Prudential Financial, Inc. (PRU)

PRU 
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Prudential Financial (PRU)

Q1 2013 Earnings Call

May 02, 2013 11:00 am ET

Executives

Eric Durant

John Robert Strangfeld - Chairman, Chief Executive Officer, President and Member of Executive Committee

Mark B. Grier - Vice Chairman

Robert Michael Falzon - Chief Financial Officer and Executive Vice President

Edward P. Baird - Executive Vice President and Chief Operating Officer of International Businesses

Charles Frederick Lowrey - Head of Asset Management Business, Executive Vice President, Chief Operating Officer of US Businesses, Chief Executive Officer of Prudential Investment Management, President of Prudential Investment Management and Executive Vice President of Prudential Financial & Prudential Insurance

Analysts

Christopher Giovanni - Goldman Sachs Group Inc., Research Division

John M. Nadel - Sterne Agee & Leach Inc., Research Division

Jamminder S. Bhullar - JP Morgan Chase & Co, Research Division

Thomas G. Gallagher - Crédit Suisse AG, Research Division

Suneet L. Kamath - UBS Investment Bank, Research Division

Eric N. Berg - RBC Capital Markets, LLC, Research Division

Nigel P. Dally - Morgan Stanley, Research Division

A. Mark Finkelstein - Evercore Partners Inc., Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the First Quarter 2013 Earnings Teleconference. [Operator Instructions] And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Eric Durant. Please go ahead.

Eric Durant

Thank you, Cynthia. Good morning. To say the least, we know that you have been running a gauntlet of earnings calls today, so special thanks for joining our call. We actually delayed the beginning of this call to accommodate those of you who have been otherwise engaged.

Representing Prudential on today's call are John Strangfeld, CEO; Mark Grier, Vice Chairman; Ed Baird, Head of International; Charlie Lowrey, Head of Domestic Businesses; Rob Falzon, Chief Financial Officer; and Peter Sayre, Controller and Principal Accounting Officer. Our presenters today will be referring to slides. If you would like to follow along, they can be found on our Investor Relations website at 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 first quarter of 2013, 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 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?

John Robert Strangfeld

Thank you, Eric. Good morning, everyone. Thank you for joining us. Before we discuss specifics in the quarter, I'd like to kick things off with a few words: first, regarding our results; and second, regarding the visual aids Eric mentioned that we've added to enhance the discussion. So let's begin with the results.

We're very pleased with the results for the first quarter, and we believe we're off to a good start to achieve our goals for 2013. The building blocks supporting our enhanced performance are solidly in place and, in particular, we're encouraged by the visibility results from a number of initiatives we've implemented over the last few years. Retirement, U.S. Individual Life and International Insurance all contributed significantly to our results for the quarter.

Now we're mindful that one quarter does not a year make, and that we did benefit from a generally favorable market conditions and mortality in the quarter. That said, solid fundamentals largely account for the promising start to the year. Of course, challenges remain, and we'll continue to focus upon the delivery of business results that drive financial performance that support our goals. In sum, a great start.

As for the new slides, as Eric mentioned, these are available on Prudential's Investor Relations website. They have been provided to enhance our discussion with you. We appreciate that noise in the numbers, as well as developments like new product introductions or prices changes can sometimes make it difficult to interpret what's going on. We hope these visual aids will help clarify underlying trends and results and business drivers, and that's the basic intention of them.

In a moment, Mark Grier will take you through our results for the quarter, then Rob Falzon, our new Chief Financial Officer, will cover our capital and liquidity picture. And then I'll sum up very briefly and move on to the Q&A.

So with that, Mark, over to you.

Mark B. Grier

Thanks, John. Good morning, good afternoon or good evening, depending on where you are. I'll add my thanks to joining us. And as both John and Eric mentioned, I'll be referring to slides that are in the deck to which you have access through our Investor Relations website.

I'll start with Slide 2, an overview of our financial results for the quarter. On a reported basis, common stock earnings per share amounted to $2.28 for the first quarter, based on after-tax adjusted operating income of the Financial Services businesses. This compares to EPS of $1.61 a year ago. After adjusting for market-driven and discrete items in both the current quarter and the year-ago quarter, EPS was up 49%, amounting to $2.13 compared to $1.43. This increase is largely the result of underlying organic growth in our U.S. businesses over the past year; the first full quarter contribution from the pension risk transfer business we put on the books in the fourth quarter; the initial contribution from the in-force Individual Life Insurance business we acquired from The Hartford in January; continued growth of our International Insurance business; and finally, a more favorable claims experience across several businesses.

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