Good morning and thank you for joining our call. Representing Prudential on today's call are Charlie Lowrey, Chairman and CEO; and Rob Falzon, Vice Chairman; Andy Sullivan, Head of U.S. Businesses; Scott Sleyster, Head of International Businesses; Ken Tanji, Chief Financial Officer; and Rob Axel, Controller and Principal Accounting Officer. We will start with prepared remarks by Charlie, Rob and Ken, and then we will take your questions. Today's presentation may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, this presentation may include references to non-GAAP measures. For a reconciliation of such measures to the comparable GAAP measures and a discussion of factors that could cause actual results to differ materially from those in the forward-looking statements. Please see the slides titled forward-looking statements and non-GAAP measures in the appendix of today's presentation. And the quarterly financial supplement, both of which can be found on our website at investor.prudential.com. Now, I'll turn the call over to Bob McLaughlin. Please go ahead.

Good morning and thank you for joining our call. Representing Prudential on today's call are Charlie Lowrey, Chairman and CEO; Rob Falzon, Vice Chairman; Andy Sullivan, Head of U.S. Businesses; Scott Sleyster, Head of International Businesses; Ken Tanji, Chief Financial Officer; and Rob Axel, Controller and Principal Accounting Officer. We will start with prepared comments by Charlie, Rob and Ken, and then we will take your questions. Today's presentation may include forward-looking statements. It is possible that actual results may differ materially from the predictions we make today. In addition, this presentation may include references to non-GAAP measures. For a reconciliation of such measures to the comparable GAAP measures and a discussion of factors that could cause actual results to differ materially from those in the forward-looking statements, please see the slides titled forward-looking statements and non-GAAP measures in the appendix to today's presentation and the quarterly financial supplement, both of which can be found on our website at investor.prudential.com. Now, I'll turn it over to Charlie.

Thank you, Bob, and thanks to everyone for joining us this morning. We delivered solid operating earnings for the first quarter, including strong variable investment income that more than offset the impact of elevated mortality from COVID-19. We have also recently achieved multiple significant milestones in our transformation process to become a higher growth, less market-sensitive and more nimble company. These milestones included continued execution on our plans to reposition our businesses. We completed two key divestitures and announced another programmatic acquisition. We continue to invest in our businesses to further enhance the customer experience and expand solutions to support sustainable long-term growth. And we also further advanced the progress on our $750 million cost savings program. We are pleased with the pace of these initiatives, which are well supported by our rock-solid balance sheet and help us expand access to investing insurance and retirement security for our customers and clients around the world. I'll provide an update on each of these areas before turning it over to Rob and Ken. Moving to Slide 3. At the beginning of April, we successfully completed the divestiture of our full service retirement business and the sale of a significant portion of our legacy variable annuities block. Together, these dispositions reduced the overall market sensitivity of our businesses by approximately 20%, while enabling us to further sharpen our focus on higher growth opportunities, including programmatic M&A and asset management and emerging markets. To that end, we agreed during the quarter to acquire a minority stake in Alexander Forbes, a leading provider of financial advice, retirement, investment and wealth management in South Africa. This deal provides access to essential financial tools and further expands our footprint in a strategically important market. We also continue to focus on enhancing customer experiences and creating solutions to…

Thank you, Charlie. I'll provide an overview of our financial results and business performance for our PGIM, U.S. and international businesses. I'll begin on Slide 6 with our financial results for the first quarter of 2022. Our pretax adjusted operating income was $1.6 billion or $3.17 per share on an after-tax basis and reflected a benefit from variable investment income, which exceeded the net mortality impact from COVID-19. PGIM, our global investment manager had higher asset management fees than the year ago quarter. However, these were more than offset by lower other related revenues as well as investments made to support business growth. Results of our U.S. businesses increased 12% from the year ago quarter and reflected higher net investment spread, including benefits from variable investment income and rising interest rates, more favorable underwriting, primarily due to declining COVID-19-related mortality experience and lower expenses, primarily driven by our cost savings initiatives, partially offset by lower fee income resulting from the runoff of our legacy variable annuities. Earnings in our international businesses decreased by 8%, reflecting lower net investment results, less favorable underwriting results and lower earnings from joint venture investments, partially offset by continued business growth. Turning to Slide 7. PGIM, our top 10 global investment manager has diversified capabilities in both public and private asset classes across fixed income, alternatives, real estate and equities. PGIM's long-term investment performance remains attractive with more than 84% of assets under management outperforming their benchmarks over the last 3-, 5- and 10-year periods. PGIM experienced third-party net outflows of $4.3 billion in the quarter as institutional net inflows, driven by fixed income and real estate, were more than offset by retail outflows, driven by mutual fund investors rebalancing out of fixed income due to rising rates and inflation expectations. As the investment engine…

Thanks, Rob. I'll begin on Slide 10, which provides insight into earnings for the second quarter of 2022 relative to our first quarter results. Pretax adjusted operating income in the first quarter was $1.6 billion, and resulted in earnings per share of $3.17 on an after-tax basis. To get a sense of how our second quarter results might develop, we suggest adjustments for the following items: first, variable investment income outperformed expectations in the first quarter by $275 million; next, we adjust underwriting experience by a net $165 million. This adjustment includes a placeholder for COVID-19 claims experienced in the second quarter of $40 million for our U.S. businesses based on 25,000 COVID-19-related fatalities in the U.S. and a placeholder of $25 million for our international businesses. While we have provided this placeholder for COVID-19-related claims experience, the actual impact will depend on a variety of factors such as infection and fatality rates, geographic and demographic mix and the effectiveness of vaccines; and last, we expect other items to be $95 million lower in the second quarter, primarily as a result of completing the sales of both our full service retirement business and a block of legacy variable annuities. These items combined get us to a baseline of $2.75 per share for the second quarter. I'll note that if you exclude items specific to the second quarter, earnings per share would be $2.91. A modest decline from recent quarters, primarily from the completed sales of businesses, and the proceeds from these sales will provide flexibility for future capital deployment. I would also note a few other items: first, due to the rise in interest rates, we no longer anticipate a reduction in net investment income from portfolio reinvestment. The benefit from a rising rate environment on our investment income compounds…

[Operator Instructions] Our first question today is coming from Erik Bass from Autonomous Research. Your line is now live.

Can you provide some more color on the net flow drivers for PGIM in the quarter? And with interest rates continuing to move higher, can you talk about how this is affecting fixed income demand from both retail and institutional clients?

Sure. Eric, it's Andy. As we've discussed in the past, PGIM flows are going to vary from quarter-to-quarter, and we're very focused and stay focused on our long-term track record. We're very proud of the fact that 18 of the last 19 years, we've had positive third-party flows. In the first quarter, we did experience $4.3 billion in net outflows. It was a challenging quarter for the fixed income U.S. mutual fund industry in general, and we were similarly affected. We saw $4.6 billion of retail outflows, almost entirely driven by retail investor repositioning out of fixed income. On the institutional side, we saw a positive $300 million driven by flows into public fixed income and real estate. We continue to think this is a good proof of our diversification. And on the institutional side, we see algorithms actually positioning into fixed income given the rising rate environment. As we step back, our long-term track record remains very strong. We saw $55 billion in flows between 2017 and 2021, with $27 billion of that being on the retail side. That being said, we do think it's fair to expect continued pressure on the retail fixed income industry as the rates and spreads continue to rise, but that's a near-term effect. As Rob said upfront, higher rates are good after the transitory period for the fixed income business. We're very confident in the fact that we have the right products, the right strategies, exceptional long-term investment performance and great distribution and will be a net winner over time. One thing I wanted to add today, when we talk about flows is more around the private business that Rob talked about given that those are higher fee rate businesses. We continue to benefit from a very strong market for real estate and private credit. We were able to put $9.6 billion to work in the first quarter across real estate at PGIM Private Capital raise another $1.8 billion. So, we are confident in PGIM and confident in a long-term track record.

I appreciate all the color there. And then, I was hoping that you could talk about the implications of the weaker yen for your Japan business in terms of earnings, capital and the demand for foreign currency-denominated products? And I realize that you're hedged for 2022, but can you just remind us what percentage of your earnings are in yen?

Yes. Erik, it's Ken. I'll start off on sort of the financial implications. And you're right, we do have a pretty established and, we think, a very effective hedging program. But first, it's important to know that of our -- because of the success of us in the Japan market with U.S. dollar products, a substantial portion of our reserves and our assets backing those reserves are U.S. dollar-denominated. And that in combination with the fact that as a Japanese company, our expenses are almost exclusively denominated in yen. The combination of that results in our income from our Japan business being mostly -- nearly all of our U.S. -- our income in Japan is U.S. dollar denominated. What income we have denominated in yen, we hedged over three years. And we have a net equity capital hedge position as well. So, it's a long-established hedging approach, and we think it performs well, both from an accounting and economic standpoint.

Got it. And for the product demand with just -- you sell a lot of foreign countries denominated products start…

I'll hand that over to Scott.

Eric, this is Scott. Yes, in the -- it's a little bit of a mixed bag or a dislocation, if you will. But for the most part, the higher U.S. interest rates, which I think are related to the currency is good for demand, as Rob said, and I think it's good for Prudential overall. But as investors in Japan are looking for more attractive yielding products, that's good. In the short run, though, and when the currency moves, it does make the price tag of the purchase a little more expensive. And we have found in the bank channel where there's an intermediary in there. You may see slightly higher surrenders because of the run-up in the dollar. But net-net, we think it's generally a positive for us.

[Operator Instructions] Our next question is coming from Tom Gallagher from Evercore. Your line is now live.

Ken, a question on the holdco cash and just overall capital generation in the quarter, if I look at the -- it looks like you issued $1 billion of junior debt in the quarter, so that would be an inflow, and you got $300 million of cash from the dispositions, and I guess, $4 billion-plus is still closed after the quarter, but that's $1.3 billion. And then, I look at your holdco cash balance, it didn't change versus 4Q. So, just curious, how I should think about that? It doesn't -- looking at it that way, it doesn't look like there were much in the way of dividends that came up during the quarter. Were there capital needs that came up in the subs? Or is it a timing issue? Can you help us think through like the capital generation in the quarter and what that should look like going forward?

Yes, Tom. Yes, we did issue $1 billion of hybrid debt is actually early in the quarter and before the rise in rates and before the spreads widened out. So we're happy with that execution. And that's part of our process to prefund upcoming debt that we would like to either -- that's either maturing or we're going to call. And we do have about $1 billion of hybrid debt that's going to be callable in September. So, we sort of earmarked that $1 billion for that purpose. Liquid assets at the holding company will fluctuate due to timing. Typically, that's within our $3 billion to $5 billion target. But in the first quarter, as is in typical with most first quarters for us, subsidiary dividends and cash flow were low, and then they tend to be greater in the second part of the year. And so, part of that is just timing. But we also did make a capital contribution to a new reinsurance subsidiary that we have -- that we've established in Bermuda in the first quarter. And that will give us the ability to reinsure policies from PICA, our U.S. insurance company to that new subsidiary, to give us more economic reserving and greater capital efficiency over time. So, over time, it was -- it did require some capital to initially fund -- but over time, we feel good about that in terms of giving us much more balance sheet efficiency going forward? And then also just keep in mind, we did receive $4 billion from the sale of full service and PALAC in April.

Got you. And just a follow-up there, Ken. Can you comment on the size of the new reinsurance vehicle that's, I guess, ranged on the captive that you referenced?

Yes. We initially capitalized it with $800 million. So that was the amount of initial capital that we put in. And although it's a requirement now, it's actually going to provide capital efficiency in the future. So you can think about that as a net positive to our capital efficiency over time.

Our next question today is coming from Suneet Kamath from Jefferies. Your line is now live.

Great. First question just on strategy. I guess, Charlie, we've been talking about this objective of improving the earnings contribution from growth businesses to, I guess, over 30%. And we're a year into the strategy and haven't really seen that move all that much, at least based on the way we're calculating it. So my question is, is the plan to still sort of get there over the next couple of years? And is it going to take something more than programmatic M&A in order to accomplish that?

Sure. So, we can't control the markets, but this is -- we look at it as both a numerator and a denominator issue. And we're continuing to make progress on both -- through both the acquisitions we've made, the four acquisitions we've made over the past year and the dispositions that we just completed. And so, you've seen that we've made progress with the four acquisitions and the two major dispositions. And we'll continue to execute on the strategy. We have a sense of urgency. We're going to make progress as we go forward, and we'll make progress in both ways.

And can you give us a sense on the timing of the use of the $4 billion of proceeds? Obviously, we could think about a couple of different buckets, right, M&A and/or capital return to shareholders. But now that these deals have closed, sort of over what time frame would you like to use that capital?

Yes. Sure. So as I hope you've seen, we are operating with a sense of urgency, right? Speed is important, but we don't have a specific time ban per se. So, we're going to remain prudent stewards of capital, as we've said, and continue to evaluate programmatic acquisitions. But as we've also said and as we've done in the past, we'll return capital to shareholders if we can't find the appropriate opportunities over time. So, we're going to continue on our process. But as you've seen, we have returned capital to shareholders, and we'll continue to operate in that fashion.

Got it. If I could just sneak one more in for Ken or Rob. When we think about the individual annuity business, I think in the past, specifically thinking about the highest daily value product, I think the commentary you guys gave in the past is a rising interest rate environment, coupled with a falling equity market environment is generally not great for that business, which is the environment, obviously, we're sitting in today. So can you just talk about from a risk management perspective, how that business is holding up in this environment?

Yes. Suneet, this is Ken. We've very well capitalized and reserved our business, and we have a highly effective hedging program. And that has been very effective of mitigating market impacts, both from equity markets and interest rates. And so, -- and it continues -- it was continued to be very effective in the quarter. So no change there.

Your next question today is coming from John Barnidge from Piper Sandler. Your line is now live.

Expense ratios in both group disability and group life insurance decline. I know that some of the source of the expense saves programs, but you're also building the service COVID claims. Can you maybe dimension some of the improvement in admin expenses there between those two?

Sure, John. It's Andy. So our admin expense ratio for the quarter was 15.6%. That was almost a 4% improvement from Q4, but was basically flat from Q1 of last year. I would just keep in mind, fourth quarter was elevated by some one-time compensation expenses, so there's some seasonality effects going on. We are starting to see the beginnings of our core expense improvement of impacting our businesses. When I think about that, I would say the expense saves are more attributable to the overall expense work. The incidents and severity in the business remain elevated, even though they have started to come back towards normal, they remain elevated, and we maintain the higher level of staffing in both our claim and our call centers. So, we would expect that the admin ratio will stay elevated for the remainder of the year.

Great. And then my follow-up question. Can you talk about maybe how higher rates have changed the conversation around pension risk transfer activity with potential counterparties?

So, John, it's Andy. So, we -- maybe let me talk about the current quarter and then I'll go into looking forward. So, as you're aware, this is a very transaction-oriented business. And first quarter tends to be light, and that's kind of what we saw with the industry. We think the first quarter was somewhere around $5.3 billion. We were very pleased, as Rob said, that we did two deals for $700 million. Overall, as we look forward for the rest of the year, we believe it's going to be a strong year, and I think the overall industry level should clock in around $40 billion. The fact is, funded status hit a record high in February of 102%. And if you add on top of that, the rise in rates and then the volatile environment that we're in, all of that bolsters sponsors' desire and proclivity to transact. So this is a big market that it has become more competitive, but we know that we could pick our spots and be disciplined and net-net, will grow over time.

[Operator Instructions] Our next question is coming from Tracy Benguigui from Barclays. Your line is now live.

I'm wondering if your intolerance of interest rate sensitive business changed at all considering the 10-year is nearly 3% may go up from here? Like are you thinking at all about increasing the portion of spread-based business going forward?

Tracy, it's Rob. Let me take a stab at that. First, to your point, yes, rising interest rates are a good thing. They're a good thing for the industry and they're a good thing for us as a company, both because it allows us to be more competitive in providing a value proposition to our customers and our products and also because it has a positive impact on our portfolio yield. Having said that, it is our desire to have a mix of businesses and products that are less market-sensitive and less market-sensitive across market cycles. So our focus is on trying to operate at the intersection of both shareholder and customer value propositions that are sustainable throughout cycles. If you're asking about how we think about the impact of higher interest rates on the long-term reversion rate that we have in our assumptions, obviously, that drives pricing and valuation. We do our assumption updates in the second quarter, probably not something -- anything specific we can say about that. But maybe I'll turn it over to Ken and he can comment more generally.

Yes. Thanks, Rob. Yes. The long-term interest rates and our assumptions are something that we do look at in our assumption updates annually. We do that by looking at multiple perspectives sort of from an array of economists and banks and asset managers. We also look at the forward curve, which as you know, has increased recently. And we set our assumption kind of close to the median of that. And also with our assumption update, inflation has risen. We factor near-term inflation into our reserve setting as well as for long-term inflation as well. And then part of our assumption update will obviously cover mortality and other policyholder behavior as well, including not just our own experience, but anything we get in terms of new data from other sources in the industry. We did recently receive a new industry study that indicates experience is more adverse in some of our assumptions of our U.S. life insurance business. We're evaluating this information and its applicability to our business. And to the extent that it would cause an increase in reserves or a decline in earnings. So, that -- all that work is underway, it will conclude later in the quarter, and that will be part of what we report in the second quarter.

Okay. Great. I'm also wondering as unfavorable FX impacts change your view right now on increasing international business through M&A.

Tracy, this is Scott. I'll go ahead and take that one. I guess in the short answer, I'd say, not really. We're seeking to build out a well-diversified emerging markets portfolio of businesses. And we see local currency weakness as an opportunity to improve our U.S. dollar purchase economics, if you will. But that being said, we do factor in the potential for currency risk over time by using risk-adjusted discount rates in our valuation estimates when we think about these businesses. So I would say if you take a step back, we'd actually say, it's a net positive.

Okay. Sorry, if I could just sneak one quick one, that mention of that reinsurance entity established in Bermuda for the type of business. I'm just wondering, is that reinsurance flow or the back book? Is that being reinsured?

Initially, we're going to use it for reinsuring some of our in-force business, but we are gaining experience in Bermuda and our ability to use it -- we will be considering strategies, potentially, for flow in the future.

Your next question is coming from Alex Scott from Goldman Sachs. Your line is now live.

I had a follow-up just on Suneet's question and the answer there. And when you mentioned that the business mix shift, part of it's the denominator, I guess -- I think part of that is also being communicated is the runoff of the annuities business over time or at least the sort of more legacy piece of the annuities business. And now that, that transaction is closed, I was just wondering if you could give us a more firm way to think about how we should expect the earnings power to run off or whether some of the new product growth can offset that?

Alex, it's Ken. Yes, our traditional -- we've -- we're no longer issuing traditional variable annuities. So it is running off. And after our -- the sale of about 20% of our block of business with PALAC, it will continue to run off at about $3 billion a quarter is what you saw in the quarter. So, you can kind of think about that as kind of $12 billion to $15 billion a year, and that's about an 8% runoff a year. So that, combined with the PALAC business that was 20%, that over time will get us very close to our objective to reducing our income from traditional variable annuities, and having said that, we would think about other ways to do that as well.

Got it. And then I had one more follow-up to the response on the impact of interest rates, particularly your comments on the actuarial review. The inflation impact that you mentioned, I assume that's probably long-term care and the reimbursement style policies. Could you help us think through the sensitivity to that? I mean, you've provided a lot of sensitivity around long-term care. And so, we have all of that around changes in discount rates and new money yields and so forth. But the inflation one, I've struggled to put my finger on. So even if it's just relative to rates, which is the bigger factor, any kind of commentary you can provide to help us think through that would be useful.

Yes, Alex. Yes, long-term care is probably where that's most relevant in terms of inflation. We have factored in inflation, obviously, into our reserves including increases in near term, it's -- long-term inflation would be where it's more sensitive. We have provided some of those sensitivities. So -- and overall, we think it's very manageable for us.

Your next question today is coming from Elyse Greenspan from Wells Fargo. Your line is now live.

My first question is on Assurance IQ. You guys took a goodwill impairment there in the fourth quarter. And I believe at the time, you mentioned that part of the rationale for that was the lower valuation of the public peers. I noticed you didn't take another charge this quarter, and the peers have rerated subsequently lower from a few months ago. Was that to contemplate it when you took the charge in the fourth quarter? Or any update you can give us there?

Yes. The charge that we took in the fourth quarter was relevant to the environment at the end of the fourth quarter. We again did a qualitative review of our -- the value of our insurance goodwill and assurance, and we did not need any further impairment. So that's where that stands.

Okay. And then my second question, the group disability loss ratio was pretty strong in the quarter. Can we just get some more color there and just how you expect that to trend over the balance of the year?

Yes. Elyse, it's Andy. We very much obviously like the improvement that we saw in the disability business this quarter. It was our best benefit ratio since 2018 at 73.4%. I would frame this as what we've seen in disability, it continues to behave as we would expect and what we have been preparing for. And you always need to split this into the two different impacts. The one impact on the absence and STD side, on that side, we do continue to see a very high level of COVID-related claims. That, in general, turns into the need for the elevated staffing and claim and call. And because those are fee-oriented businesses, it shows up in our more from an elevated admin ratio perspective. We're going to stay the course on that staffing because being there for our customers is critically important in job one. On the long-term disability side, as I mentioned earlier, we are beginning to see both incidents and severity trend back downward in the business. You'll recall the previous two quarters both of those were up about 10% in Q3 and Q4. But on top of that, our claims teams are also experiencing very good claims resolutions. And what we're hearing from our claims managers is the combination of very low unemployment at 3.8% and wage inflation accelerating, there's a strong desire for claimants to get back to the productive workforce. So, in all, we're very pleased with the claims team's performance, and we're obviously happy to see the beginnings of an improvement in the environment.

We reach end of our question-and-answer session. I'd like to turn the floor back over to Charlie for any further closing comments.

All right. Thank you very much, and thank you all for joining us today. We continue to make significant progress on repositioning our business mix and advancing our cost savings program to transform Prudential into a higher growth, less market-sensitive and more nimble company. We're confident this strategy will help us deliver an even more meaningful difference in the lives of our customers and sustain value for our shareholders, while enabling us to fulfill our vision of becoming a global leader in expanding access to investing, insurance and retirement security. Thanks again for your time today.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation.