PFG - Earnings call transcript Q3 2017 | Principal Financial Group, Inc.

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Operator

Good morning and welcome to the Principal Financial Group Third Quarter 2017 Financial Results Conference Call. There will be a question-and-answer period after the speakers have completed their prepared remarks. [Operator Instructions] I would now like to turn the conference over to John Egan, Vice President of Investor Relations.

John Egan

Thank you and good morning. Welcome to the Principal Financial [Technical Difficulty] as always, materials related to today's call are available on our website at principal.com/investor. actuarial the this earnings annual additional we've the in slides conference to assumption quarter, review included Due call presentation. comparison as statement a excluding review. the added of quarter assumption third We've operating XXXX significant actuarial variances, item well line income as impacts of the earnings,

Nora CFO, And questions. reading a Investment include we US Officer. Principal Solutions; Q&A up call Dunbar, for and Tim will available Income Safe will for deliver session our CEO, Dan Solutions; Harbor Insurance Valdes, open Retirement Following Strable provision, some Others Jim the Investors; the Chief and Global Friedrich, Houston; Principal of and Deanna Everett, prepared remarks. the Amy International; McCaughan, Luis

within that The the Reform information, of implied Risk Securities the Litigation does reflect them in could with changes or Private the company the expressed in cause meaning of made uncertainties to company most conference comments call statements Some U.S. from the Act. XX-K, revise this those results events or actual new to recent filed on during or annual not subsequent update are and may Commission. forward-looking contain by strategy. Form and report Exchange differ discussed Securities company's the materially

measures slide this supplement be Additionally, financial financial Reconciliations financial refer of comparable found of measures directly release, conference the in earnings and to comments some may made to the GAAP during U.S. non-GAAP may our call non-GAAP measures. presentation. the most

This group will deeper our to on XXXX an as deployment Workshop City long-term update risk risk Investor dive and on on December as an I York businesses, call Before a our I year's capital transfer be pension including to invitation in turn the focus upcoming and well our on spread strategy. Dan, X. benefits extend our businesses, over New want Thursday

XX. Additionally, be on outlook Dan? our call will December held XXXX

Daniel Houston

for on deployment. continued everyone third results and to details provide accomplishments growth. call. us on welcome an This highlights Deanna performance quarter on key capital I'll update to share and some position will the John, financial Thanks, morning and

growth of of Principal's end to And The Afore pension of accelerate Deanna and provide Before long-term be closing, on us of I will of AUM. terms provide XX Mexico this AUM. pension providers for in in details our Afore Mexico expected position Principal. the funds. our Afore yesterday quarter. clearly results, is and very market the for XXth in MetLife market want Assets the $X Under one I countries acquisition as announced currently largest and is third after of poised in business business planned the more morning. scale and terms economies. world's of briefly well as mutual the or billion of will as the comment to largest acquisition important as MetLife's and It's quarterly of is savings voluntary mandatory very get become us to is to Management a in one pension one has a largest AUM the the to of will benefits largest approximately world development positive our in

results, our Moving months. where we I'm to very through stand with X pleased

by We conditions. and macroeconomic very execution results strong strong have favorable driven

quarter, of earnings. $XXX we operating third the reported For million

expense the on discipline. of billion $XXX the were And variances, XX% million, earnings XX $X.X and operating assumption ongoing Excluding quarter. ago trailing increase ago, year strong a net significant actuarial operating earnings revenue from to increased a excluding XX% compared year growth review, reflecting a basis,

cash billion or business increased benefits review, record With execution our at billion a $XX year again, our we've ago. demonstrating of growth of compared quarter In we second Compared strategy. delivered the integrated operating model XXXX, earnings operating pre-tax segments addition, XX% XX in to months, excluding quarter-end, each four over positive of in a trailing achieved $XXX net the these over and strong Chile. Southeast double-digit the our Principal a AUM by unevenly $X to International, actuarial and of measures with management flow for retention rebound institutional cash flow, improvements deposits as occur reflecting billion in Institutional quarter, inherent including large recovery a and for this PGI Brazil, solid in time. asset significant can Volatility and and Asia retirement net sales of is and withdrawals

important differentiate to remains by solutions quarter, terminate investments. net remains cash couple as our quarters. we remains few We'll the market client our meeting small revenue an medium and next to strong. cash retirement business large in focus needs ahead, still growth. communicated expect flow of Net last and That alternative on RIS-Fee But Looking a sized said, additional over through specialties, plans metric. to flow continue value-added core

gathering asset of of the performance. in retirement, markets needs businesses; investment and management including: asset to in customers ultimate Our a several more investors; We wide problems. institutional array the strong expertise classes around retail of and well-positioned course, asset goal strong remain world; the of and meet is time, with in solving and distribution U.S.; retain sized by positions meeting and asset to allocation; factors, unmet solutions serve leading assets over and due networks breadth medium across the to attract needs that small a key and diversity businesses in key to

level For had our X, XX% of of funds, were Slide XX% three and or on for September above as AUM more Further, as our shown fund active strategies performance a Morningstar year than XX% X-star and of five rated median XX. X- rating respectively.

expertise for the options consistency critical, retirement and least focus and It on active our at another investment given Third is about other strategies. XX% quarter we investors investment long-term and through management. demonstrates further strength our our to marks median quarter can This of our conviction deliver fundamental five-year performance. above reinforces with value

and investment performance discussed, over previously natural that ebb a particularly is can pronounced of As there flow periods. shorter-term be

quarter, of funds suite, above were second points the midyear primarily at investment as of were median one-year above median driven a our and XX. date performance in Our improvement from by these XX% percentage September XX% significant improved target XX

during quarter. receive the Global Our third-party franchise noteworthy Management Asset continued recognition to

things from multiple organizations to Morningstar, HFM changes retirement retirement-readiness; recognized mutual a how sponsors In design. to provide including retirement to expand plan competitive and Green named plan ability save, invest, Benchmark income Management non-correlation enhance multi-manager, focus remaining addition of for on Star European funds ESG GRESB purposely tailwinds positioning and Social can in El quarter, best help received our diversify. Chile outcomes array comments impact awards was within We us our Environmental, solutions. design Hedge terms, best to simpler the Reuters investment fixed Mercurio. we best participant multiple-asset, global health; to and These important, oriented key in because my asset demographic Lipper leading they as plan Week. and Fund income modeling designed further or allocate solutions. by the our diversification Year Finisterre designations protection see key and Real are execution a on global Principal strengthen kind doing first company real-time fund third I'll investment, from we're In solution-set. the and equity for data, by continue with a to people Using plan built advisors and to We work of our Two platform planner. cost Assets. and was We Firm of demand Governance in of assess Thomson and are second fund associated and our highlights. enable that The features estimate up launched capitalize its driving classes.

as with We continue product. our our in solutions new the well and launch of benefits invest to voluntary accident specialty insurance worksite

unique results an easier and in Our experience benefit customer a design claims streamlined process. better

account downside to on quarter funds, strides four with and on of and more CIT as Malaysia. U.S. key strategies. to We America, managed China platform managed suite funds mutual lower active provide complement of ETF in our during income we first to capitalize fund investment on investments platforms heavy our Shariah-compliant expanded retail on risk; in options to our international investment an continue to income spectrum enhance actively separately important solutions; ETF Asia made ETF, focus a our and based the areas: also our in included and opportunities oriented cost funds We our preferred diversification alternative traditional Europe; our Launches Latin platform. focus platform and with outcomes manage

Multi-Factor Unconstrained Finisterre planned the risk-adjusted and Principal strategies Index, fixed suite ETFs; U.S. XX additional our of launches active our in quarter. Contrarian to for beta brings Index, expertise launched fund, fourth manager an new as This Sustainable ETF look Principal with to to still quarter-end, Markets Principal also as Fixed us strategic expand three the increasingly funds. investors market, Value. Momentum Mega-Cap for the Leveraging markets Emerging Since we've launched We Income income higher emerging returns.

multiproduct strategy. we're multichannel, distribution, to Moving advancing our

the list and investment quarter, with recommended get to options model to placements. we platforms dozen portfolios, third over new During continue two our third-party added

trailing more the over we've earned platforms asset offerings classes. XX XX months, Over on XX than placements, different success total with XX across different

Principal CCB selected funds offer venture Asset Construction joint our their the Management, quarter, to platforms. last China highlighted financial Alibaba was on As with mutual Bank online

billion platforms As nature. to platforms these to saw our getting additional efforts investments China, quarter joint the in early net in contribute cash traction, recognition, contributing venture an are meaningfully of These these in good China. for primarily $XX.X our flow are short-term update, our we while name and positive

expense nine through performance I'd oriented capital. our above investments to customer market months, of also solutions balance appropriate focused consistent our achieve growth of our between and highlight on highlight reflect effective I an shareholder execution growth. good use As ability I'd in and discipline, strategy,

around businesses, not on medium position with outcomes without strength. intensified we're our from of institutions go sized forward individuals, focus better world. to to and small And an While, challenges, we delivering the a

estate shareholders repurchase. this existing strong quarter, our which to participating in we're real dividends, share capital particularly position in shareholder the value Deanna and returning by through Deanna? will stock With cover, common in M&A we've businesses, opportunities, and to investing transaction create executed

Deanna Strable-Soethout

contributors Thanks, and Dan. provide an financial update per morning $XXX the on quarter the call. XXXX capital diluted third our operating We earnings strong Good of for of or the on share. to comments key to reported focus I'll my $X.XX million deployment. on performance, everyone

on Slide X, other shown variances. the As reviews of annual and impact actuarial XXXX significant and excluding the XXXX

income Life actuarial partially changes line actuarial to $XXX Benefits, to the of pre-tax and for operating rate assumed interest Third on and reported from of RIS-Fee, Individual after-tax unit. payment increase were third U.S. RIS-Fee, higher due in business million. future. X total by International, environment were compared impacts million, Life. by the XXXX. assumptions Principal Slide The company million $XX behavior These decreased have policyholder items all to material was a earnings by The including assumption significant quarter operating RIS-Spread, $XX not actuarial were to by item of Specialty review and assumptions an assumption annuity statement impacted The third year-ago. impact experience assumption premium quarter the variable XX% review. in quarter the review refinements by most earnings XXXX update provides the our our the impacts run total operating offset earnings will what a impact rate Individual our earnings

the $XXX losses Principal of income gain, of company real a by XX% our estate a was Group Company range of over third to end industrial XX real successful manage making area real to strong Southern estate other estate the exposure creation, to be quarter total guided driven due We Our after the with year on tax capital through Realty the space $XXX result $XX and reported than ROE, gain of for opportunity quarter contributed reported actuarial adjustment of estate Majestic in within than a the We for was manage XXXX. million the rate California. took properties the and the quarter strong credit was to realized over and XXXX, Net our full for excluding the the gains. XX% translation earnings, basis. we currency operating warehouse quarter. realized retained. to guided XX.X% expect gain tax to benefits the and market real and during to earnings net in portfolio to was certain lower The the strong tax control net in XX% million review transaction. value capital of as develop range operating years AOCI still magnitude amid venture attributable modest joint basis, our million historical size cost The Financial a low foreign At

our and net XXXX reviews, favorable increased $X to from market basis strong the cash management. both Excluding operating improved XX year-ago ROE average Principal AUM a Index quarter over growth businesses S&P record third of billion, earnings flows The including Quarterly quarter. strong to and from XX% company benefited total quarterly market second and the Principal U.S. impact International. company the XXX over fee record points almost billion, year XXXX from actuarial Strong quarter, performance. XX.X% a conditions XXXX disciplined in and Global Investors and equity X% the $XXX for capital daily increased earnings prior AUM total reflecting U.S. during

and provides operating both the in actuarial review The earnings, morbidity Specialty Slide the pressured only third Life benefited quarter. business I RIS-Spread significant and for of following XXXX. were periods. prior and quarter impact business. but comparison unit risk transfer and significant excluding Individual variances was mortality in quarter quarter addition, my In the our slightly pre-tax X for variances favorable significant mainly the comments, Benefits, in variance pension And will exclude year the third a of

key always slides, Individual Corporate found RIS-Spread, the and for Pre-tax Life be supplement results the and our can in As within press reported operating unit quarter. Specialty and expectations release. drivers for third earnings were business Benefits,

strong and in record surpassed $X have Principal merit million, Principal in market our some year-to-date Our and Global were quarter. sales a continue solutions quarter. income guaranteed for target under deliver International, strong our $X.X risk remains billion third businesses Investors protection XXXX sales our while providing billion $XXX spread sales RIS-Spread important In record risk XXXX. operating this pension in earnings of and operating transfer to explanation Pre-tax RIS-Fee, in earnings, customers. the The pipeline and plans

shown Slide $XXX DAC lower performance RIS-Fee's from revenue operating to earnings year over ago on million, Pre-tax quarter. during X% quarter. also the Positive operating timing fee the contributed As pre-tax of of earnings benefited increase market X, higher expenses. favorable and amortization

by Principal increase prior million, market management. Slide transaction pre-tax performance, a Global year strong to the earnings XX% disciplined Investors' expense driven operating and borrower compared were Moving to XX, when and higher $XXX quarter fees,

inflation Principal International's earnings of shown million tailwind. to quarter year $XX expected primarily Slide As encaje slight in translation a expectations, were performance when and than to prior due XX, on lower slightly pre-tax currency America, compared than operating was our Latin the lower

on normally to our while ratio basis. risk Moving we speak to capital, don't estimated based quarterly a capital

I We expect ratio earlier. our range to end mentioned our due RBC will estate be targeted year above at real transaction, the

quarters, return to the over expect XXX% targeted deploy our We as capital. our XXX% strategically we range ratio of RBC to to next several

deployed million Turning full a million ownership million a share of common common capital remain million year $X.XX deployed quarter $XXX boutique. deploy stock to the on prior Last XX, we and the capital payable we've billion for dividend the night, year. of from to increase increase to million increase quarter. quarter, the fourth from $X.X $XXX quarter, we announced $X.XX PGI $XXX to the million in in third in and dividend in track and XXXX third Slide including in $XXX stock our a $XX $X dividends, Year-to-date, repurchases, XX%

our the growth. and we've we over target and growth more fit. continue we fit, ratio aligned leverage our operating the operating earnings growing dividend three rate be criteria: of past financial years, XX% use flexibility. forward given ourselves will We and earnings payout evaluate going M&A with dividend When few financial debt reduced reducing a to opportunities, By strategic greater fit, and cultural ratio

in business into first achieve expected greater distribution a Afore EPS help acquisition. will transaction By to it quarter and network, Afore fit to MetLife cash ROE all we retirement capacity to is Our anticipated larger existing to of this to close and Mexico be intend planned in available the additional their is in to We accretive the goals. our acquisition XXXX. The and XXXX, three. acquisition gain our integrating use customers scale, business, finance of

carefully We pipeline, deployment an and options other opportunities. active are to have M&A we continue our capital weighing for

be usually Fourth as As performance by This our impacted a quarter claims disciplined always, businesses. to Investors, expenses and related as don't Principal prior the we in will is into sales earnings investing items, lower in due higher to these quarter and balanced Global year, fees years. our take quarter back fourth Specialty operating to to continue and expect in highest capital approach in deploying experienced we Benefits.

open concludes macroeconomic fundamentals. both remarks. levels, please call very it and Operator, matter questions. doesn't long-term. strong quarter's the environment factors overshadow growth earnings and pushed the many to we'll strategically No our our underlying While, promises on operational this in, for operate work operating strong to we the This to deliver continue over prepared our

Operator

Please Instructions] [Operator question Ryan The ahead. will Krueger first KBW. from with come go

Ryan Krueger

good morning. Hi, thanks,

over Can deploy dividend kind capital ratio to $XXX sounds on on the about gain is perspective the like was us the be question at and the of wanted your some quarters. commentary next level a of it to from looking kind give million payout at you several - you First your standpoint.

give that you're ways you on can us So the potential capital? some thoughts looking on at deploying

Daniel Houston

Yeah, to question. we'd for Thanks, Ryan, do be happy that. the

as I two first thoughts. in deploy period always time. in happens those quarters, Well, is longer We approach it don't a you have stated a thoughtful The over I next how on to is say capital. in not would Tim it - very guess may of to that Dunbar want weigh thing the we why happen take my

Timothy Dunbar

thanks. Sure,

on before and As between we'll we yesterday. billion made we're $X.X that the that, deploy we the $XXX Afore in target with said certainly announcement XXXX, million with and of

and management our business relationship asset PI furthering a both businesses. we and to businesses, also or in risk we our the income of a our some about partners. we have venture with our we of really lot that pipeline well, - growth of spread addition and fee-for-service about But terms as have joint assets very within that, seeing producing talked in the are strong we've growth opportunities, In good have organic talked within some options and

Daniel Houston

Ryan, have do a you follow-up?

Ryan Krueger

Yeah, some the you potential to of the on what if impact for I provide curious the - market I want shifting that Principal's if just guess, kind thoughts would guess, idea and you potential in Rothification industry? be - gears, on and and Dan, you could view to of the savings the

Daniel Houston

make for it's at that a today, doesn't of impact at them, is question. isn't impacted We Frankly, our I retirement did largest kind those $XX,XXX, that with and earner of policy participants between expected a issue. be in that, look That's $XX,XXX Frankly, long-term impacts third today, third, that like categories. the negatively a wage folks roughly limit. issue. modeling. that a a earners This think of all a good high wage actually And XX% Rothification of a we lot core this the And one. people. of I know Yeah, fact This would the a roughly attention $X,XXX concern if of all we the gets savings. some by negatively discussion

you of that today looked $XX,XXX, cohort at If retirement and plans, same in took you them $XX,XXX between people participate. qualified and making XX%

to If are you a for retirement eligible $XX,XXX take X% cohort plan, of only participate. who $XX,XXX that

it more. proposition value the positive from that scheme that save saving an is has profit and deduction, the sharing day deferral impact retirement employer-based They gets employer to contributions, So saver. tax the back on matches, payroll around

policy, they have they less a sort otherwise As result this of would than would saved. of save

been is Hill. active the as to So try tax IRAs defined direction. out treatment like people completely contribution to she voluntary going an I've the in go adopted. I XXX(k) lot if additional our $XX big to possible, why this and make system. this. Principal point Capitol the trades We're at the time, that make. as that, we're both well internal a implications amassed deferred with includes And to keep have chosen get first on done industry comments we've a people to pressing within rollover And think sure see going to for education to trillion has look active as modeling, a But, personally, on is was as of That has of said of we roughly she'd although just since educating we've driver or any policies there. very favorable in best I'm Nora, that

Nora Everett

Sure. regulatory in we're Thanks, we're mode certainly, mean, off the Ryan, to think first right just Dan's reg, about for like just Yeah, you point, DOL changes. reg, the these look We're if got of extremely well all question. technology. speculation of that then the significance you segue changes DOL just I all, pike. kinds like positioned the if for the around really of come now. of of But of the and at significance design, we've we've with well the plan these do this got potential got deal we've down to they regulatory positioned kinds expertise, scale, just change change, the infrastructure

Daniel Houston

Ryan, Thanks, the question. for

Ryan Krueger

Thank you.

Operator

Humphrey ahead. next will come from Dowling question The go Partners. Lee & with Please

Humphrey Lee

question. Good morning for and thank you my taking

and up Met on compared Afore of from what of business to now? you're right they how the mentioned of that distribution. describe doing follow addition you do to about You gain kind transaction, yours the Just different right the that now? scale can Anything

Daniel Houston

you position a the Yeah, from versus it's top-ten like the I top-five I say, little Operating also question, let benefit being with in operating incredibly had compliment This a Kong is AXA Hong done. just it space. that a deal. MPF think a in Humphrey. a from - And on transaction me recently for wrote I was business. transaction is report that we you group the the bit well on thought great big

Luis out, Luis? to in weigh But so limiting it Afore. ask just do the to point going how just on And and as you as this the I'm get strategy entire benefits distribution. Mexican to opposed scale we here our to advantages of

Luis Valdes

extend and opportunity so say a to terms certainly give more of also that have to quality very base your customers, those is good and there base more add thanks to adding. Humphrey, expand in in customer. terms, our our and is voluntary for standard, morning, going in business. they is services us strategy our advice, One to general the X.X would a to question. I Mexican Mexico customer thing they're good to million that's The to good Yeah, that value add customer addition And

I us serve So going up the certainly market it's going be to say share total good Dan would It's scale in of said. AUMs, to customers able that a matter moving number X% position, that is of forward. are as we adding a fifth and to

Daniel Houston

Does that Humphrey? help,

Humphrey Lee

Yes, and thank you for the compliment.

Can some on given talk market ask of at dynamics your maybe Benefits case about So in group very the market, the that see, have space. nice a question growing Specialty pace? you you small especially I especially been core

Daniel Houston

Yeah, nice that it growth for engine us, has question. a Amy and really been is well answer prepared to

Amy Friedrich

Thanks, Humphrey. Sure.

market Some noted that space, that seeing industry. of the in are dynamics, employers the optimistic, especially feeling more small are the small in really that you've out the

make So excited owners to at regulation, get guidance things it. when those are things are coming small you're about on to out business on the easier, looking trying guidance that capital that access

And industry, small at care be employees. seriously take ones so the owners look their in tend I business that their when to dynamics the of to obligation take really

- of come to out in lot talk to tend It let's have to great they benefits down really set have to there. a them want get benefit right the about, So to benefits. and a don't we come

feeling they're the And going So when their they're companies make of dynamics investments one in investments employees like employees. those to in when Principal. is, optimistic, their they're benefit excited,

relationship up we a up them. having of a So doing wallet closer larger getting with we them, just end things the right end with and share

one say dynamic I'd optimism. So market increased is

XX total on look X.X% to you're months trailing X%, at it's last our less XX mentioned if covers, look this what we quarter growth You'll a employees, the about under a trailing a numbers, when But we're things on you that than basis. see is when months seeing X.X% employment you employees employment group growth, closer XXX basis. it's like

other is even that things pronounced So one the employment is seeing market. of small growth over the in we're

is to market is of care broader industry the benefit And small growth all and take their Principle there, employment things their So there, of really is then and a employees optimism formulaically whole. those as there. willingness

Daniel Houston

for the questions. Humphrey, Thanks,

Humphrey Lee

Thank you.

Operator

come ahead. Sachs. next Alex Scott Goldman Please The with go question will from

Alex Scott

of on included guess, had fee quarter? $X I How you question. the highlighted the numbers one retirement in my taking for that of was potential - this much guys I terminations. billion have Thanks that

Daniel Houston

thank want for for coverage take to you go Alex, you question, initiating Thanks, Yeah. and Principal. also the Nora, and that on one.

Nora Everett

Sure.

of $X.X larger to XQ thought roughly $X that regard last that cases called of with handful that of on the billion we out So just north call. billion, we

So at that case within $X billion addition case - point. transfer in was end was to to potentially, there that still that and $X.X or types relatively whether estimate, question has that into recall north case this that the cases, has with terminated of larger left, what that not this we one that of happens some billion identified was often And of and there's these towards as or XQ either would not transfers XQ. not

of some as XQ we in to $X.X So have realized event there's uncertainty north that as to whether XQ. a we still just XQ or event. But answer billion, question your

Alex Scott

the on follow-up one CCB maybe partnership. then And Thanks. it. Got

they a of like to go do your to if going to Would to interested ability ownership, of were you push the and that. try have ventures. in potentially partnership looks report, to Just around allow you higher the treasury stuff maybe terms have ownership percent of companies in the CCB joint they're with and some it U.S. bigger

Daniel Houston

Yeah.

Let me relationship just working is important Construction the first with China a each is Principal relationship, is that know International, really we strong And Global say, company. a also Alex, have not overall other part Investors Bank, again, as we Principal well. limited just of it very to

done working but more the closely Management. annuity, other We there's enterprise related being into together around Understanding deeper work the also to of to have Asset opportunities look around Memorandum

economic a you course, GDP Of like to would I'll a to global opportunity would the because, comments additional welcome see, whose is of third cannot total any country, we Luis likely stake, With again, make on that, to relationship our ignore to have a larger if CCB. represent growth.

Luis Valdes

good morning, Yeah, Alex.

XX% in very we're in focused CCB a As partnership Principal our to order know, CCB ownership pension today, extend arena. And Management. we with you have the Asset also in

the them. So venture it's publically with go to MoU signed into we an order joint CCB with next that in have known

very than if increase are in to to more ownership to are So extend we going much CCB any nevertheless, focused be going to we're - CCB, family. has order more in we as our relationship we our with other opportunity pleased, said, in order Dan have

Daniel Houston

Thank you for the question.

Operator

The Jimmy next Please question will come Bhullar ahead. JPMorgan. from go with

Jimmy Bhullar

couple questions. I morning. good Hi, of had a

business, First business, think, fee cases then you what's quarters or on of XXX(k) early I and or in from flows more the stand that business? And some few the cases allocation retirement improved last - a you clients. this you'd of on maturing what's and PGI secondly What's comments year Where this that made on later had changes actually were quarter, market on because that few the a the competitive this that? pricing specifically leaving the next year. for standpoint. a in either part on losing And do your driving your potentially the in really in and few outlook environment,

Daniel Houston

Management thanks, lumpiness one flows. And - on for of is a attract to to again, investment the Jim? and were But retain thing, about franchise Jimmy, thing, of institutional those we there we've also recovery is Would the the was certainly performance. that these in very in pleased continue one that some Yeah, you flows. I'll we're handle some - feel specifically, position want good PGI the Jim our And assets. comments. very have Asset And like, of to we gone record

James McCaughan

the Dan. you, for Jimmy. question, thanks And Yes. Thank

changes to the of of on the not to value that's performance. there happen also that's none running up There a the of flows cash - tended institutional back the no investment There easing it fee factors, in promotions second in flows that. you quarter. in managers and portfolio better was were and had because We the relatively Columbus quarter. were special but But getting space, outflows mandate. particularly strong our lumpy because the in were continued - a of of what to speaking of added lower but lumpy side going and improvement some of our quarter lumpy number fact Circle, know, outflows in a As these in to a and lower third up flows second can in more that

looking dependent particularly not hedging for the some strong base steady to is that costs, don't that, in dislocation - absent react And fact more example, level. be we've could business mandates. to asset likely asset - value diversified outflows And that's that because our to been spread, shared But you equities. increased I months. have next wrong, the yield The We've very we've are flows. therefore are that ability happening. growing you revenues. the the other Principal side real a margin and a would clients see is where I'm like through not revenues, few I said in and about managing have on mentioned with equity all trying two continue Investors Global was any is high very forward, linked. always - hedging at illustrates And seen the the and credit growth grade in shifts always what growing this lumpy it marketplace. investment to Having really the correspondence example, do people for clients to really I with one-to-one enough confident terminate like For do the those point which things higher revenues, we of know for not to But costs. a before, necessarily added any and doesn't lead

partly So for liquid inflows. when those relatively on weigh necessarily that large because potential lumpy But wouldn't scale mandate categories. happen, pricing they be billion dollar plus fees, some in and they're tend again, partly because very we remains see too these I more objective, because to of our low and highly often actually

Our for we're the that's And illustration strategically the liquid small revenues running rather estate, to for an from AUM. markets. yield, categories that growth in less to emerging remains than cap, real business high to basic

Daniel Houston

Yes. Clearly, cash flow we've not seen also the business, only positive separation in negative. or Nora's but of net from revenue growth Jim's in

but So I'll some to what it and these we're also retain that to Nora Nora? is of well. business to as speak doing ask losses, win

Nora Everett

Sure.

quarter last see well. as systemic So don't handful all. of about and We at this as Jimmy, cases actually this talked we

we In and are called handful due - of cases at majority of fact, if you out, look bankruptcy. a more to that some the them M&A

- of systemic larger really strong the impact you flow, lose you flow transfers. unbundling how cases of and discern so if So is help cash all because But our and segment net core we'll to for these on we're the nothing of perspective able business SMB cash going our cash win net handful core important the to cases is, with what flowing. and And some, look call we're be going cash But we're flow, that just what net pleased about the that some. size you. on net really the there's to cases, more our net them out, these M&A at from to SMB

Daniel Houston

Thanks, questions. the for Jimmy,

Jimmy Bhullar

you. Thank

Operator

The Autonomous Bass from next Erik go with Please question will ahead. come Research.

Erik Bass

thank Hi, you.

you in implications on could the election, going that for outlook upcoming flows could what on AFP provide and on retirement Chile, pricing? have the Something the in of what's system and the an update

Daniel Houston

ability in and Yeah. positive the of of Great customer our favorable. out lot a we've to our in a parts we one. becoming go thing of that look to at migrate Chile, take want timely. question, continue as to and and Especially, see very the net moving more recognition to very service and Cuprum about flow some Luis received coming cash But you

Luis Valdes

Erik. morning, Good Yeah.

our see positive our First, could you in in Chile. continue trend we and flows

but the outflow, - basically modest put quarter a beginning those in we basically So outflows the negative third we all the very a negative of quarter. - happened

continue Chile. behavior we So to a seeing in positive

strength continue on We main our of focused very Cuprum. Dan said, - the

return. customer investment increasing continue - net service, service attention paying investment customer a our our of income lot we of continue we So and

that less we December moment. standpoint know it's the this with I dividends finish in the a quarters retention and Chile. have as the view than last, likely is that put we that, And all about very are going say From have would for Cuprum and round. paying all three to retention, election So political second three the asset of in weeks, in us in off Presidential going focus good to at we customer that sort in

order see bill ahead in So no with almost we chance pension will - have that the we and so to congress. move that in our

the government, President. the congress. that right going will bill probably So have it the next to to take change I - that going the be to is to be who going probably depending probably to see that And the this. next the now is administration they're in one is seemed

we're So we're many pension advocator to in country, many those being ready participate being to are going And are coming. doing and going things very forward continue so. coming, discussions in discussions actively and a that working

Erik Bass

And one Thank Great. follow-up. then, just you.

earnings other quarter of less normal the expenses, year outlook the are bump the you expecting fourth should this we fees function in there consider remarks factors prepared that's timing than in commented seasonal for as well? in of think, performance the And I a had your in about just past. of and

Daniel Houston

two a Is in sufficient? only some to the our speculation the comments. again in that see not that's the in predict we and seasonality, factors going don't One in a there, significant is as and really demonstrated of QX. reflected that dental why would fees result we bump space ability the There's performance perhaps those, Yeah. we've There's past, Jim's to prepared that the also normal our and think we're see Eric. timing

Erik Bass

expense move some quarter if those well? I lower think, it. And to of G&A of would as couple in the some wasn't you'd so sort timing, due a just sure last also Got fourth commented that quarters of into I

Daniel Houston

make Yeah, have additional sure. And maybe I'll there. comments Deanna

Deanna Strable-Soethout

Yeah.

in growth be with with talked in business, and investments our can to the we've lumpy but revenue it the quarter-to-quarter. As try in our about expenses the align past, balance in growth that obviously, we

to just fourth to driven cost marketing at in an loaded. supplement be quarter and through branding comp third quarter. look in years, you relative you'll actually for many first quarter the fourth And elevated can that the other many, see see in you If what the by be that tends

little seasonality, fourth quarter technology costs are been That the benefit quarter. in be can evident the could you just hasn't this in more Some fourth be higher more of think as because impact in costs that but well. that And of of a our muted years, as higher bit year, an fourth past naturally of see that could quarter. that because in I

point to I out. just so, And that wanted

could see think as a well that occur that in evidently PFG both as year can And very we number You likely for businesses. our very of this as well.

Daniel Houston

Thanks, for the Erik, question.

Erik Bass

Yeah.

Operator

from will Please with come The ahead. O'Neill. next go Barnidge John question Sandler

John Barnidge

or Thank of as for costs? it Do globally you. about you businesses? or are a Can your you in see talk of savings implementation Thank II in And Europe? MiFID increased expense just you it driver implementing plans you.

Daniel Houston

and It's the and organization. to the is have that. all at to topic ahead across And going look John. a this question, him closest us above. address require to good Yeah, certainly I answer, would D, the to probably I'll go take Jim

James McCaughan

you, and John, thank Yeah, thank Tom. you,

for really in been First XX over and context, for is a invested thing we a research data of matter equity years, say lot to fixed tools, science. We've developing proprietary in as lot industry the last have leading investing income a both research.

I third-party and typical think a that we've And less asset dependent makes noted that manager. data on research past. than us in the somewhat

all around in clients this this strong our a the that's regulators. how in and implement by we greater move investment for So and in various towards strategies. different be and transparency clients operations With transparent world, the background will timely obviously

out really EU, in up where the research. bundled the we're and in made investment been that direct so aforementioned you because assure that to outlook not in of become our investment also the are will I have comes to those as we It's the end some costs, the EU, talk And into provided it of a outlooks moment professionals at know when will But covering it developing, small that the it's I based costs of own direct about you profits. number expense us. that we'll calling about in call number hits and the manager. research And a clients to December they a in can be it trading and we'd points pretty of research

see open this is MiFID longer this between environment longer-term, SEC of and a particularly to environment operate challenge for consistently don't big I think paid term environment, clarifications do in some a think as it market and I participants a how a I terms influence I know that welcome, the gets will you So more near-term that lead SEC on an And the that environment. more transparent think with help global for. research making business, execution.

that's industry. management the still that think progress, the in be actually healthy affects will quite I of in how asset terms and in future

Daniel Houston

a follow-up, John? you Do have

John Barnidge

are going your one doing determined, even to they're week because Europe or have of that earlier Yeah, just or this to Europe? just you in clarify, said peers just it you in it do globally

James McCaughan

Yeah, we're in it Europe. doing certainly

the interest some We means transparency. and are finding type in operation MiFID exactly other jurisdictions the about from of MiFID clients

do only doing in compliance I go say January their X, to But SEC to clarifies how in asset we're more of alongside see and of operate you're doing that rigorous it Europe. about Europe. the be as clear So practice management MiFID environment, I dogmatically I and think we're say a But the global going can MiFID wouldn't industry. going of think kind that emerging in would I as a

to have think in point dogmatic two crossing of next and So I want regulatory to the I effectively be of view, we're or only a terms very the three years, Europe. But in hurdle wouldn't say we near-term. the from

Daniel Houston

the for question. thanks John,

John Barnidge

Thanks a lot.

Operator

ahead. The with Please Suneet Citi. go next Kamath from come question will

Suneet Kamath

morning. Thanks. Good

that provide announced, to a you how just transaction much that and capital that freed to that can wanted then sense real much be on capital freed you you deploy? back circle how would of of Just estate willing

Daniel Houston

Tim? Tim Yeah, that. very good. do I'll have

Timothy Dunbar

as say now that Deanna created And that we that there $XXX or about in we capital about said capital we probably as $XXX so million gain. million is additional deploy. script Yeah, said that can would

do as balanced we'll approach so, And our alignment and judiciously in we that talked XXXX. about in with

Suneet Kamath

Okay. second And question on is the then DAC my review.

was largely sizeable quite item. you didn't I I other life, get. assumptions individual because the due I said was the VA, impact lapse RIS-Fee the on which that to get think

what the saw essentially So what and talk caused affected you it in which about review, you it? can products

Daniel Houston

Yeah, and go tackle that Deanna, want very to good. you one?

Deanna Strable-Soethout

allows the those of views policyholder Yeah, our and - flexibility we individual so designs for today products, how specifically within products. life product obviously

that. what variable UL premium DAC the last perspective. And noticed so, had have that deferred our or lower we future type to EGPs, price future They than payments the as DAC. What But lot felt so of we life those to obviously over premium your comp year do write flexibility specifically occurring used UL prudent well that to look assumption. policyholder of lowers at some our obviously a was that as policyholder the our payments models. it we fund to were we secondary different with the to non-qualified guarantee, into was universal expectation of we products. in profitability in future that products, lower factored we the off relative over then When to That ranges and our of effect leads

perspective. So is individual in the specifically life that what happened

life, not As made in manageable very we rate the feel impact but company, changes and individual run of the mentioned, across very we just we that are immaterial forward. going the

Daniel Houston

Suneet. you, Thank

Operator

will question come next from with The Sean Please Dargan Wells Fargo. go ahead.

Sean Dargan

debt commitment to I before a strengthen some the you've would up capacity think and or acquisition as with thank about would Deanna thinking that to grown But tie delevered because mentioned an either about strategic you taken which earnings be it run base capital available resources, back just $XXX I Yeah, with debt. you million make your to think to a retired XX%, your you've you. additional capacity, there to be delever? able

Daniel Houston

the re-ladder debt have we us additional that is to But long we very our it think would sort reasons. consider as today. equity both that in opportunity ourselves any capacity for to a is I more question we and position could as we'd come in favorable the have the financial don't in back a should down, XX% the there the very strategic right with debt side side. our leverage. very along markets shareholders, right it that drive There And flexibility well good to to take find are to better frankly, as much it position up as in of put long-term

Sean Dargan

how help moderately great, can us any much thanks. the But Afore, I'm coming to right, it about if you us be give All to in ROE tell EPS detail and would sounds you And both back accretive think paid. you it wondering like can't how to us then, just year-one.

Daniel Houston

terms, I'll ask on of agree question. bit to Yes, appreciate the a But to question the price. the color that, disclose and little with seller's we add to the did not Luis

Luis Valdes

to Yeah, mainly and to of it's thanks, going the - mostly accretive I modestly going Sean, due expenses. question. say of in the Yeah, expenses to be be year, first about a this in have more in, And second expenses would integration acquisition it's year. range do $X.XX a accretive some we the

is are good where accretive. Sean. be we And So immediately It's very to right it's a transaction. going now, that

Daniel Houston

a this. with it. other teams Sean, several we've And now including HSBC thing like frankly, lot has And, we've got transactions add Mexico, experience Luis' I the already integrate to to that, of done that would

predictability and We that us of So and Thanks fairly the the component, voluntary integration allow the distribution. elements good. in is Met of the participants for success ongoing the with the playbook of a high have understand value relationship all question. degree the future these to for

Sean Dargan

Thanks.

Operator

Evercore The Please final ahead. with question ISI. will come Tom Gallager from go

Thomas Gallager

the on morning. do had want or you think at Good I These Chile. just improvement Luis, to see so, just post-election being to risk be understand, there a current clear that. the I environment follow is wanted for environment? you up on from - do actually greater I hope

Daniel Houston

ahead. Yeah, go Luis,

Luis Valdes

President political being be ago. case, hours possible is Tom, It's you of going environment sensible good the the sense, going Sebastián happen. should in question. refer next going kind to the the we're is but center polls to represent that Piñera, - XX next I'm In to published most discussion who a that improvement likely, very terms that that know a that right. in Yeah, of be seeing are never that recent to the

take happen wait then order three a in weeks very to first the that's ballot the today, And So happen for so is what next going to that our round. we in see touch a have likely to it political my second today, be optimistic to But in personal that Tom. cautiously to about take is that's that environment better. And of are we week the much my December. going take, the has is

Daniel Houston

follow-up, a Tom? have you Do

Thomas Gallager

helpful, capital is that and then just - Yeah, on my that's was follow up investment.

$X.X be them? of do $XXX annual $XXX billion the capital to assume we have size other you completely the gain, capital investments would also pace historic that's created should deployment So million normal in And to that additive any large XXXX? for the going of then, gains have to million from embedded these of

Daniel Houston

the have me so and question Yeah, let first up take on second. backing Tim the Deanna

Deanna Strable-Soethout

capital obviously is we say into our that would come on as what just I incorporate December. outlook Yeah, to our we'll XXXX that into outlook

increases. I our well. we'll capital well We're about. outlook thoughts I of in organic to as talked opportunities, that explore M&A other XXXX December. opportunities be think prudent committed in we But have strong pipeline We'll at specific that our and think a way in about deploy as we more continue dividend call will as a to excess

Timothy Dunbar

terms, other we a that fact pretty or portfolio. gains partner estate we we one by portfolio; of in do magnitude gains just but depreciates, could real joint other have in one And the sizeable like have nature of do have certainly this none we that realize, core with properties. Yeah, certainly, the of venture group this

Daniel Houston

question, the Tom. Thanks for

Thomas Gallager

Thanks.

Operator

comments, please. closing your Houston, Mr. session. Q&A our of end the reached have We

Daniel Houston

if well assure a well And going organization XX, balance with and to appreciate to good as everyone the outlook to dividend XX-month with fee we'll from again, better for before. this for feel today about long-term. certainly good can up. invest then and enjoyed I you perspective, where capital in But and thanks repurchase encourage you New foremost, bolt-on road. we've the places And how XXXX hearing prosperity We've as basis. our much businesses the meantime, metrics and very see York, world. we are acquisitions and a think the strike priority on talked, on we've broad quarter the from as your the focus perspective give First share and both that remain your our there and us it's We of in I how hitting that making team's increasing spread businesses. growth call the you in would fundamentals ago. the economic We can on you trailing the hopefully a December participate listening of support. X And we our more December some management grow the Again, is the year businesses I about deploying intact. shaping view understanding help as to described us. we're organic again, around results our you should an also The high on very risk

Operator

Canadian available conference for call. beginning approximately Thank be the Thank the you ladies XXXX. XXXXXXXX participating you the or end replay in until number is This today, U.S. for day call access Time Eastern for X, at replay international XXXXXXXXXX replay. of PM for to and today's will dial callers. is The code and XXXXXXXXXX gentlemen. X:XX November

You may disconnect. now

Principal Financial (PFG) 27 Oct 172017 Q3 Earnings call transcript