Ladies and gentlemen, thank you for standing by, and welcome to the Prudential quarterly earnings call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, the conference is being recorded. I would now like to turn the conference over to our host, Mr. Mark Finkelstein. Please go ahead. Alan Mark Finkelstein - Senior Vice President & Head-Investor Relations: Thank you, Don. 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, hand it over to you. John Robert Strangfeld - Chairman & Chief Executive Officer: Thank you, Mark. Good morning, everyone, and thank you for joining us. I will provide some high-level observations on the quarter and the fundamental trends in our businesses. I will then briefly discuss actions we've taken to improve our capital flexibility and reduce volatility, which directly led to last evenings announcement of a $500 million…

Thanks, John. Good morning, good afternoon or good evening. Thank you all for joining the call today. I'll take you through our results, and then I'll turn it over to Rob Falzon, who will cover liquidity, leverage and capital highlights. Starting on slide 2, after-tax adjusted operating income amounted to $1.84 per share for the quarter compared to $2.91 a year ago. After adjusting for market-driven and discrete items, EPS of $2.46 was down $0.16 from year ago. Underlying business performance remained solid through the challenging macro environment. The decrease reflected a number of moving parts, but I would highlight a greater loss from corporate and other operations driven by negative fluctuations in expenses and investment income and less favorable claims experience in comparison to the outperformance we called out in the year-ago quarter. We estimate that these two items, together with less favorable currency exchange rates, had a negative impact of roughly $0.25 per share on the comparison of results to a year ago. Current quarter variances in comparison to our average expectations for mortality in Individual Life and International Insurance, pension risk transfer case experience and returns on non-coupon investments were largely offsetting. Favorable revenue seasonality in International Insurance contributed about $0.04 per share to earnings. After adjusting for market-driven and discrete items, our EPS of $4.72 for the first half of 2016 implies an annualized ROE of just under 13%. This includes a modest net negative impact from variances compared to average expectations for the items I mentioned, together with favorable International Insurance revenue seasonality. On a GAAP basis, including amounts categorized as realized investment gains or losses, and results from divested businesses, we reported net income of $921 million for the current quarter, about $90 million above our after-tax adjusted operating income. GAAP net income included…

And first we're going to the line of Ryan Krueger, KBW. Please go ahead. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Hey. Thanks. Good morning. I had a question about the annuity ROA; it dipped down a bit to 98 bps in the quarter from kind of 105 basis point range it's been running at. Can you give an update on how we should think about that going forward? Stephen P. Pelletier - Executive Vice President & COO-US Business Unit: Ryan, this is Steve. We've long encouraged people to think in terms of 100 basis points as being the longer-term run rate of ROA for the annuities business. The recent change in this quarter reflected a couple of things. First of all, it reflected some one-time expenses, and it also reflected something of a shift in our product mix gradually over time towards the PDI product, which is lower risk but also on a marginal basis lower fees as well. So given all of that, we'd still encourage people to think very much in terms of 100 bps as the ROA for the annuities business. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Okay. Great, thanks. And then do you just have an update on the fair value of the yen capital hedge? Robert M. Falzon - Chief Financial Officer & Executive Vice President: Ryan, it's Rob. Yeah, so we've – the hedge at the end of the first quarter was a negative $520 million. Ryan Krueger - Keefe, Bruyette & Woods, Inc.: Okay. And then does that – would you expect that to have an impact on – I guess if things stay unchanged, should we think of that as having any impact on free cash flow generation over time as it gets realized? Robert M. Falzon -…

Thank you. And next we're going to the line of Nigel Dally. Please go ahead. Morgan Stanley. Nigel P. Dally - Morgan Stanley & Co. LLC: Great. Thank you. Good morning. So, Mark, you mentioned that you've reduced the interest rate assumptions as part of the actuarial review. Could you elaborate on that? How much was it changed and what was it changed to? And also, did you recalibrate the separate account return assumptions? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So, Nigel, it's Rob. Actually, I'll jump in on this. The – we took the benchmark U.S. Treasury 10-year down from 4.25% to 4%. In Japan, we took the similar 10-year benchmark down from 2% down to 1.9%. The impact of that, if you think about the returns expected from the variable annuity accounts, which I think is what you're asking, is that the return over the what we call the near- to intermediate term, so call it the next 0 to 10 years, averages about 4.8%. And then after 10 years, as a result of migrating up to those reversion rates that I mentioned, it's about 6.5% Nigel P. Dally - Morgan Stanley & Co. LLC: Okay. That's helpful. Then just on the buybacks, are the higher plans purely a reflection of the capital release from this VA restructuring that you completed, or does the restructure also improve the free cash flow which could possibly impact the pace of future buybacks? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So the immediate increase in the buyback is tied to the $1 billion that came up as a result of the recapture initiative that we have underway in our variable annuities business. But to the point that you've made, I would emphasize that while we'll continue to evaluate our buybacks and are not forecasting anything in the way of an increase at this point. We are encouraged by the increased cash flow profile that comes out of our annuities business. It's really driven by two things, Nigel. First is the fact that as this block matures, the sales relative to the existing block lead it to throw off more cash. The second is this construct that we've put in place. It is a more stable long-term contract, subject to less volatility, and therefore gives us more degrees of freedom in terms of how we think about taking the cash out of the annuities business as earnings are generated annually. Nigel P. Dally - Morgan Stanley & Co. LLC: Very helpful. Thank you.

Thank you. And next we're going to the line of Jimmy Bhullar. Please go ahead.

Hi. The first question is just on your – just following-up on the rate assumption. I just wanted to make sure I got the numbers right. So you took the rate assumption down to 4%, or was it down to 2% from 4%? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So the U.S. rate 10-year benchmark, Jimmy, was brought from 4.25% down to 4%. The JGB 10-year benchmark was brought from 2% down to 1.9%.

But considering current rates, those still seem relatively high level, so just wondering what the justification was for not reducing them further? And maybe if you could give us any sort of sensitivity to what the impact would have been to your results had you brought it down by another 50 basis points or 100 basis points in each market? Or is it 50 basis points in Japan, 100 basis points in the U.S.? Robert M. Falzon - Chief Financial Officer & Executive Vice President: Okay. So a couple of thoughts. First, Jimmy, with respect to the process that we go through, understand it is a well-established and well-controlled actuarial review process that we undertake and come up with these rates. We look at historical rates, we look at forward rates, we survey both internal and external experts to get their views of rates on a go-forward basis. And we use a central estimate that's derived from looking at all of those data points. So that's consistent with what we've done in the past, and we continue to apply on a go-forward basis. With respect to the interest rate sensitivity, if you look at our assumption updates, what I would tell you is that they were not materially affected by the decline in that long-term reversion rate. We had some interest rate impact; not particularly material. Most of it was driven by the current level of interest rates as opposed to a change in that long-term assumption.

Yeah, that's important. Remember that we grade up to the long-term assumption but current rates are in the books. Robert M. Falzon - Chief Financial Officer & Executive Vice President: And it takes about a 10-year period of time for that grade up, so we start at current levels and then follow the forward curve for a couple of years and then do a linear grade up to that long-term reversion rate by year 10.

Okay.

Yeah, so today's very low rates are in our balance sheet.

Yeah. Basically, you're following the forward curve for maybe the next year, two years but then you're assuming a relatively steep increase to get to that 4%, right? Robert M. Falzon - Chief Financial Officer & Executive Vice President: You can do the math; it's a linear extrapolation from third year on to year 10.

Okay. And secondly just in Japan, what's your view of the bank channel in Japan? It's about I think close to 20% of your sales. Several companies have been pulling back from the channel, especially with the further drop in rates? So maybe if you could talk about your long-term view of that channel and profitability of the business that you're selling through the channel? Stephen P. Pelletier - Executive Vice President & COO-US Business Unit: Sure. Let me take a little bit of a step back and talk about our position with regard to the bank channel. So we believe that we have a differentiated strategy within the bank channel. When we first acquired Star/Edison there were about 100 bank partners in total. And consistent with what we've done both in both independent agency and the LC channels, we reduced the number of relationships focusing on the quality of products, the service and the fit with the bank partners that we've chose to do business with. So we reduced that to about 60 bank partners that currently offer our products and we sell through about 80% of those bank partners in any given quarter. But there are three points of differentiation that really affect our profitability in the bank channel. The first is that we provide exceptional service to our banking partners. We have about 240 secondees. Those are life planners that we've seconded to the banks and they provide exceptional service to the bank clients. So we don't have to be the lowest price. We compete on service; we don't compete via spreadsheets. The second is that we focus on death protection. The majority of our sales include mortality and expense margins, obviously. And the other point here is that we have a very high proportion of recurring premium in current products as opposed to just savings products. So over 80% of our sales in banks are recurring premiums and that's something we've been working really hard on and have changed the banks mentality, at least our partners' mentality, toward the kind of products that are sold. And the third is that the relatively little single premium fixed annuity products that we do sell through the channel are re-priced twice a month for new business and they all have market value adjustment or MVA features. And now we really sell only U.S. dollar products, because we've been making that shift that John and Mark talked about. So we feel very good about the differentiated strategy we employ, the mix of products we sell and the resultant profitability of the business.

Thank you.

Thank you. Next we'll go to the line of Mike Kovac, Goldman Sachs. Please go ahead. Mike Kovac - Goldman Sachs & Co.: Great. Thanks for taking the question. We've seen a couple of other life companies in the U.S. provide some increased disclosure on a lower for longer scenario in terms of the impact on both the life and annuity blocks. I'm wondering if you can give us an update in terms of how you see it impacting the balance sheet if we were in say, 1% for a prolonged of time? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So, Mike, it's Rob. Let me try to take a crack at that. First, it's important to point out that we've had a significant reduction in our interest rate sensitivity, post the completion of the VA captive initiative. You've seen that in both the first quarter and the second quarter, driven by the fact that, as I indicated earlier, we've migrated over to a more stable statutory framework and it reflects the long-term nature of the risks. Importantly we eliminated the internal corporate hedge, under hedge, excuse me, as I indicated in my opening comments. And we're managing all of the VA risks within those same legal entities. I'd also note that we manage our balance sheet so that we can maintain our AA targets through cyclical stress scenarios. So that includes 100 basis point further decline in interest rates from where we are today. So from a balance sheet standpoint, we would not expect to have any degradation in our credit quality as a result of a sustained low rate of a significant quantum from where we are today. Mike Kovac - Goldman Sachs & Co.: So do you have a sense or can you…

No. This is Mark. That's very much still work in process and we're not ready to talk about or take any actions in anticipation of what comes out. I think the main message around the work on capital standards is that all of the signals are clearly consistent with the right approach to insurance. Mike Kovac - Goldman Sachs & Co.: Thanks for the answers.

Thank you. And next we're going to the line of Seth Weiss, Bank of America. Please go ahead.

Yeah, hi. Good morning. Just a question on the VA recapture. Last quarter I think you mentioned that there were still some steps around ALM that needed to be completed throughout the remainder of the year. Is what you announced today basically finish those steps and put to bed any other remaining actions on the VA recapture? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So it's Rob, Seth. As of August 1, the recapture initiative was substantially completed. There is obviously fine tuning of both accounting and ALM as we proceed forward in order to optimize the structure that we have in place. But yes, we are completed as of August 1.

Okay. Great. Thanks a lot. And all around it seems like the recapture was a homerun; it reduces the volatility and increased the capacity by about $1 billion. I think if we go back to the fourth quarter last year, you commented that you were really able to make this change because of the updated regulatory environment allowing this discussion with the regulator. Was that the only thing that prevented you from doing this in the past, or are there any cost consequences that we should consider about? I guess I'm just wondering why it wasn't done in the past and want to make sure we're thinking about any kind of knock-on effects going forward. Robert M. Falzon - Chief Financial Officer & Executive Vice President: The reason we set up the captive to begin with wasn't driven by a desire to manage capital down or otherwise optimize the way we're managing capital but rather in order to optimize the way in which we were managing the risk. And the way in which the statutory construct worked in the past was such that – the primary shortcoming of it was such that the use of derivatives which we thought was important to manage this risk was not fully incorporated or adequately incorporated into that construct. And where the statutory construct is migrating toward is one which gives a much fuller and robust recognition of derivatives, both their use, their mission, modeling of the derivatives and the accounting for the derivatives. And that was really the primary reason why we went to captive and the motivation for being able to recapture from the captive. There are economic benefits in the recapture that I've described before that led to, as you know, to the reduced volatility and the free up of capital. So all things being equal, we'd rather manage this thing holistically. It was the shortcomings of the construct before that prevented us from doing so.

Yeah, I think maybe just to emphasize part of what you might be asking. Because we never used the captive to arbitrage either reserves or admitted assets or capital, we didn't go into the recapture in a hole. We actually, as you see, went into the recapture from a position of strength. So there are things out there that would have been an advantage in the captive structure that we're going to lose as a result of the recapture.

Great. Thank you very much.

Thank you. And next we're going to the line of Yaron Kinar from Deutsche Bank. Please go ahead.

Good morning. I actually have a follow-up on Seth's line of questions. I just want to make sure that I understand the impact or the mechanics of the recapture here. So ultimately, does it mean that you have added to the hedging this variable annuity hedging, or is it just that the accounting for the same hedges is now different? Robert M. Falzon - Chief Financial Officer & Executive Vice President: Yaron, the GAAP accounting has not changed, just to be clear on that. What has changed is we've taken business that resided in five different legal entities and consolidated it down to two and substantially just in one. We have a New York and non-New York set of entities. All of the risks of the business are now being managed within those two statutory entities and we're managing them through a combination of derivatives and on-balance-sheet financial assets.

And why would that new construct ultimately lead to a meaningful reduction in capital volatility and to the increased stability and cash flow uncertainty? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So, think about it this way, as I had mentioned before, we hold to CTE 97, and we do so including under modeled stress scenarios. When you're doing that calculation in five different entities, now imagine doing that consolidated across a single entity largely or the two entities. You get efficiencies, as you might expect, both in the reduction in risks that result in the offsetting of risks that go in different directions from the writer than they do the host contract. And you get efficiencies associated with the capital management because you don't have the friction of having to move capital and hedges between the different legal entities. So both from a capital standpoint in terms of how the calculation works and then from our ability to then manage the risk and then you lay on top of that the statutory construct being one that is more stable, less volatile, all three of those combine to the reduced volatility that you're seeing and will see going forward and the free-up of the capital.

Yeah, maybe a big-picture way to think about it is that the profitability of the host contract mitigates the risk of the living benefit standalone, and when the living benefit guarantee was in a standalone entity we had to manage all the volatility that went with it. But when it's combined with the host, there are substantial positive cash flows and very stable cash flows from the host contract

Got it. That's very helpful. I appreciate the color.

Thank you. And next we're going to the line of Randy Binner from FBR. Please go ahead. Randy Binner - FBR Capital Markets & Co.: Yeah, I also have a question on the recapture, sorry to belabor this. But my impression at one point was that while everything you've said about the recapture is true and I think, as Seth and Yaron said, it was a home run. But doesn't it create a reporting or an accounting potential for volatility in tail scenarios now that you've moved from that modified GAAP to the statutory accounting now? If I'm wrong, please explain why. I thought the catch in this was that it might not report as well under tail scenarios under this construct versus the old one? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So, Randy, very clearly there can be noneconomic volatility in GAAP outcomes. We've seen that in the past and we expect we'll continue to see that. If you look at our results, however, a large portion of this was due to the, quote, "corporate under-hedge" of the interest rate risk, which has now been eliminated. There is a residual misalignment between statutory and economic view of the liability and how it gets expressed in GAAP. You saw that in what we called the risk margin, which was the delta between the GAAP liability and the hedge target before. And you will continue to see that volatility between the full GAAP liability and our economic target of that liability, so that has not gone away for us. Having said that, we expect to manage the outcome in a way that helps to mitigate that reported volatility going forward. The other thing I think is important to highlight is that, as I mentioned earlier, the annuities business going forward we think in addition to the stability coming out of it is going to be a source of strong cash flow for the two reasons that I highlighted. And so the wins associated with this construct far outweigh what we view to be the potential for GAAP volatility, which frankly, we've been dealing with for our historical period already. Randy Binner - FBR Capital Markets & Co.: So basically, for all intents and purposes, you're saying that whatever that GAAP volatility is that's non-economic, really, it won't change that much in the structure versus what you had before? Robert M. Falzon - Chief Financial Officer & Executive Vice President: I think that's fair to say. Our expectation is, relative to interest rates we'll have less GAAP volatility than we had before, and our volatility in response to equity market movements will be roughly what it was before. Randy Binner - FBR Capital Markets & Co.: All right. Thank you.

Thank you. And next we're going to the line of Eric Berg, RBC Capital. Please go ahead.

Thanks very much. With respect to the interest rate that you have now lowered – your long-term interest rate assumptions that you've lowered. Are we referencing here the rates for the appreciation in the separate accounts or are we talking about discount rates that is used to discount the cash flows underlying the liability calculation? Robert M. Falzon - Chief Financial Officer & Executive Vice President: So this is the – Randy, it's Rob. This is the - Alan Mark Finkelstein - Senior Vice President & Head-Investor Relations: Eric. Robert M. Falzon - Chief Financial Officer & Executive Vice President: Oh I'm sorry. Eric.

No problem. No problem at all. Go right ahead. Robert M. Falzon - Chief Financial Officer & Executive Vice President: Eric, it's Rob. I'm on the last question. That is the long-term rate that's used in our actuarial assumptions as they affect the different liabilities that we have on our balance sheet, so that includes the account values and the rate at which they grow, but it also includes the host of other liabilities that we have for which we have to do actuarial computations.

It's not just the variable annuity piece. Robert M. Falzon - Chief Financial Officer & Executive Vice President: Right.

Right. And maybe, John, you could address it – and my second and final question relates to the Asset Management business in general. As is widely known, it has proven to be a historic year in a negative sense for the asset management industry. It looks like we're on track to have a record amount of equity outflows from equity funds in North America. What is Prudential's strategy? You've talked now for two quarters about outflows in equities. What is your strategy for Asset Management given this very challenging context? John Robert Strangfeld - Chairman & Chief Executive Officer: Okay. Eric, so let me take a couple of minutes on how we think about Asset Management because I think our view on this reflects both the uniqueness of our approach and our circumstances. So for us, Asset Management is a hybrid business model, one that we're very proud of, one that works well for our clients and ourselves. By that what I mean is, it's not a holding in which we have a passive ownership stake as some do and nor is it a department that's serving one client. What it is is a business and has a capability with critical interconnectivity to Prudential and its strategies. And its market-facing strength enables us to attract and retain topflight investment talent which in turn produces consistent investment results that are very favorable. At this point it's got over $1 trillion in AUM and as we commented today, it's over $0.5 trillion of third-party unaffiliated assets. And actually in terms of Asset Management fees, roughly 80% of them are derived from managing third-party assets. So it's a very significant third-party asset manager and business but it does exceedingly well. I think last year's flows were around $20 billion. Keep in mind we…

Great. Thanks both of you. Alan Mark Finkelstein - Senior Vice President & Head-Investor Relations: Don, we'll take one more question, please.

Thank you. Next we'll go to the line of Suneet Kamath, UBS. Please go ahead.

Thanks. Good morning. I just wanted to start with the annuities business. I guess we've kind of been in breakeven flows now for several quarters. And given its one of your largest earnings contributors, I'm trying to get a sense of, do you have some initiatives in place around product innovation, et cetera, that can start to turn the flows positive at some point over the next several quarters? Stephen P. Pelletier - Executive Vice President & COO-US Business Unit: Suneet, this is Steve. First of all, we very much want to make sure at all times in the annuities business, that we're operating it on a sustainable basis. So while obviously we seek to be competitive, we also want to make sure that we're maintaining a pricing discipline. In PDI for example, we recently announced a 25 basis point decrease in both the rollup rate and the payout rate and we think that's appropriate under the circumstance. But I'd say that we look at this, Suneet, on both a tactical and a strategic level. First of all, on a tactical level, we'll continue to make the adjustments necessary, as I say, to make sure we're tailoring our product design and pricing it on a sustainable basis. But on a more strategic basis, I think it's going to be very much a story of product diversification, including getting more and more into areas of streamlined and simplified product design. I think our recent track record on how we've managed product in the annuities business and how we've managed our diversification strategy gives us a lot of confidence in our ability to continue this. We've taken PDI from a standing start basically from launch two years ago, only two years ago, to now representing over half of our sales in this quarter; half of our sales even before you account for HDI reinsurance. So that type of success and diversification up to this point gives us, as I say, a lot of confidence in believing that we can take that further in product design along the lines that I mentioned.

Got it. And then just a little while ago, Lincoln talked about on its call, moving to more passive options within the VA, presumably to lower cost to the consumer. Is that something that you guys are looking at as well? Stephen P. Pelletier - Executive Vice President & COO-US Business Unit: I think there will be a lot of different elements where we're looking to, as I say to have a streamlined and simplified product design and some that may be lower cost as well. In a sense, PDI represents already a step in that regard but we'll continue that path.

Got it. And then just one quick one for Rob. You may have covered this before, so I apologize, but on the Life Insurance charge and the change in accounting interpretation that was referenced earlier, is there any ongoing impact to earnings that we should expect from that change, or is it purely a one-time phenomenon? Stephen P. Pelletier - Executive Vice President & COO-US Business Unit: It is a one-time charge, however, recall that the way it works in any business, the present value of a number that we have to accrete to over time, some 15 plus years out. And so therefore, there is an ongoing impact as you establish a number that on a PV basis now needs to grow to that future value. So our belief is net of all our assumption updates that'll get washed out. But on an isolated basis it has a small, modest drag going forward.

All right. Thanks.

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