Ladies and gentlemen, thank you for standing by. Welcome to the Prudential Financial Quarterly Earnings Conference Call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] As a reminder, today's conference is being recorded. And I would now like to turn the conference over to the Head of Investor Relations, Darin Arita. Please go ahead, sir.

Thank you, Brad. 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; Steve Pelletier, Head of Domestic 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 comparable non-GAAP – comparable GAAP measures and the discussion of factors that could cause actual results to differ materially from those in the forward-looking statements, please see the slide titled Forward-Looking Statements and Non-GAAP Measures in the appendix to today's presentation, which can be found on our website at investor.prudential.com. Also, as a reminder, we will be hosting an Investor Day here in Newark, New Jersey, starting at mid-day on June 5. The focus will be on our business strategy, with plenty of time to interact with our executives. We will also feature a Financial Wellness experience exhibit at the start of the events. We hope that you will be able to join us. With that, I will hand it over to Charlie.

Thank you, Darin. Good morning and thank you for joining us today. The first quarter of 2019 marked a solid start to the year for Prudential. We accelerated our strategy to bring greater financial opportunity to more customers. We produced a 12.6% adjusted operating return on equity, increased our book value per share and generated good business fundamentals. With a foundation of a rock-solid balance sheet, we continued to return capital to shareholders totaling $915 million this quarter via share repurchases and dividends. Our three interconnected businesses are the drivers of our financial results. They are the U.S. Financial Wellness business: PGIM, our global asset manager; and International, which has our life insurance business in Japan and smaller businesses in growth markets around the world. In our U.S. Financial Wellness businesses, we continue to grow our suite of solutions to help the employees of our workforce – of our workplace clients learn, adopt and practice positive financial behaviors. Rob will provide more color on these solutions in a moment. Our workplace clients employ millions of people, giving us a distinct advantage in our ability to connect with a large population via a trusted environment. These workers can engage with us how, when and where they prefer in an in-person, phone or digital way. We see a significant opportunity to expand our total addressable market and to grow as we holistically serve people's needs including investment, retirement income, protection as well as savings and debt management. PGIM is a top 10 global asset manager, with leading positions in alternatives including real estate and private credit. The business continues to generate consistently strong investment performance, third-party flows and core earnings growth. PGIM provides a competitive advantage for our other businesses by helping to innovate new solutions and by generating differentiated investment returns.…

Thanks, Charlie. I'll provide more color on how we are growing our three businesses: U.S. Financial Wellness, PGIM and International. As shown on slide 5, U.S. Financial Wellness represents our workplace and individual solutions businesses that produce a diversified source for earnings from fees, investment spread and underwriting income. Our broad capabilities including advice, investment, retirement income and protection solutions continue to help clients with their financial wellness needs. We have three key growth priorities for financial wellness. First, we are continuing to help employers understand our differentiated value proposition. Since the launch of our Financial Wellness capabilities in 2015, we have generated about $11 billion of full service retirement plan sales and over $130 million in Group Insurance case wins that we contribute to the competitiveness of our platform. In addition to helping us win new clients, we expect to retain more of our existing clients that are aligned with our value proposition. Second, we are engaging and educating workers to better understand and utilize their existing workplace solutions. We activate these relationships through our financial pathways program and our digital Financial Wellness platform. Our financial pathways program has been adopted by nearly 600 of our workplace clients. In this program, employees of our workplace clients participate in worksite financial seminars delivered by Prudential's financial advisers. Our digital Financial Wellness platform has been adopted by nearly 3,100 clients, reaching nearly 8 million employees. This platform provides a digital venue to address a variety of individuals' needs including education on financial wellness topics, assessment of financial needs and tools that allow individuals to take action. And third, we are addressing the holistic financial needs of individuals. One way we deliver that is via LINK by Prudential which we launched in the second half of 2018. This is a highly personalized…

Thanks, Rob. Slide 9 includes the notable items which had an impact on adjusted operating results in the current quarter. We highlight these items because they may not be indicative of future performance. In total, these 3 items reduced pretax earnings by $10 million or $0.02 per share. Excluding the notable items, earnings per share would be $3.02, relatively consistent with the year ago quarter. First, variable investment income, which includes non-coupon and prepayment income was about $100 million below long-term expectations. This reflects the 1 quarter lag effect of private equity returns and lower-than-expected prepayment fee income partially offset by higher-than-expected hedge fund returns. Second, equity market appreciation in the current quarter resulted in a $70 million of favorable adjustment to certain -- to the recognition of certain benefits and costs primarily associated with variable annuities and variable life policies. And third, underwriting experience was inline with our seasonal expectations and reflects the benefit of our complementary mortality and longevity profile as highlighted on Page 22 in the appendix. Regarding our quarterly earnings pattern, I would also like to highlight a couple of additional items also included in the appendix that impacted current quarter results. Long-term compensation expense for retiree eligible employees is recognized when awards are granted, which is primarily in the first quarter of each year. This resulted in about $30 million of expense in corporate and other and $30 million -- $35 million of expense in PGIM. In addition, certain deferred compensation and long-term employee compensation plans are based on Prudential's stock and equity market performance. Market appreciation in the current quarter exceeded our expectations and resulted in an incremental expense of $50 million primarily in corporate and other. In total, these 2 items reduced pretax earnings by $120 million or $0.22 per share. I would…

[Operator Instructions] Our first question today comes from the line of Erik Bass from Autonomous Research. Please go ahead.

I was hoping you could comment on the pension risk transfer pipeline given the strong momentum you've seen to start the year. And is this pulling forward activity, or do you expect it to remain very active here?

Erik, it's Steve. I'll address your question. We look at the pension risk transfer pipeline for the -- for this year as still quite solid. The decline in interest rates has impacted funding levels in plans on an aggregate basis. However, we still see the need for the solution as being quite strong and we still see a very solid opportunity set before us in regard to companies that have already taken steps to hedge or mitigate their exposure to capital markets movements. So we still see a pretty solid pipeline. This is on the U.S. funded side that I'm speaking about, and we feel very good about our opportunities to compete with the net opportunity set. On the unfunded side, the longevity reinsurance side, the U.K. business, we actually see a very strong pipeline. We reported in the aggregate $1.1 billion in PRT flows this quarter. That was $400 million in funded business and $700 million in longevity reinsurance. Also, since the beginning of the second quarter, we publicly announced another couple of billion dollars in longevity reinsurance, and we expect the demand to stay pretty strong on that front for the balance of the year as companies look to manage their risk in this area ahead of Brexit considerations.

Thank you. And then can you talk about the returns you're able to generate on new PRT business? I think historically, you talked about it being in line or higher than the corporate objective of 12% to 13%. Is that still the case?

Yes. That would still be the case, Erik. For quite some time, we've been able to write this business at a return level that is consistent with our corporate objectives, actually in the low-double-digits on an unlevered basis, so quite consistent with our corporate objectives. There are certain instances in which we might choose due to the risk characteristics of a certain piece of business to make that into the very high-single-digits. But by-and-large, we do this business at our target levels that are quite consistent with our corporate return objectives.

Great, thank you.

And we do have a question from the line of Jimmy Bhullar with JPMorgan. Please go ahead.

I had a couple of questions. First, could you just give us some color on what's going on in the Japanese business in terms of competitive conditions, and just your expectations for sales? Obviously, you had a pretty good quarter on the Life Planners side, but a very weak result at Gibraltar.

Thanks Jimmy. This is Scott. I think I'll answer that in two ways. For the traditional Life Planner business, we feel like our model is fairly differentiated. It's well trained Life Planners. It's a needs based selling model, and the benefit you're seeing now is that our Life Planner account in Japan is continuing to increase. I think we were up over 250 Life Planners in Japan or 6% this year. So I think that's fairly straightforward, if you will. If you look over at the Gibraltar businesses, you do end up with a different set of activity there, and that we are in the bank market there, and that market is a little more -- it's a little more opportunistic. First of all, the competitors there have different drivers than we do in some cases, and we also compete against the mutual fund market and other things that customers might be looking to do on the margin. For the most part, our business there, we're very focused on recurring premium. You may recall from our Japan Investor Day that what we like to do is take former Life Planners that are well schooled in needs-based planning and move them into the bank channel. And therefore, their focus I think is substantially different than the average player in the market. Market has been pretty competitive. You've seen a decline year-over-year, although not so much quarter-to-quarter, and that will just vary. And if we're going to maintain our pricing discipline, it's really a little bit hard to forecast from that perspective. But I would say there's a stable core of what we do that customers need in the banks, and we're going to stick to our knitting there.

And for Ken, how much insight do you have on just the book value impact over earnings, increase in earnings volatility you might experience from just changes in accounting for long duration product?

Yeah. So Jimmy, this is Ken. We're in the early days of adopting those new accounting methods, and it's too early to provide any guidance. Overall, we're working our way through it, and our objective is to, in the end, be able to provide clear measures of our fundamental business performance that's in line with the economics that are appropriate for our business mix. So, it's still very early days, too early for us to comment on directional impact.

Okay. And then just lastly, on the $55 million tailwind to 1Q earnings that you don't expect to repeat in 2Q, that's an after-tax number?

No. It's a pre-tax.

Pre-tax number, so it's going to like $0.08, $0.09 to EPS, right?

I think that's about right, yes.

Okay. Thank you.

And we do have a question from the line of Tom Gallagher with Evercore. Please go ahead.

Hi. So, it looks like your Holdco debt went up by about $1 billion versus 4Q, but Holdco cash stayed flat. Can you comment on what's happening there? Was that just timing of dividends out of the subs, or are you planning on using leverage to fund part of your buybacks and dividends this year? That's my first question.

Yeah. So overall, we feel very good about our position in terms of capital and highly liquid assets at the holding company. The liquid assets were flat from year-end. We did issue $1 billion of debt, and that is really to position us well for a pre-funding of debt that matures in the second quarter. We did have cash flow come into the holding company from our businesses that pay dividends quarterly and regularly, and that was from annuities and PGIM, which are nice, stable fee businesses that we have on -- providing dividends on a quarterly and regular basis. And then we tend to have the dividends from our insurance operations in the second half of the year. So our businesses are generating solid cash flow, and support -- will support our plans for shareholder distributions as we go through the year.

So Ken, I guess, yes. So bottom line there, you expect to fund your dividends and buybacks with all dividends from subs throughout the course of the year, not to re-leverage? Is that a fair conclusion?

That's right. And over time actually, you've seen our leverage trending down, and that's reflective of the strong cash flow nature of our business.

Got you. And then just my follow-up is just on PGIM. Now I know you don't disclose it this way on asset flows, but from the ending balances between equity and fixed income, it looks like you're seeing pretty big inflows in the fixed income and outflows in equities. Just want to know is that what's happening underneath? And also, with that -- are there implications for revenue yields that you see there because PGIM revenue yields have held up quite well, so just curious if you would expect that to remain the case.

Tom, it's Steve. I'll address your question. Thanks for it. You're right in making the observation that, by and large, we've seen flows into fixed income and outflows on the equity side. That's been the case for the past about several quarters, largely in the face of the active to passive trend, especially in equities. Although generally speaking, we've seen that -- we've seen the pressure on our equity flows moderate in the course of 2018, say. Our equity performance as well as our fixed income performance remains very strong. We see a good pipeline of mandates. So, based on the observation that at the end of the day investment performance really is the beginning of the virtuous cycle in the asset management business. We remain very confident in our ability to continue to generate flows in certainly fixed income and equities as well. In regard to revenue yield, I would say that our flows into fixed income have been into, relatively speaking, higher fee-yielding strategies. That's been especially true over the past, say, year and a half to two years. And so we have been able -- even in the face of some equity outflows and strong fixed income inflows, we've been able to maintain that 22 basis point fee level for some period now. That remains quite stable and we expect it to be so. I'd also just make the final observation that while all of our businesses are at scale with PGIM, the scale characteristics of our fixed income business are especially strong. So, when we attract flows into that business, it bodes well for our operating margin in the business.

Okay. Thanks. That's helpful.

And we now have a question from the line of Suneet Kamath with Citi. Please go ahead.

Thanks. Just wanted to start with the wellness initiative. Can you give us a sense of how much you're spending on that on an annual basis? And what kind of the spend has been maybe over the past couple of years and where it's showing up?

Suneet, I would address it. We've spoken before about our initiative spendings overall as a company. The Financial Wellness spend is a meaningful portion of that, but we have not broken that out as a separate matter. I would say that a fair amount of the spend is visible in our retirement and group businesses kind of concentrating on the top of the client engagement funnel, if you will. That's where people come into the Financial Wellness experience, through group and retirement. So, when you see some pick up in expenses -- in G&A expenses in those businesses, a significant portion of that is due to the Financial Wellness effort. In regard to the returns, we're realizing on it. We're actually very pleased in the areas that Rob outlined in his opening comments. We definitely see that momentum on the top -- at the top of the funnel. The very strong momentum in our full-service sales and in our group sales over the past couple of years is directly attributable to the Financial Wellness effort and Rob highlighted those numbers in his comments. And we see very strong beginnings of engagement of individuals with the Financial Wellness experience. Lots of different numbers I could cite from Rob's presentation, but in particular, I'd speak to the 8 million people who are now accessible -- who can now access the digital Financial Wellness portal through the 3,100 employers that have activated that portal. And we see the beginnings of very solid engagement, engagement with the digital properties that are in the portal, with the digital properties that are being introduced across the Financial Wellness platform, in particular LINK and some of the other capabilities that Rob mentioned. We see very solid engagement with those capabilities. We see people completing the kind of learning experiences and needs-based analysis that is embedded in that experience. And over time, we like the prospects for this resulting in individuals who come to us via the Financial Wellness portal engagement with our solutions, with our individual solutions as well, investment solutions, retirement solutions, and insurance solutions. I will emphasize that those individual-based revenues will emerge over an extended period of time, but all of the metrics that we're tracking and we'll talk more about this on Investor Day in June, all of the metrics we're tracking lead us to feel that this initiative is well on track in terms of achieving those outcomes for individuals and their employers.

And I'll just add. This is Ken. Overall, we've been very disciplined and consistent in our approach to managing our operating expense resources and that reflects a combination of taking actions to gain significant efficiencies across the company by creating centers of excellence, pulling together functions to gain efficiency, and improving quality and improving systems and implementing automation. And those savings and efficiencies allowed us to, at the same time, increase resources to the initiatives that Steve just described to you in building data, digital customer service and customer engagement capabilities and expanding our PGIM business globally. So, if you looked across the surface at our operating expense, you'd see a pretty stable outlook modestly growing and growing at a rate below our earnings growth and expanding margins but, at the same time, being able to invest into the capabilities that Steve described.

Okay. Thank you. And then on the compensation plan, I guess that hit in the first quarter for the retirement eligible employees. Can you give us any kind of sensitivity around -- either sensitivity of the markets or your stock price just to help us model this? It seems like that was a decent portion of the shortfall relative to consensus?

Yes. There was really kind of two pieces to that and I think it's important to distinguish between them. The retiree-eligible piece means that if you're a retiree-eligible, the accounting requires that we expense that when it's granted even though it is paid out over a -- typically over a three-year period. And that was $70 million; $35 million in PGIM, $35 million in Corporate, but that's not market-sensitive. That's going to occur in the first quarter when their grants are typically made, and that occurred this quarter and it occurred in prior quarters as well. So it's more of a seasonal timing of expense than market-related. On the market-related piece which was $50 million and primarily in Corporate, you can think of that as having our compensation plans tied to the performance either of our stock and aligned -- aligning management's interest in that. Or to the extent people defer compensation and linking it to market indexes, it would experience fluctuation with those markets. In the first quarter, that was $50 million and our stock price improved by 13% and the S&P improved by 13%. So you can sort of calibrate $50 million to a 13% change in both of those components.

And will that happen every quarter? Meaning that, that second one, the $50 million, is that adjusted on a quarterly basis?

Yes. It will as market moves. And if you look to the fourth quarter, you saw it in the opposite direction actually to a more sizable degree.

Got it. Okay. Thanks.

Suneet, it's Rob. The only thing I'd add is that, that is factored into the sensitivities that we've given you for full year earnings for the -- plus or minus 10% in equities. We talk about that being $0.30. That $0.30 is net of this. It's just the timing of it is such that we give you a full year number on sensitivity but the compensation piece hits in the current quarter, whereas the benefit is sort of spread throughout.

Okay. Thanks.

And we do have a question from the line of John Nadel with UBS. Please go ahead.

So Rob, I appreciate your comment there at the end in response to Suneet's question. It's a good segue to where I wanted to go. It seems to me at a high level that the strong market performance in the first quarter, actually on an aggregate basis for your company's earnings had a negative impact given we get the point-to-point impact through these compensation arrangements. But the average market performance impact was not that significant and we are to be getting that on more of a lagged basis as we work through the rest of the year. So I guess, just to confirm your comment, 10 or 10%-plus, I mean the market's up almost 17% at this point year-to-date performance. We ought to be seeing the first quarter pressures more than overcome by business segment earnings results, right?

Yes. This is Ken. That's exactly the way to think about it. It's the timing. So the $0.30 that we provided for a increase of 10% in the markets, that was over one year. And you saw the first component of that being the impact on costs of $50 million of the deferred and long-term comp expense hitting this quarter, and then in subsequent quarters, you would see the benefit which would be more than the $0.30 over one year's period. That make sense?

It does make sense to me, I guess. I guess when I think about the -- one of the slides in your deck shows a seasonal pattern and I know this isn't necessarily seasonal, but you highlight that -- and this has been the case forever, that your international operations benefit seasonally in the first quarter and then to some degree relative to the rest of the year. But you're not really highlighting for us the negative impact of this particular comp item relative to the positive impact that you ought to see in the rest of your businesses for the remainder of the year. And I guess I'd advise you guys if I could be so bold as to try to lay that out for us, even it's not on this call at your Investor Day coming up because you've missed earnings now, right, for four straight quarters. It's despite what's been a pretty good -- other than 4Q, a very good market backdrop, and I think there's some significant disconnect. I hear some really good commentary about growth around Financial Wellness, et cetera, et cetera. It seems to me there is more upfront cost and more lagged revenue effect. Maybe you could help flush that out as well. I just see you guys just performing so well from a strategic perspective and there's some miss between the connection of earnings to consensus expectations. That's all.

Yes. There's a timing consideration. We do think it's important to align management's interest with the performance of the stock and that -- the accounting for that is appropriately recognized immediately and then the fees will occur over time. So over time, we think obviously, the equity markets are a very positive thing for our underlying earnings power and you should expect to see that in the subsequent quarters.

Hey, John, it's Charlie. First of all, let me say thank you for your comment. No, we really appreciate it. And to be candid, it's a source for frustration for us as well. We think our businesses are performing well. We are very pleased with the businesses we're in. We think they're high quality, they're at scale. The Financial Wellness initiative is bringing them all together in an integrated way. And this is -- we've been on a long journey and we're proud of where we come from in terms of the divesting of non-strategic businesses, acquiring businesses that we want to be in. And so we are also, quite frankly, frustrated by the noise that's out there that is created by some of the accounting regulation and other things. And so we will work on that and we'll try and see as we have and Rob and his crew over the years have tried to simplify our earnings. And you've seen us to be able to simplify them and bring net income more in line with AOI over time, but we have more work to do and we will commit to working on that to try and clarify and simplify our results to reflect what we think is a really good business system that we have and a good strategy.

I appreciate that, Charlie. Thanks very much.

And we do have a question from the line of Ryan Krueger with KBW. Please go ahead.

Thanks, good morning. I had a question on holding company, liquidity above your targets. I think your buyback and dividends are relatively equal to your free cash flow generation. Just curious, how you're thinking about utilizing excess capital that's above your targets over time and if it's more dependent on opportunistic situations or if you look to manage that down?

Well, yeah, again, we feel really good about our capital position and our cash flow. It's been a pretty consistent picture of us generating good cash flow from our businesses, using that in a combination of ways. One, first, is to grow our businesses in attractive opportunities such as pension risk transfer. We have also had the opportunity to reduce leverage, and that also provides a source of financial flexibility for us. So overall, we feel real good about our capital position. It's been very consistent. We've been increasing our shareholder distributions in line with our earnings and as we generate cash flow. And we -- I think you should expect that to continue.

Okay, thanks. And can you give any perspective on how you're feeling about interest rate assumptions and policyholder behavioral trends and variable annuity, and the variable annuity business heading into the actuarial assumption review?

Yeah. We're still going through that. As you know, we do that in the second quarter. We're still doing our work, and we don't -- we prefer not to preview that on this call.

Okay, understood. Thank you.

And we do have a question from the line of Humphrey Lee with Dowling & Partners. Please go ahead.

Hi, thank you for taking my questions. My first question is related to prepayment income. Obviously, you've lowered this in a quarter, and I think some of your peers talked about having lower prepayment income as well, which is surprising given yield came down in the quarter and spread tightened. I was just wondering, do you see that as a timing issue, or is there any structural change to the debt issuance market as refinancing activity slow down?

No. I think it's just -- the way to think about it is typical volatility, less tied to rate environments and more tied around the financing needs of the borrowers, and that's typically tied to some transactions or strategies that are underlying their businesses. So the change has been very typical, and if you looked at that -- as we look at that over time, it tends to be above and below our expectations on a fairly consistent basis, and so we see what happened this quarter is just typical.

Got it. And then shifting gear to PGIM. Just looking at the gross sales, especially on the institutional side came down by a fair amount. I was just wondering, if you can talk a little bit about what you're seeing recently and then also in terms of your pipeline, in terms of on a gross sales perspective?

Humphrey, it's Steve. I’ll address your question and in doing so, I'll echo some of the comments I made earlier. We do see some solid pipeline in front of us across multiple asset classes, in particular in fixed income but also in equities as well. And with the performance -- investment performance that we're generating, with the build-out that we made in our global distribution platforms and with some of the mandates that we've -- that we're already seeing, some of which have yet to fund, but they've already been awarded. We do continue to feel very confident that our long, long string of positive net flows from the institutional market has every prospect for continuing.

So the low gross sales is just more of a timing issue as opposed to a change in client demand?

Correct.

Okay. Thank you.

And we do have a question from the line of John Barnidge with Sandler O'Neill. Please go ahead.

Thanks. Both VA and FA sales did well. How much of this momentum have you seen carry over into 2Q? And then how much of this growth, do you think is coming from just the industry being hot versus Financial Wellness program driven demand?

John, it's Steve. I'll address your question. We think that the sales that we saw in the first quarter really reflect the strong momentum that we have in the business. It's across multiple products and we see very strong diversification and growing diversification of our business with our Prudential defined income product having a major contribution and building momentum in our fixed index annuity. And that, in particular, was a product, which basically got off the ground a year ago when we saw $200 million in sales in it this quarter. We see this strength across multiple distribution channels within the industry, and we think we have every prospect of continuing the momentum. In saying that, we always run all of our businesses for sustainable profitable growth, and we will continue to manage them accordingly and to take a look at our pricing dynamics in relation to the market environment in which we're operating. But I think what we're really seeing is growing demand among financial advisers for their clients to be able to access this type of solution. There has been a pickup in industry sales, but I will say that we're pleased to see that both in 2018 and in the first quarter of 2019 our growth has been above industry levels. So we've been gaining share in this market.

Okay. And my follow-up, with this being the first tax season since reform was finalized, have you noticed any changes in behavior on the part of the consumer, business owners? And this may also be more relevant for 2Q than 1Q? Thanks for the answers.

I've not seen any particular dynamics from the -- any behaviors in regard to tax season, that would be unusual compared to previous years.

And we do have a question from the line of Alex Scott with Goldman Sachs. Please go ahead.

Hi. Good morning. First question I had was just on dividend capacity. I think you commented some on it already, but I guess just in light of sort of the mix of dividends this last year and it kind of being, I think, a bit more weighted towards international versus your biggest U.S. opco, could you talk about how dividend capacity looks this year? When you do expect to have access to dividends?

Yes. This is Ken. Last year, I'll remind you that we did have the impact of tax reform and that led to a strengthening of our capital position in Prudential Insurance Company of America, our flagship U.S. insurance company. And so we didn't take a dividend from that business last year, but we would expect to this year in ordinary course, as well as having the diversity of our cash flows from our other businesses with PGIM generating cash flow, quarterly annuities generating cash flow quarterly and our international businesses, particularly in Japan, also with a source of cash flow at the typical levels, which will vary over time and certainly quarter-to-quarter, but it's about 65% of after-tax earnings.

Got it. Okay. And my follow-up question was just on PGIM. When I look at earnings and maybe a margin, sort of, adjusted for the other related revenues and earnings that you receive there, I mean the core margins and I appreciate that there was, sort of, these first quarter seasonal deferred comp expense, but even just looking relative to other 1Qs. I mean the margin I think was down around 4 or 5 points from where it's been. So I would just be interested if there was anything else that's already going on there. I mean, should we expect margins to sort of remain at this lower level, or do we -- or should we expect them to go back up to a higher level? And if you could remind us, I think you guys have talked about a core margin target there before that maybe was closer to the 30%?

Alex, it's Steve. I'll address your question. We do not -- the numbers that we look at, we're not seeing the same type of margin erosion to which you refer. Maybe we can follow-up in due course. But we do see that, as we attract flows into businesses at scale and maintain our average fee rate, which we've been quite successful in doing, we see the ability to continue to gradually and all of the things being equal, expand our margins in the business. In the range of the 30%-plus is how we see our margin objectives in the business. We can talk more about this again at Investor Day, but we do see the opportunity and the reality of continued margin expansion in the business.

Thank you.

And at this time, for closing remarks, I'll turn the conference back over to Charlie Lowrey. Please go ahead, sir.

Sure. Thank you. Let me close with a few final thoughts. We feel confident about our strategy, the scale of our businesses and the strength of our balance sheet. As we continue to focus on our businesses and deploy new technology to grow and expand our markets, we will make an even greater impact on the financial lives of our customers and in the global community. This should lead to growth in our businesses and greater value for our shareholders. We look forward to providing you with more details at our Investor Day here in Newark on June 5. Thank you for joining the call, and have a nice day.

And ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using the AT&T Executive Teleconference Service. You may now disconnect.