Prudential Financial, Inc. (NYSE:PRU) Q4 2014 Earnings Conference Call - Final Transcript

Feb 05, 2015 • 11:00 am ET

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Prudential Financial, Inc. (NYSE:PRU) Q4 2014 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fourth Quarter 2014 Earnings Teleconference. At this time, all lines are in a listen-only mode. Later we will conduct the question-and-answer session, instructions will be given to you at that time. [Operator Instructions]. And as a reminder, today's conference call is being recorded.

I would now like to turn the conference over to Mr. Mark Finkelstein. Please go ahead.

Executive
Mark Finkelstein

Thank you, Cynthia. Good morning, and thank you for joining our call.

Representing Prudential on today's call are John Strangfeld, CEO; Mark Grier, Vice Chairman; Charlie Lowrey, Head of International Businesses; Steve Pelletier, Head of Domestic Businesses; Rob Falzon, Chief Financial Officer; and Rob Axel, Controller and Principal Accounting Officer. We will start with prepared comments by John, Mark and Rob, and then we will answer 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 section titled Forward-looking Statements and Non-GAAP Measure of our earnings press release, which can be found on our website at www.investor.prudential.com.

John, I'll hand it over to you.

Executive
John Robert Strangfeld

Thank you, Mark. Good morning, everyone, and thank you for joining us.

Our fourth quarter results were a little lighter than the other quarters of the year, partly due to seasonality. But overall, we feel very good about 2014. More specifically, adjusted operating income, excluding market-driven and discrete items was $9.84 per share for the full year 2014, which is an increase of 10% over 2013, and exceeded the expectation we established in guidance.

Likewise, our ROE for the year exceeded our 13% to 14% long-term target range. Results benefited from tailwinds such as strong non-coupon investment income, favorable equity markets, and better-than-expected underwriting experience. Nonetheless, we are pleased with the positioning of our businesses, and the prospects going forward, and would like to highlight just a few.

Our annuity business benefited from favorable equity markets that contributed to 15% adjusted operating income growth, excluding market-driven and discrete items in 2014. Additionally, we are pleased that our newer products like Prudential Defined Income, which isn't equity-centric, are gaining traction, and collectively represent over 20% of total annuity sales in the second half of 2014.

Retirement had a record earnings year, with strong momentum in pension risk transfer. We originated over $37 billion in total buyout and longevity account values in 2014, including the landmark $27 billion British Telecom longevity transaction. Asset Management reported $5.4 billion in positive unaffiliated third-party net flows in 2014. And assets under management grew 8% over year end 2013.

While net flows in the second half of the year were less robust, solid underlying investment performance and business momentum keeps us optimistic that this will continue