Prudential Financial Exec Insights: Regulation & Capital
Christopher Giovanni – Goldman Sachs: Wanted to see, I guess, firstly about regulation. So, in particular, curious on the status of deregistering, as your savings and loan to automatically – (would it) not automatically quality for Volcker? Sort of what are you learning from the processes we’re seeing around MET in terms of the challenges in dealing with some of the regulators? And then lastly, how are you positioning around potential for non-bank SIFI?
A Closer Look: Prudential Financial Earnings Cheat Sheet>>
Mark B. Grier – Vice Chairman: This is Mark. Quickly on the first one, we are absolutely on track with respect to the transactions and processes associated with dethrifting, which isn’t actually a word, but we anticipate the completion of the process on schedule this summer. In terms of the lessons from watching what’s happened to MET, I don’t want to comment specifically on line items and there has been a lot of discussion picking at different parts of the framework and the way questions get asked. But I just emphasize that our view all along has been that the basic banking-type approach to balance sheet and stress test will not be appropriate to apply to an insurance business for a variety of reasons related to the nature of assets and liabilities and the way in which risk is actually realized, and also I’d add the long-duration nature of both sides of the balance sheet, and I think if we’re learning a lesson it’s that that hypothesis is right. That basic framework doesn’t work very well, you wind up with the need to make a lot of exceptions and explain a lot of things that just don’t make sense because there is an application of the basic rules of the road that just don’t fit very well with respect to the insurance business model versus the bank business model. We have filed comments in response to the Fed’s NPR consistent with that statement and consistent with what we’ve said all along, which is it’s more important that we get this right than that we fight over the labels that get put on one company or another, and I continue to believe that that’s true and we’ve provided a pretty thoughtful discussion of the way in which we think the right framework differs from the pure cookie-cutter banking type framework in looking at businesses like ours. And again I would say, if anything, we’re learning that it really is true that it doesn’t work very well. And then finally on the question of non-bank SIFI, we’re part of the process with respect to commenting on the letter. We continue to attempt to engage with respect to opportunities to educate and discuss our business models and the way in which risk comes true for us, and as a result of that how we think we should be looking at solvency and stress test type questions, and I expect that we’ll have the opportunity as we go through the process to discuss both the issue around whether or not we should be designated as a SIFI and within that context how we should be approached in terms of understanding the solvency measures and criteria.
Christopher Giovanni – Goldman Sachs: Then just quickly on variable annuities, in the past you’ve had an appetite and I guess some success around acquiring certain blocks of business from Allstate and Skandia. So, it seems like every month someone wants to get out of this business, so curious if you would be willing to acquire something in the VA space?
John R. Strangfeld – Chairman and CEO: I would say that with our highest daily value strategy that we are very comfortable with that and would not be, especially domestically, interested in acquiring any other VA block of business.
Mark B. Grier – Vice Chairman: We certainly wouldn’t be looking for standalone books, this is Mark, just to elaborate a little bit. I guess if there were something incidental to a very compelling story, we’d have to think about it, but we’re certainly not in the market to buy variable annuity books.
Mark Finkelstein – Evercore Partners: On capital management, maybe I’ll ask the question this way. John, in your opening remarks you reiterated the 13% to 14% ROE target as achievable in 2013. Within that was obviously a contribution from capital deployment. I guess my question is has there been any change in the pace or quantity of capital deployment in relation to those original expectations?
John R. Strangfeld – Chairman and CEO: Mark, let me answer that question more broadly and then I will come to the capital piece of it because I think it is important to elaborate on why and how we have the conviction we do about our ROE aspirations, and capital is certainly one of the elements. When we talked about this in the past, we’ve been very consistent in saying there’s really three things that are going to enable us to achieve our goals for ROE expansion. One is the superior business mix and the strong performance of our high ROE businesses. Second is the deal-related synergies from Star, Edison, and the third is the capital management. So, let me, by expanding slightly, just hit each of those three briefly, particularly in the context of where we are and where we are this quarter. The superior business mix thesis holds. If you look at our International Businesses, which now represent nearly 50% of our earnings, they had strong performance and exceptional fundamentals. If you think about our Asset Management businesses, we’re feeling very, very good about that business as well. The variable component of revenue was less strong this quarter than its sometimes been and that will fluctuate, but in terms of the overall vital signs, investment performance assets flows, and revenue growth of base level fees, that business is doing very well, and we have no difference – change in our thinking regarding the prospects or the return potential in that business. Annuities, Life, Retirement; they’re strong as well. So, Group, clearly is been unhelpful, and its performance in recent times, and we recognize that. But we have to keep in mind that that business is the smallest of our reporting segments, it represents in a good year 5% to 7% of our earnings, so that while we’re very intent on fixing it – I don’t mean to minimize it at all, it’s not driving our overall business mix element of – the achievement of our ROE. Second piece, which I’ll hit much more briefly, is Star, Edison. You’ve heard from our comments that that’s an important part of our attaining our ROE aspiration and that holds absolutely true as well. Then the third piece that you specifically (surfaced), Mark, was the capital management piece, and that’s a combination of investing in our businesses, opportunistic M&A, returning – also opportunistic divestitures which you’ve seen us do as well, as well as returning shares to our – returning cash to our shareholders as well, and it’s a blend and we continue to be with that way. So, when I think of the overall picture and then taking extensive approach to your question between the business mix and deal related synergies on Start and Edison and the strong capital management all three of those remain an essential elements to what we inspire to do and we’re holding the course with our expectations and aspirations.
Mark Finkelstein – Evercore Partners: Maybe just one quick follow-up for Rich. Rich, I was a little surprised that the readily deployable capital component dividend increase and I thought you did a transaction earlier in the quarter, first quarter around RMBS that may have moved some money from capital capacity to readily deployable. Am I wrong about that or why didn’t readily deployable capital go up?
Richard J. Carbone – EVP and CFO: The (indiscernible) transaction only added to operating debt and its going to be used to fund the operating needs throughout the year. It didn’t add to capital debt, it was operating debt.