to an overall question on just the M&A environment, maybe for John. Can you give us a sense for -- obviously markets have recovered a lot. We've seen a couple of things take place recently. We've seen a couple of European companies maybe put up a business here or a business there for sale. I mean can you characterize what the discussions and what the -- how much is going on? How much are you seeing in terms of opportunities today relative to maybe two or three quarters ago?

Okay, John. So let me take that in a broad context and then answer more specifically as to the M&A fees [ph 57:15]. Because I think that one needs to think about the terms of the organic aspect of this as well as how it relates to M&A. We very much continue to believe, and in fact our experience reinforces, that these are times where there's a lot of upside associated with our brand, strong capital and a very clear commitment to the businesses in which we're in. It clearly expands the existing opportunities, whether it’s the bank channels then or it creates new opportunities as well. And converting these opportunities into reality is the charge of our individual business leaders. And they're doing a great job at it, as you can see, in the U.S. and outside the U.S. And we feel very, very good about that. The manifestation of that has been market share gains in many of our businesses. And in many cases, market share gains you would have normally associated with M&A without the intrusion and disruption and costs of M&A. So we're feeling very comfortable with what we're achieving in that regard. But now transitioning to your question more about M&A, there’s obviously a number of well-publicized franchises that remain in flux with uncertain time lines. There’s others that are less visible, but are likely to arrive. Whether we buy them or whether we compete with them will be a function of our overriding considerations in market dynamics. It is an interesting time in terms of supply and demand dynamics in the sense that there’s a limited number of counterparties that have the scale, scope, management and international capacity that we do and that makes us, at least in our eyes, an attractive and qualified trade-buyer. And furthermore some people who did have the capacity have already now made choices as to how they’re committing their capital and they've chosen to commit their capital on things that would not have been of interest to us. It's not a critical comment about what they've done; it’s rather just an observation about our own opportunities there. So we can't really at this point predict the likelihood or timing of our role in M&A. It's naturally unpredictable. We also have a situation where a number of these businesses were never envisioned to be divested so they’re going through long and painful processes in terms of preparing them for marketplace. We’re at the same time very protective of our organic momentum as well. So there's a lot of things to be encouraged about, both organically and also on the market dynamic front. At the end of the day, I think I have to summarize it by saying that we shall see.

And our next question comes from the line of Ed Spehar from Bank of America-Merrill Lynch.

Just following up on John's questions. Could you give us some sense for what the equity market hit was to statutory capital in the second quarter? And how much of that maybe has been recovered already, if we just look at what the market’s done in July?

Ed, it's Rich. We really don't track these things at that granular level. It hasn't had a material impact on RBC in either direction. So that's about all I can say.

Okay. And then the follow-up is on the GAAP side, Mark, related to all the noise in the Individual Annuity line. I think everybody, probably almost everyone on this call, can agree that the $385 million NPR item is kind of a silly item. So I guess if we just looked at the rest of this, and we said, “You had a $133 million benefit when we net all this stuff together. If we took out the $385 million from the NPR, it's a $250 million roughly hurt all the other items.” Can you give us any feel for what portion, if any, of that $250 million you consider to be an economic event?

I don't have it parsed in the detail that you might be thinking of. But you've all heard me say before, that the real economics of the Annuity business are not as volatile as the accounting for the Annuity business. And I’ve really got a couple of things in mind there. One is that there are some mismatches between the way some of the components of embedded derivatives, for example, are valued relative to what really happens to policy holders. So there's some things there where I believe we overstate the liabilities and particularly overstate the impact of changes in the financial markets on the liability. And secondly, another point that I've made is that there is, with respect to DAC accounting, a fairly substantial mark-to-market component. And so, it's not necessarily a portrayal of current period earnings as most of us would like to think about, and a simple way to say what I mean by that is that if you apply a PE to the DAC number, you're double capitalizing a huge bunch of stuff because DAC reflects valuation influences as opposed to just current period earning influences. So again I don't have it parsed to the detail that you might be asking for. But there are substantial components of this that are either not consistent with the real underlying economics or represent something that's more like a mark-to-market as opposed to a current period earnings influence. So that would be my comment on the general picture there.

Our next question comes from the line of Mark Finkelstein with Macquarie.

The capital margin, I think, was $3.5 billion to $4 billion, roughly in line with where we were at year end. I know these are approximates. Historically, you've used a 60% operating earnings-to-capital-generation ratio. I think with the growth earlier this year I feel like maybe that was taken down to 40% range. What I'm asking is what is the current thinking about capital generation from here for the back half of the year? And should we be thinking about that 40% of operating earnings as a good metric?

I don't think so. I think it's probably closer to 50%, but we've got some more work to do on that.

Okay. So we can think about capital growth from the $3.5 billion to $4 billion using 50% and offsetting kind of the normal capital deployment and realized loss-type numbers?

Right. But it’s also highly dependent upon sales and where the sales are, right?

Okay. And then just secondly, can you just give a little color on the flows in the Asset Management business? I mean this is, obviously, a huge quarter. I think it was $13 billion between Institutional and Retail. And can you just talk about, I mean, mainly on the Institutional side, how should we think about the margin on those flows? And what is really driving those flows? And how should we think about that going forward?

This is Bernard. I think the margin varies widely just because the basis points of revenue per dollar of AUM is quite different, depending upon which asset class you're talking about. But all of that, I think you can discern from our disclosures. I think what's driving the outcome is a combination of things: it’s first of all, good investment performance, which is true for us, has been true for us for quite some time, but is unusually distinctive at this point in the cycle. And secondly, we do have very substantial fixed income flows, and fixed income as an asset class is getting the lion's share of the flows in the institutional world at the moment. So to the extent that continues, that works to our advantage.

Next we'll go to the line of Jimmy Bhullar from JP Morgan. Jamminder Bhullar - JP Morgan Chase & Co: I had a question first on your 401(k) business. Your deposits and the flows were weaker than they’ve been in the past few quarters. So just your views on the 401(k) market given the environment that we’re in. And then second, just if you were to do a deal, what would your preference be in terms of how to finance it? You do have some balance sheet flexibility; there’s some room in the RBC as well. So and assuming it's a $3 billion to $5 billion deal, is it reasonable to assume that in the environment we’re in you’d actually consider a modest-sized equity raise? Or could you do that type of a deal without having to raise new equity?

Jimmy, let me go first. It’s Bernard again and answer the question about the 401(k) business, and then I will let John address the other question you have. I think the right way to answer that is to say that we are cautiously optimistic, with emphasis on the "cautiously", with regard to the RFP pipeline and the Retirement business. And I say it that way because things have improved in many ways. People are reinstating matches and so forth in the business. And there’s not the same sort of heightened anxiety about the benefit. But it's also fair to say that the passage of the Healthcare Reform Bill has sort of taken up a lot of the bandwidth, if you will, for discussions of this benefit with the executives in corporate America who are responsible for administering both the healthcare benefits for their employees as well as the retirement benefits. And so I don't think that we have seen yet a robust pipeline of RFPs of the kind you might have assumed would happen here just because so much of the energy of the clients at the moment is focused on thinking through how to adjust to the healthcare business. So it's getting better, but it's not growing dramatically at this point. Jamminder Bhullar - JP Morgan Chase & Co: And do you expect this to -- the thoughts on healthcare and the taking time on the part of benefit managers, do you think this is going to go through next year, given that there are a lot of changes that have happened with the healthcare reform?

I think that depends on the pace of events in Washington. The grandfathering rules on existing healthcare plans need to become a lot clearer before anybody's going to know what they want to do. And until they know what they want to do, it's going to be hard for them to focus on other issues.

And, Jimmy, I'm going to turn over to Rich the other piece about the financing. I mean, clearly we talked earlier about some of our mathematical capacity, but how we think about this is going to be a function of how we view individual attributes of any potential acquisition. Rich?

It will be deal-specific, Jimmy, but I'm going to address your question around the equity issuance specifically. At the upper end of your range, the $5 billion end, that would likely require some equity issuance. At the lower end of your range, the $3 billion, it would be very deal-specific and might not require an equity issuance.

Thank you. And that's all the time we have for today's conference call. But it will be available for replay after 1:30 p.m. today until midnight, August 12. You may access the AT&T replay system by dialing 1 (800) 475-6701 and entering the access code of 144584. International participants, dial (320) 365-3844. That does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect.