Ladies and gentlemen, thank you for standing by, and welcome to the third quarter 2011 earnings teleconference. [Operator Instructions] And as a reminder, today's teleconference is being recorded. I would now like to turn the conference over to Mr. Eric Durant. Please go ahead.

Thank you, Cynthia. Good morning. Welcome to Prudential's Expanded Third Quarter Call to cover third quarter results and our financial outlook for 2012 and beyond. Representing Prudential today are the usual suspects. John Strangfeld, CEO; Mark Grier, Vice Chairman; Rich Carbone, Chief Financial Officer; Charlie Lowrey, Head of Domestic Businesses; Ed Baird, Head of International Businesses; and Peter Sayre, Controller. Slides supporting the financial outlook presentation are available now at our Investor Relations website, www.investor.prudential.com. 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 third quarter of 2011, 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. Our earnings press release contains information about our definition of adjusted operating income. The comparable GAAP presentation and the reconciliation between the 2 for the quarter and 9-month periods ended September 30 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. John?

Thank you, Eric. This is John Strangfeld. Good morning, everyone. We appreciate you joining us. I will make some overview comments while leaving plenty of room for Rich, Mark and for your questions. Although our results in the third quarter reflected the highly unsettled market environment, underlying performance of our businesses continue to be quite favorable. Our International Insurance operations, which are largely insulated from changing financial markets, continued to produce a very solid growth in earnings and strong fundamentals. The Life Planner business achieved an 11% increase in earnings as they continue to successfully execute their time-tested business model. Sales in the Life Planner businesses increased by 13% in comparison to the third quarter of last year based in constant dollars. In Gibraltar, adjusted operating income increased 82%, including the contributions of the former Star and Edison businesses we acquired earlier this year, as well as the gain on sale of a portion of our indirect investment in China Pacific. If we back these items out of this quarter's results to get a same-store type comparison, earnings would exceed those of last year's third quarter by 26%. Gibraltar sales more than doubled, exceeding $0.5 billion for the quarter for the first time, and excluding the contribution of Star and Edison sales were up 37% lead by the bank channel. The Star/Edison integration is going well and the legal entity merger of Star and Edison into Gibraltar continues on pace for a first quarter close as planned. After that, we will begin to achieve the significant expense savings that will drive much of the earnings growth we expected from this transaction. In the U.S., reported results were less favorable, but business fundamentals continued strong. For example, in our Annuity's business, our distinctive HD projects continue to enjoy excellent traction with…

Thanks, John, and good morning, everyone. As we've just heard from John, we continue to build business momentum even in these adverse markets. And while common stock earnings per share was $1.07 for the third quarter based on adjusted operating income compared to $2.12 per share in the year ago quarter, market-driven and discreet items, including the impact of our annual update of experience and actuarial assumptions, had a significant impact on our reported results as they did in the third quarter of last year. In the Annuities business, the market drop in the quarter caused us to increase reserves. The guaranteed minimum death and income benefits and amortization of DAC resulting in charges totaling $0.68 per share. In Retirement and unlocking, based on the annual update of experience and assumptions, resulted in a charge of $0.04 per share. On the Individual Life business, it benefited from $0.12 per share from the reduction of net amortization of DAC and related items as a result of the annual update of actuarial assumptions. This benefit was partially offset by increased net amortization of charges of $0.05 per share, driven by the equity market decline in the quarter for it benefit of $0.07 per share. Group Insurance results benefited $0.04 per share for reserve refinements driven by the annual assumption update. In International Insurance, Gibraltar Life benefited by $0.13 per share from the partial sale of our indirect investment in China Pacific Life. This benefit was partially offset by integration costs of $0.06 per share relating to the Star/Edison acquisition. And Corporate and Other results absorbed charges of $0.15 per share to increase reserves for estimated death claims based on new matching criteria used with Social Security Death Benefit Death Files and $0.03 per share for a contribution to be made to New…

Thanks, Rich, and good morning, good afternoon or good evening. I'll start with our U.S. businesses. Our Annuity business reported a loss of $191 million for the third quarter compared to adjusted operating income of $588 million a year ago. Results for the current quarter reflect the unfavorable reserve adjustments and unlocking that Rich mentioned. Strengthening of our reserves for guaranteed minimum death and income benefits resulted in a charge of $241 million to current quarter results. This charge was largely driven by the equity market decline in the quarter, with a partial offset from our annual update of actuarial assumptions to reflect a more favorable experience pattern on contract features than our earlier estimates. The DAC unlocking resulted in a further charge of $194 million to current quarter results, also largely driven by the equity market decline. The items I mentioned sum up to a net unfavorable impact of $435 million on current quarter results. Results for the year ago quarter included a net benefit of $412 million from a favorable back unlocking and the release of a portion of our reserves for guaranteed minimum death and income benefits, largely driven by the 11% increase in the S&P 500 in that quarter together with our annual update of actuarial assumptions, which reflected strengthening persistency. Stripping out these items, Annuity results were $244 million for the current quarter compared to $176 million a year ago for an increase of $68 million. These results translate to a return of 87 basis points on average account values for the current quarter compared to 76 basis points a year ago. While our quarter-to-quarter reported results reflect market volatility since we are required to adjust reserves in DAC, essentially by projecting the impact of current market movements out over contract periods that are measured…

Hello, again. As always, we like to lay out the assumptions and then get into the numbers and I'm on Slide 6. So let me give you -- you've probably printed it by now. On Slide 6. It should say Assumptions for 2012 Outlook. First, we estimated 2011 baseline FSB earnings where we exclude unusual and nonrecurring items that we've identified throughout the year and some items that we know are going to occur in the fourth quarter. Next, we need to input some S&P assumptions. We assume the 2011 ending S&P of 1,250, a 2012 average S&P of 1,300 and an ending 2012 S&P of 1,350. 2012 is fully hedged with the yen at 85 to the dollar and the won at 1,181 to the dollar. In 2012, the effective tax rate will be back up to around 27%. Our guidance assumes we maintain leverage at around 25% and that we deploy excess capital generated during 2012. And lastly, we have assumed 2012 rates will track the forward curve. So for example, the 10-year treasury rises to 212 at the end of the year 2011 and to 250 at the end of the year 2012. Now I'm on Slide 7. And it's a bit complicated. There's a lot of columns, there's restatements, there's a whole bunch of stuff going on. So I'm going to go slow, hopefully, and start on the left-hand side there. So you see 2010 baseline excluding DAC, it should be yellow on your slide, and it says $5.50 to $5.60 in that first column. I think, given it's November of 2011, we can narrow that range a bit and call it $5.56 since that's what we actually reported. The next column, 2011 projected earnings, shows AOI without taking out the unusual items and before the…

[Operator Instructions] And we'll go to the line of Nigel Dally of Morgan Stanley.

So I want to focus on your ROE goal for 2013. For 2012, your guidance implies an ROE of roughly 11%. So to hit the 13% to 14%, you imply a pretty massive increases in EPS. A couple of questions on that. First, you review that as a stretch goal or a target you expect to achieve? Second, you provided some of the building blocks. Can you place some dimensions around their relative contribution? And third, what do we need to see with interest rates at that goal?

Okay. Nigel, let me take that. This is John. Just to take that in terms of the primary building blocks, for me, they are the same building blocks we have been talking about before, which is that the principal things that are going to get us there are continuing strong performance of our ROE businesses, particularly the International Insurance, Asset Management and Annuities. Number two is the successful integration of Star and Edison and number three is appropriate capital management in a variety of different ways. And those are going to drive it. It doesn't -- it's not predicated on some change in interest rate assumptions in these sorts of things. It's those 3 elements are the primary drivers of our outcomes.

I guess, just going in to those in more detail. The relevant contribution of each. Are they roughly equal in size? Or are there any particular areas, like capital management providing more of a boost your ROE outlook?

Actually they are relatively equal in size. 1/3, 1/3 and 1/3.

And on one of your other questions. That forecast uses continued low rates. There's not a right scenario that's -- other than as Rich described the forward curve.

Okay. So it's all based on the 2013 forward curve as we currently stand?

Yes.

Yes, and also, we believe this is an achievable target. This isn't pie in the sky. So to your question about how confident we are, we're pretty confident.

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

I guess, a few questions just on the progression that you're talking about. I guess, what are the -- can you elaborate it all on the capital management assumptions that are being baked into the 2012 estimates?

Yes. Well, 2 things. One is, I think I mentioned earlier on, that we expect capital that has generated during 2012 will be deployed. We've got a $1.5 billion buyback program in place. So we used $750 million so far. So as our expectation, we'll complete that buyback. New capital will be generated next year and we'll have to make sure we deploy that effectively. But I just wanted to mention one thing that may lead back to Nigel's question, but it also addresses yours. Keep in mind that when Star/Edison comes fully online and all of the synergies are realized, we had contemplated between a 60 to 70 basis point, if my memory serves me correctly, in an ROE lift. So that's coming on. In 2013, we're not going to be fully there, but a big chunk of that is chipping in. And right now -- and right now, we're not getting a lot of help from that. It may be a 0 sign, but it needs a lot of help.

Maybe I'll ask it slightly differently. If I look at the ratio of deployable capital versus the $3.5 billion that you used. It's a ratio -- it's a free cash flow ratio of about 43%. Would you expect that ratio to radically change in 2012?

That moves around. It depends upon the capital needs of the businesses, and the one thing that ratio is missing, and I would remiss not to point it out, that we -- that's the pure income ratio. What we have is our businesses do throw off capital as we change the business mix. So for example, we're exiting the interim loan business and winding down that portfolio. We expect capital to be freed up from there. Now that's not in the 43% free cash flow ratio that you just calculated and we've got more of that built into the plan going forward.

Okay. And then just finally, your ratios in Japan, 700 POJ over 650 in Gibraltar, I mean, why -- what is the plan on how much capital you're going to keep overseas? I mean, those feel like very high numbers. I know there's kind of a trend upward historically, but they just seem very high and what is the strategy around that?

This is Ed Baird answering with a slight cold. The ratios there are being monitored on a couple of bases. One, as you know, we've always looked to maintain a top tier ratio there consistent with the competitors and what the rating agencies are looking for. Given the fact that next year will be a change in the official calculation of the solvency margins, I think, at this stage, it's a little too early to pick a specific number there but the sense is that somewhere between 600 and 700 will probably be the range that will be looked at as competitive, and as deemed to be consistent with a AA rating.

Our next question comes from the line of Andrew Kligerman with UBS.

A couple of quick clarifications just on the buyback. So when you're talking about capital redeployment of $1.5 billion next year, that assumes that the $1.5 billion authorization for buybacks is completed. So in other words, you'll finish that up and then you'll have another $1.5 billion next year to deploy. Is that correct?

There's an assumption of the redeployment of the capital that we generate. It wasn't in Rich's presentation divided between organic growth, acquisitions or disposition in other ways, including share repurchases or dividends. So that will be part of the judgment that we exercise next year as we go through the year and will depend on the business opportunities that are in front of us. Right now, we're operating under an authorization to repurchase $1.5 billion, which ends in June, and I think I've said in the past that we reconsider this often. Capital management is something that's in front of us regularly, not a discrete item that we take a look at when our authorization expires. And it's an ongoing process. So there's not reflected in Richard's comments or this guidance a specific implication of another $1.5 billion or not.

Okay. It seems, Mark, you really like your stock here. You did have the authorization in 1 quarter. How do you feel going forward? Do you pretty excited about buying back your stock?

We exercised judgment in the recent quarter and I'm glad you're pleased with that outcome. It's a dynamic process and we will continue to consider all of our choices in the context of the environment.

All right. Open-ended answer there. Let me move on to your interest rates and REO. By year end 2014, you'd lose income of $360 million, and then you mentioned, Mark, a number of mitigating factors. Could you give a sort of a range or quantification of what those mitigating factors would do to the $360 million in lost income should interest rates remain where they are now?

Well, I described that 2014 cumulative number as an unmanaged pretax number, which is how you ought to think about it. And the immediate levers in front of us are the opportunities to further reduce crediting rates as market conditions allow, as I indicated, we've got about $25 billion of liability products with substantial room to reduce crediting rates, meaning 100 basis points or more. So you can do the arithmetic on that opportunity. We also have opportunities to change our investment mix without compromising credit quality if we decided that's the path we want to go down and the market was there for us in private placements and in commercial mortgages in particular. We also have opportunities to extend duration, particularly in some of our overseas portfolios where we don't necessarily have the rate risk, but where we would get the consolidated benefit. So I don't want to scale it in the abstract, but you should think of that 2014 cumulative number again as unmanaged and pretaxed. And there are some significant things that we can do to mitigate that impact. And by the way, the rest of the company, in terms of a number of core contributing items, will be growing around this potential stress from the gradual decline of the yield in the general account.

I just wanted you to quantify those factors, but my math and it's hard to do in this short period of time would at least slice out half of that $360 million, I mean, is that fair?

Well, I've given you a roadmap.

You've given parameters, I'll work with it. Okay. And then just real quickly, lastly, Gibraltar saw the reps go from 13,400 to 12,900. Where does that -- I know there's a lot of Star/Edison integration going on that's going to have some fall out, where does that finally settle?

We don't have a forecast, but I can give you a context for thinking about it going forward. I think what you'll see unfold on the Star and Edison will be very similar to what unfolded when we acquired Kyoei. Not necessarily numerically, but certainly, directionally. So for example, when we took over Kyoei they had about 7,000 sales people. We put in place our performance standards that are more consistent with the higher performance that we expect out of our traditional Gibraltar organization. And that led to a reduction, ultimately, down to about 4,500, which you will notice has grown up to over 6,000 in the years since then. I would expect, without knowing what the degree would be, that the direction will be similar so that what you've seen here is a reduction. I would not expect this to be the last such reduction. It will depend on how successful we are in providing products and training that allows them to perform at the higher level that we expect.

Our next question will come from the line of Thomas Gallagher with Credit Suisse. Thomas G. Gallagher - Crédit Suisse AG, Research Division: First, I had one on the free cash flow and then another one on capital. The -- Rich, I just want to make sure I understand the numbers and ask you maybe to give a little more granularity in terms of what's behind them so I start with the $3.5 billion annual capital generation number. The $1.5 billion that you're talking about as being free cash flow. I should think about that as being used for either 1 of 3 things: one, being buyback; two, being common dividends; three, being M&A. Is that -- am I starting -- and then $2 billion is to support business growth?

Yes. Specifically for 2011, you're exactly right, Tom.

But just to be clear that was getting to the of end of this year. That was going to the 12/31 position. So that reflects the reality of our expectation of generating about $3.5 billion, deploying about $2 billion of it in our businesses and about $1.5 billion through repurchases and dividends. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Okay. So I if I think of it as a sustainable number, a reasonable mix might be of -- this is my words, I'm just curious if you'd care to comment, a $1 billion buyback, a $500 million common dividend. If we're to think about splitting it up between at least what you've done historically as we think about going forward, is that a reasonable mix to think about?

No, Tom. I think the way you got to think about it is in the percentages moving away to dollars, right? So maybe -- and I forget, that might have been Mark earlier who computed the 43% free cash flow coming from operations. So earnings throws off 43%. We pick up a few percentage points coming out of capital, freeing up of capital. It's in the businesses. And so we're looking at maybe like 50%. And that's a very hard number to get to because the capital number that gets freed up each year from a more efficient use of capital by the businesses is not that predictable. The free cash flow coming up is a little bit more predictable and maybe 43% is a little low this year, maybe it's 45%. But that's way you have to look at it.

And one other thing that I mentioned, John -- one other thing I mentioned is kind of barbelled this so it's either normal organic growth, M&A or return to shareholders. And that's a reasonable way to think about it in a broad sense. But our other thought, hope and expectation is there's -- there could be some other outside to organic opportunities that may be very attractive ways for us to put capital to work. The most notable example, it's in the heart of a very difficult time to quantify is in the area of pension risk transfer, which is a really natural place for us to compete in. And were in that because to materialize in a more visible way can be of a highly attractive way for our capital to go to work. So when Rich comments about that it's sort of it's using the word normalized, organic patterns of things, but please appreciate. We're thinking well beyond that in terms of potential capital applications that will be a very attractive fits for us in our business.

So don't narrow your thinking to a dollar number of $1.5 billion as redeployable every year forever.

Just a reminder on 2 things, one is when we talk about this relationship between earnings and available cash, that's over time, remember that net income versus AOI matters and we tend to talk in the earnings world about AOI but the real capital accounts are impacted by net income. So when we talk about this, it's an over time concept and it's based on the broad relationship between net income and AOI kind of being in line. The second point to make though is don't lose sight of the strength of our current balance sheet as you're thinking about projecting earnings. We have finished this quarter in spite of a lot of turbulence in very good shape with respect to capital, liquidity and asset quality. And as Rich rolled forward and talked about the end of 2011, we'll go into next year with just about the same amount of excess capital that we came into this year with in spite of substantial investments in the business and in spite of what we're doing with respect to share buybacks and dividends. So keep the static picture in mind as well. The balance sheet is very strong.

And that balance sheet resource is what funds the capital freed up in the future of over and above the free cash flow coming out of earnings. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Okay. That's clear. And then, I guess, just any quantification on the $2 billion or so that you think needs to be replowed or kept in the businesses to support growth. Can you give any sense for where exactly most of that is being held? Or what is that to support? I don't know if you can bracket it between International, variable annuities and then non-US variable annuities or however you can quantify, that would be helpful.

Well, more than -- don't forget, this is an actual number. This isn't a projection. We actually absorbed $2 billion of additional capital in 2011. More than half of that's annuities and international, and the rest is sprinkled amongst our other businesses.

And just to remind you, we don't have international variable annuities. I think you used that phrase. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Yes, now I understood. So -- but could you quantify how much was VA? Just out of curiosity.

No. Thomas G. Gallagher - Crédit Suisse AG, Research Division: Okay. So that's just in the half bucket and/or more than half bucket between international.

More than half, yes. Thomas G. Gallagher - Crédit Suisse AG, Research Division: More than half, okay. The other question I had was just on the mark-to-market impact from the quarter thinking about how it affected GAAP, and I'm talking specifically about variable annuity mark-to-market reserving versus hedging, how that looked on GAAP and how that translated to stat. I guess what stood out to me, Rich, was the -- there was very large hedge breakage if I strip out the benefit of the NPR. There was north of $2 billion of hedge breakage on a GAAP basis, and I appreciate there's some uneconomic effects there. But can you comment on how that affected your capital and statutory? And how we should be thinking about that?

Well, on a statutory basis, they -- there were two -- there was an offset, right? We had the duration hedges -- the derivative duration hedges, which offset the negative impact. Not entirely. It offset partially the negative impact of the hedge breakage in one of our subs. But all of that is taken into consideration the 500 RBC plus that I've laid out at 9/30 earlier in my remarks.

And, Tom, it's Mark. I'm not going to call it hedge breakage because there are hedge differences that we accept and actually actively manage to. There is some breakage in these numbers in the sense that some things didn't lineup as tightly as we might have liked, but there also are numbers in there that reflect the general way in which we've positioned in the context of offsets that happen in other places. As Rich mentioned, the marks on the duration hedges go the other way from some of the exposures in the calculation of our living benefit liability. Just to cut to the bottom line with respect to statutory capital, there's very little impact overall and that's reflected in the RBC numbers that Rich quoted. Some direct product-related items going one way and some other items going another way. And you see in GAAP, I understand the question about taking out NPR, but at the end of the day, we don't really get to take out NPR. All in the effect on the GAAP net income statement was pretty small from the annuity picture. We're going to, in our 10-Q, disclose a lot about this. So rather than go through the line items today, I'd like to talk at the macro level like we just did, but you'll see a lot of transparency around the annuity results in the 10-Q.

Our next question comes from the line of Eric Berg with RBC Capital Markets.

You mentioned repeatedly now the 500 RBC. I guess, my first question is, does that going to sort of be a new placeholder or place where you plan to capitalize your flagship company to maintain your A rating? It seems pretty high relative to not only where you've been but to others, how should I think effectively about that 500% number?

It's kind of easy. What happens is that the RBC builds throughout the year in PICA and then we take the dividend out in the first quarter, if approved, of the next year. So towards year end, you're always going to see that build up of RBC naturally and then we take it down in the first quarter of next year and it rebuilds by the end of the next year, and so on and so on.

Eric, this is Mark. We believe that at 400, which is the benchmark that we have used as the threshold above which we define capital capacity, we're targeting capital levels that are consistent with AA ratings, not A. And in fact, I think the standard in the industry is more like 350 in terms of targeting RBC levels. So we're conservative at our 400 target, and you should not think of 500 as an operating target. The threshold above which we define capital capacity is still 400.

My second and final question relates to the future and perhaps I'm not sure of who that's going to answer this question -- maybe John. But my second and final question relates to the future of interest rate sensitivity of the company as it relates to the business mix. And in particular, if we assume that your Asian businesses, your Japan and Korean businesses, will continue to be your fastest growing businesses. And also that there will be an evolution of the business over time away from traditional mortality business on which you grew up with POJ, and more towards what you're calling Retirement businesses, although through the vehicle of retirement-oriented life insurance, what will that change in business mix mean that I predicated or that I premised for the interest rate sensitivity of the company? Yes, that's the question. How will the change in business mix that I have posited? What will that mean for the interest rate sensitivity of the company?

Eric, this is Ed again. The bottom line answer is not much of anything. But let me explain why I say that. We described certain products in Japan as retirement versus traditional protection. But the underlying products are essentially the same. They are traditional whole life products. It's simply a matter of some of those being characterized as retirement because they have much higher cash value accumulation focus as opposed to, let's say term insurance, which we report into the debt protection bucket. That would be point one. Point two, I would remind you as I know that you're very aware of, that with the 1 Exception in Gibraltar, we have never looked and continue not to look to investment spreads as a source of earnings in Japan. We make our money there off of the Mortality and Expense margins. That's the reason that you see the remarkable consistency in the earnings regardless of interest rate environment, economic conditions, equity markets, et cetera. So it's only in Gibraltar where we do have a good return on investment spread as a result of our having reset the crediting rates and the in-force book once we took it through the bankruptcy courts. So the nomenclature we're using here maybe misleading you a little in thinking about Retirement products as somehow investment products as opposed to insurance products. The fact is the vast majority of these products, with the one exception of some fixed annuities, is -- and even the fixed annuities, by the way, are NDAs to a large extent, so you don't even have the risk there. So we're getting our earnings out of MNE and we continue to do that going forward.

Our next question comes from the line of Chris Giovanni with Goldman Sachs.

Just wanted to come back to capital management and sort of reconcile some of the numbers we're talking about. I guess, putting into the context sort of the methodical, I guess, share repurchases you guys have historically done where you've been pretty consistent on a quarterly basis in the past. So I guess, should we be thinking about $750 million as the run rate? And the reason I ask is that if we think the 100 and -- sorry, the $1.5 billion that you guys have available to deploy for 2011 after we think about your annual dividend, it doesn't leave a lot of room for share repurchases in the fourth quarter and then also trying to reconcile the $1.5 billion versus the $2.22 billion to $2.7 billion that you say is readily deployable.

Right. It's Mark. Let me start with the first couple parts of it and then maybe let Rich answer the last. We're currently operating under a total share repurchase authorization to buy back up to $1.5 billion worth of stock by the end of June of next year. And we've said since the time that we announced this authorization that we may revisit it in the interim. You shouldn't read anything into what we did in the third quarter other than the context that I mentioned earlier, which is that we exercise judgment. Right now, the authorization is for $1.5 billion by the end of June, but we'll be reconsidering the whole question of capital deployment on an ongoing basis.

Yes, Chris, and the second part of your question ties to the answer I gave a little bit earlier. The excess capital that you see now, I guess, was the $2.2 billion to $2.7 billion that's sitting in the regulated entities in cash. Over the early parts of next year, that will be dividended up to the holding company, not all of it, but a lot of it. And that's how it becomes usable in our capital deployment. And that's going to happen every year. Every year, you're going to see the capital spent and the capital build in the next year's spent again. But at by the end of the year, it's sitting in the regulated entities for dividend approval in the early part of the next year.

Okay. And then for 2012, you had mentioned the capital that you generated you're going to deploy so we should be thinking about the upstreaming of dividends of that sort of the $2.2 billion, $2.7 billion capacity plus the free cash flow you generate next year?

No. Because that free cash flow -- it's a rolling free cash flow. Okay. So that $2.7 billion comes up, when the $2.2 billion comes up and the one that was generated last year stays down until the next year, it's sequential.

Okay. I understood. And then...

That's the assumption that underpins the guidance. So that's how you ought to think about it.

Okay. And then you guys have mentioned sort of adjusting the AOCIs for the ROE calculation to be more consistent with your peers. I'm wondering in terms of the DAC unlocks that you guys take certainly within annuity that's been pretty volatile as you include everything in adjusted operating income while many of your peers make -- include some of the unlocks below the line. Have you given any thought to sort of changing that practice to maybe reduce some of the volatility consistent with peers?

We're giving more thought to it, leaving the DAC in -- below the line.

We're trying to be very transparent. And portraying operating earnings in a business like annuities that has a lot of mark-to-market type numbers and what we believe are some numbers that don't necessarily reflect economics. Going through operating earnings every quarter is a little frustrating. But as I said, we've tried to be very transparent and we've been consistent with what we're doing but we appreciate the fact that we are not necessarily aligned with industry and it's something we ought to consider.

And our final question will come from the line of Randy Binner with Friedman Billings Ramsey. Randy Binner - FBR Capital Markets & Co., Research Division: So somehow we made it through the whole conversation without mentioning the federal government and it doesn't seem that your capital management decisions, on a forward basis, have any pause or hesitation because of potential nonbank SIFI status. So just want to kind of confirm that that's the case and see if you've kind of felt any shift in the vibe out of Washington, obviously, the banks have met and have seen a more conservative shift there.

Yes, this is Mark. We have you all along that the most important thing for us as we enter the world of regulation from someone at the federal level, whether it's the Federal Reserve or someone else, that the most important issue for us is that our business models be understood and that we not be pounded into a bank framework that really doesn't reflect the dynamics of our financial structure or the business models that we're managing. And I think that's more important than whether or not we have a label of SIFI or not, and I still think that's more important. In that respect, I would say that we're having a sense that the environment's pretty constructive. I believe that we'll have a good faith opportunity to engage on that topic, to think about what we look like, to think about setting and calibrating metrics and to understand the differences between Prudential as it looks and banks as they look. So the general tone of things in that respect, I think, is favorable in the sense of the opportunity to engage and think about it the right way. Remember that financial strength is part of our value proposition. So transparent high-quality regulation can be very important for us, and we want to be a constructive part of that process. And so the opportunity to have a good outcome is important for us in our business and important for us in our business models. With respect to the potential to be a SIFI, there are a couple of different issues there. One is the broad question of oversight as it would relate to, I think, particularly the holding company and the unregulated subs, which is kind of a hot topic in light of the experience with AIG in the…

Well, we don't know. That whole question of setting and calibrating metrics is very much an open issue. But having said that, I have the sense that there is respect for the functional regulators. Meaning the state regulators as it relates to our insurance companies and I hope we wouldn't throw that out. The RBC system has withstood the test of time and served the industry very well.

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