PFG - Earnings call transcript Q4 2017 | Principal Financial Group, Inc.

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Operator

Good morning and welcome to the Principal Financial Group Fourth 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 call over to John Egan, Vice President of Investor Relations.

John Egan

Thank you and good morning. Welcome to the Principal Financial Group's fourth quarter conference call.

to are related website on materials principal.com/investor. at always, today's available call our As mention changes a quarter to like I'd few materials. to fourth our we've level. both the To non-GAAP and after-tax label SEC recent the pre-tax non-GAAP changed total at measures, company to on comply earnings our earnings guidance operating basis operating with financial on The calculation not has measures changed. of these

fund AUM AUM schedule view Investors. Additionally EPS sourced provide to business into management fund detail new then the under and by have on sourced of the as PGI The Global platforms. funds by U.S. the institutional updated Principal assets been further previously Page The all reporting PGI updated In mutual the XX, mutual provides sourced sourced AUM we've how our we've schedule and we Investors better including since PGI well, and entities integrated AUM PFG. structure reflection PGI. and of sourced of The Principal changed schedule has other our and our mutual sourced funds we'll and PGI AUM financial the AUM Global breakdown a channels includes XXXX, supplement, denoted the move for AUM. of U.S. distribution

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

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

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

I’d like Dan. to the turn over call Now, to

Dan Houston

Thanks, the on reform, accomplishments results of impacts John, U.S. call. Deanna key morning was the and for financial to for quarter fourth another on and deployment. everyone for growth. good share will us results. our despite the tax Principal year positioned I'll capital This details highlights continued Then, and welcome that year provide very XXXX

As shareholder protection and more year see Chile, in great reflects Brazil, of employees. much detail, outlook I and better improvement a be with was our communities customers, ray Deanna to our digital earnings investments performance businesses network investments China, in balanced It expense made confidence to XXXX, be to our will India work guidance, indicator our capital key value Mexico. solutions. of and source a our in we distribution last drive retirement, deliver discipline, and our important and of market we subsequently expanded call year we progress investment expenses for growth, XXXX and We good and a in including full capabilities strong fees produce continue and in we stewards low a place deliver enhanced our where accelerated and In month. operating fourth taxes, strategies. quarter in to and in our higher provided the accompanying PGI on continued performance ability as digital our results, cover non-GAAP a

$XX at India, of recognition, solid for delivered record the we year billion year in AUM China, organizations Fortunes XX% we received billion At including the or providing after growth we and fund diversity, U.S. billion, we a end, list $X.X in Mexico management to best record growth of XXXX. MorningStar non-GAAP our for Forbes Malaysia, and and Hong or notable grew earnings We asset assets foundation to Companies. Most list some under best from nearly Thomson World's number Bloomberg, employers Admire year, in operating by of received Reuters Lipper. $XXX a dozens Just management in XXXX, franchise XXXX. ranked Throughout the compared made double-digit Chile, end, Kong, awards Europe, sixth with

based consecutive of money in best sixth Principal and XX% with XX. best largest XXXX. Towers We world's managers, tenth of the XX XXXX investment the Willis year, list quarter, Millennials released performing international on large Watson news recently from the number one fourth up places For the on topping recognized five spots fastest we made XX% pension of category AUM management. stock a Most annual period for through over within compounded year asset work investments research growth world top ETFs, XX Principal as In growing in firms gain are a XXXX. to ETF to moved tied the the

rating years and flows end, performance, performance result billion fund as as year year collective including ETFs MorningStar-rated year XX% down Further above one-year strong businesses longer-term investor the years funds, for into income strong. above of year-end. our fixed our we cash Principal remains flows shown type, XXXX of were our integration and management and this investment from can including class consecutive At active X, net through performance. underscores our AUM investors on XX% a to $XXX estate. by investment investor very five MorningStar three fundamental At us was for billion, accounts median our asset retirement, real For of value XX% $X had funds, This a of XX% accumulation trusts alternatives separate substantially year four deliver Slide cash and geography, were of equities, above meeting a performance to full five positive and strong total level or eighth ago. from as star with period. they median meet mutual diversification enabling transition over net for company needs

prior the with Principal in the much decline XXXX Chile, of improvement XXXX of first half net cash the in in on the were International's year, significant Asia. the year. and $X softness half of improvement second discussed of half As the than meaningful the calls, Southeast first the with Brazil, from nearly in year reflects second half flows billion higher of

to in flows see cash are turned the positive pleased We Chile during net fourth particularly quarter.

several with flows strongly short rebounded in joint and half, to second China of cash lower points the the magnitude compared numbers, flows half. our for net were in Bank nature, venture of year as reported half billion Investors' $X.X billion positive immeasurable the primarily CCB the also cash were in partner. in sourced rebounded net our institutional Global of over flows the China large are than That net year cash assets Construction having of quarter in fee reflecting the in net PGI included more loss not value more fourth the While in second China cash substantially the the these full past net the negative in than Again, in but Principal first mandates. three cash flows and said, clear, year, primarily retail in including opportunity years, also billion. the $XXX the over term with venture two China $XX to flows joint improving bringing

ongoing fees has deliver despite though, strong Importantly pressure on in growth PGI our enabled management focus industry. the on to fees for revenue

we to values. Moving X% to to of flows core, our medium near deliver range the continue account sized year net X%, of targeted cash market, in RIS-Fee small, the business beginning top to of

case cash the flows drove target X% total. net year RIS-Fee However, full below X% withdrawals higher to in large

deposits planned Importantly, evidenced remains and the $XX business to that meaningful participants record XXXX. in a growth fundamentals billion strong increased in our X% of count, by reoccurring as

RIS-Fee and volatility attract both confident to quarterly we which annual retain we both to institutional unevenly in overtime, cash flows. business. will our occur and and net For remain continue in to create ability deposits withdrawals expect larger PGI, Nonetheless,

now well, solutions. generating generating cash four in $X.X for yearend. seven We continue our ETF and year investment more positive sales I'll increasing and to our institutional are China enhance from outcomes, year, diversification, platform better few billion focus the management, revenue launches ourselves us share value through added with differentiating through growth. new we've and and double the platform the ETFs investments. nearly year. Latin array capitalize market to markets and more as ago outcomes XX to than potential. a client execution we've delivering a with of launched and On flows means our continued Net platform launched a total income $X new We this highlights This expand to of to cash new efforts total cost multi-asset alternatives a alternative across for responding Asia, platform, demand we solutions In than to quarter and specialties, solutions notably funds have flow dozen substantial growth had and fourth pure on downside on doubling XXXX, Southeast allocation, in as remain to local we focus risk and the but U.S. now passive and through billion, net outstanding positioned management. in retail on effective several starting America in of on bringing important, asset strategies

XX us lead Our the spots placing top ETF on in both and moving of us seven $X billion franchise billion surpassed tables and milestones XXXX, up yearend. the $X in ETF as

some retirement we and estimation holistic a their digital of solutions We participants, aggregation also their view a more and new account noteworthy on made provides XXXX, This tool. remain accurate focused more progress. of highly finances In readiness. plan retirement launched

real-time global towards an strategies and of launched sponsors digital and see retirement investment to as digital intensify assess resources our XXXX, can health, workers modeling enhancements our quarter, come a retirement focus first more enabling our with outlook continue associated important cost and plan increasing plan businesses, within using changes the the began the we we And planner, enrollment offerings platform. in of the take design steps its direct impact participant research and our on, how we and to estimate call, benefits education our also In to retirement features plan experience, data, our to group business accelerating the retirement XXXX security. and fourth customer make number in design. financial consumer readiness kind advisors We investment plan to discussed

producing Moving increase producing our in a earned total XXXX, at to billion in a $X XX sales. distribution, classes. the least with six X to firms on we increased we investment options getting We more achieved multi-product different placements double-digit success billion and five made multi-channel, to number least across tremendous a of firms list from at $X.X in in of of XX XXXX, sales in a continue We advance number approach. over the on our platforms model progress us asset and third-party recommended getting than dozen In portfolios.

our through we've important XXXX, distribution developments. highlighted a As number had of

we’ve the resources, in As distribution to efforts opened our broader an part office of expand Zurich.

several Alibaba. added and also most We upon key notably distribution relationships, expanded

firms platform. Our top than XX per now products X.X more average

consumer remain, retirement Principal strong support for use fourth into and quarter, closing portfolio will the go translate year of direct a Brazil forward build XXXX Principal platforms again in fully momentum other launched was from asset shareholders. with individuals fundamentals growth for to position benefit just Competitive we joint Seguridade. support long-term for BB that was by meaningful the of models construction challenges its in outstanding look we During a and the continue digital year through but that I of momentum as approval needs. introduce progress. to and after to led prelude environmental platform and In long-term and savings a broad strength, our value simple, XXXX on protection, us product Deanna. they diversification. a digital be for to and of to a allocation solutions through broader venture to by a affordable, sales much seek with owned regulatory for effort advisors This pension a

Deanna Strable

on Thanks, for on and I’ll capital year Act and This impacts The the our discuss financial in of tax our morning, to quarter guidance Good position morning U.S. at our key call. XXXX. Dan. Cuts and tax results the rate year, and performance to effective deployment on or reform the contributors end. full capital Tax fourth the for Jobs everyone quarter

Non-GAAP million $XX of tax financial re-measurement U.S. from the a have reform from law adjustments liability formula late capital our know, impact and higher $XX of million or net deemed confident risk impacts tax benefit to reform into targeted billion of capital currency operating repatriation remain foreign last deferred impact on reflected net the basis to XXXX. on in than As million million earnings. translation our tax to Tax operating earnings base. on in you AOCI not was The declined $XXX a as net shown foreign from X points at Slide estimated did due based tax in our the our non-GAAP other deploy The signed included equity were XX reform, increased surplus, XXXX and and tax ROE year. earnings. approximately excluding including $XXX material $X.X other year-end expense, ability after-tax our one-time benefit statutory excluded we

The tax effective XXXX XXXX rate As effective guidance earnings bottom updated by This shown to operating X% company XX% over approximately X, tax to non-GAAP we've operating earnings is reform. on of reflect rate increase the guidance XX%. of non-GAAP total range should our tax our now XXXX. the impacts total company Slide

attributable Moving million results, $XXX $XXX tax was a in net net million $XXX The was the quarter. to primarily fourth XXXX, Principal financial compared of million from increase benefit reform. ago the for quarter income to result year to

our made In long $XX Principal our of the fourth pre-tax reflecting million to giving. and charitable contribution a quarter, addition financial during we history position Foundation, the strong

impacts year, estate million losses net quarter a the operating benefit billion, for We've record earnings of $XX continued performance quarter's taxes and A the full by remain and gain the in assumption XXXX, of the reviews, credit PGI. was markets. explained XXXX tax equity be a operating the share. non-GAAP higher for our At the results operating or billion of record operating third a below year of earnings, including items pricing the execution income of reform a On reflecting and $X.XX strong non-GAAP a million per For year quarter $XXX XXXX, lower the excluding assumptions. diluted timing non-GAAP $X.X increased annual XX% full earnings from the basis, real reported few majority from fourth favorable can transaction. $X.X from expenses, fees

than in compensation operating expenses including at years, in quarter increased our $XX primarily accelerated to million prior we fourth and $XX business businesses business and increased business. beginning seasonality the back higher benefit seasonality the one-time to by impacted first from including were increase remainder be in to fourth an in items, total saw XXXX a in including of into elevated in expenses, continue year and and to half expenses variable incentive other to by was of three stock-based due average expected attributed the the of quarters, same to of factors, our total, are and timing due expenses. digital or in million the the compared can As about fund in guarantee lower cost, was fees, expenses other timing, higher while operating one-time expenses and In strategies. expenses investments expenses assessment Slightly more level branding, In M&A quarter The the regard the XXXX. XX% from not benefited quarters and amortization. investment was timing to expenses. These than the was sales normal quarter compensation. of Approximately three transaction

$XX fourth and the fourth to between expenses in the million. by of the higher timing quarter taxes quarter addition third particularly In the impacted quarter the operating quarter, negatively approximately

a line company earlier, pension mortality and periods IRS-Spread exclude our significant in benefits The year impacted favorable On basis. Individual rate Life, and standard fourth expected businesses. million quarterly a with basis, negative benefit as significant full lower on a earnings Mutual In our the slightly normal Individual Our effective operating fourth expectations total and in taxes, our performance to operating In comparison. comments, into the variances of only both mortality, morbidity were line our discussed expenses morbidity in $X quarter Specialty line impacts earnings my tax for were of level from mortality the with over that longer and Specialty I but in all of to time. business in Life variance quarter, and our to I an quarter quarter, was annual view was non-GAAP We company expectations. account the with from transfer items for total business. will following risks periods primarily the morbidity timing fluctuations overall, elevated RIS-Spread, were Benefits the my fourth the in pre-tax results, encaje on out Taking expectations. pre-tax expenses than

assumption margin excluding within earnings, and operating annual non-GAAP the the earnings pre-tax operating the were accounted in of XXXX. guided the XX% increase our and of than Together, risk businesses pre-tax year, better in For risk total combined reviews, spread nearly XX% spread for our impacts from reflecting ranges. a company revenue

of As compared X% ago to RIS-Fees shown Slide X, on earnings increased a the pre-tax quarter. operating year $XXX million

of by investment a partially revenue was Now, income. revenue, offset a other fees growth in net X% X% increase lower by in driven

Additionally, described the impacted quarter higher operating was current expenses the by earlier.

decline AUM prior Excluding X% on large our on lower revenues. reviews, margin I’ll regarding offset at growth revenue by XXXX the operating Operating back performance pre-tax earnings leverage Despite the announced assumption than line ended Principal high ranges. over pass-through In XX%, expertise XXXX. prior the earnings operating year growth pressure return in higher point, account top the within XX% end industry revenue Investors' driven shows in operating us XXXX in Dan’s on our pre-tax Slide quarter, quarter, less the of year of a impacts full range. despite or metrics fees to guided Compared $XXX annual increased This guided XXXX to was revenue real Global year Full estate X% year our commissions platform pass-through refer average Both at X% fees. Internos. management focus end year, grew fees acquisition of less commissions fourth throughout by give and the higher increased values. primarily in million. of Europe. the the management X and an to a performance in planned the growth we fees, our combine XXXX a anticipated the we will was pre-tax fees.

of We in the first half are still on to track close XXXX.

Earnings by the over increased discussed Turning of to International's business pre-tax expenses was operating higher the $XX Principal offset the Slide earlier. quarter. earnings partially operating XX, growth X% ago year in million from

Excluding variance annual net revenue encaje one-time was of the second Principal combined both XXXX acquisitions XXXX close Consistent the expense XX% combined International. growth impact and slated in and assumption quarter, the a expected announced three within XX%, guided All planned three in return recently increased reviews, to net from XXXX. in revenue in our performance on International's Mexico ranges. half we've are first international were the with pre-tax strategy, Principal of

in in Principal additional full XXXX, that As ownership October, At acquisition announced the beginning Punjab of take we and in National the planned pension distribution the in provide Asset we of business Company Afore the Mexico. of will announced MetLife's to Management scale planned mandatory India. strength business Bank

strategic India. economy We years and XX nearly in India This have us gives our plans business greater increasing overtime. been our in in ownership transaction for executing been have

asset will Once XX% announced plan in retirement region. ventures the to us complete, and we the management better Asia Finally, our capabilities positioning management in in leverage with our CIMB. increase be ownership Southeast asset to also our global ownership joint our

to are these excited opportunities about accretive to transactions in total We XXXX earnings. we these and expect be

expected expenses losses higher of pre-tax were the operating due Corporate, earlier. million our higher to than Moving discussed run-rate $XX to operating

can reform earnings in foreign quarter with Fourth and the ago. full annual than gain guidance estate base any year, volatile the of given excluding the translation the reported the For assumption primarily line real losses reviews our This adjustment in operating impacts excluding be tax year reflects currency ROE other from transaction. points basis the XXXX non-GAAP XX losses quarter and impacts XX.X%, and AOCI quarter. a were corporate the the was third on higher due from decline a equity to decline

at range in to real of risk primarily to XXX% This year-end. due estimated third based our targeted above was Our is capital XXX% estate transaction quarter. formula XXX% the

Our range ratio back goal the next our targeted through opportunities. the quarters remains over to several strategic deployment to capital RBC bring

balanced As outlined Slide XX, to a capital on take approach we deployment.

reform first common a in full year dividend $XXX a XX% The deployed ownership Last was common tax million goal to ratio. XXXX, with common we I XX% acquisitions bringing share, transaction. estate $XXX indicator Despite our results the repurchases between we full night, Full of in $XXX any XX% in pleased continue to per of a payable increase the very year a income our the better deployments Our increase a deploy $X.XX capital variability announced $XXX XX% the XXXX for am to the a dividend of dividend dividend investment per million net boutiques. income financial Internos third MetLife million included or XXXX, quarter, stock with is quarter. quarter in performance. the target XX% strong as through fourth stock our share our in and $X.XX over Afore In stock per $X.XX in year, of net payout from capital share. the results, of planned million excluding increased real the given income we impacts and dividends, year quarter and and net

want and Benefits to ahead our lowest Looking and is quarter PGI. to you in that taxes earnings quarter elevated Specialty first vision for to to the claims I remind dental in payroll typically XXXX, due

unevenly a digital strategies As results occur business the the the may unit business year. and in investment through throughout reminder, accelerated the flow our investment will

our growth tax will inflation, a the by sized target of already additional margins medium growth, for our from the included small wage our confident prepared excited open to or levels. and economy through challenges, an to prospects We strong guided year continue reform have whether Operator, it likely and but impact on to brings execute new on offer call decline questions. While positive packages. to won’t cost will be enhanced are or to in concludes businesses growth. ranges, ability XXXX about the our employment a XXXX the in remarks. to market deliver strategy without in market anticipate remain companies we economy, its This above our benefit on enabling new XXXX please

Operator

with [Operator O'Neill. first Barnidge will instructions] John And Sandler the question come from

John Barnidge

domestic reform is, your from and saw And change international focus? seeing no tax impact and RBC more or then material retirement? increase how you benefits My this from from mirror medial, are contrast and with large that charges the ratio in shifted it'd has second more their combined appetite would quarter. impossibly part for question to now, peers question, a of focused on be reform the One, possibly some it increase rearview being this life clients the tax in interest whether employee M&A

Dan Houston

for this the impact acquisitions that whether capabilities to relates criteria, making do then impact. of with would morning. or through see a to take material and for it having as that scalar that’s thanks I’ll behavior maybe I our building acquisitions, say client fundamentals has and John, Yes, to international the and the don't Deanna. question it our over I domestic,

generally in That’s of majority thought recently you now on control what and acquiring move of stakes saw larger the more making to gain case International, control. are certainly over CIMB and start the you with to most Punjab National seen the Bank. think us we domestic have that have scale, added at we some businesses capabilities. have and years, I our most shares

was we seemed contributions. week, But employer its think I continue fallen material we reform of to yesterday, to matching make this matching not seen working with as view his to the a that, have earlier benefits, One volunteer say anticipate although and benefits, investments. about just team, an relates her what was yes, and speaking buckets. those Nora three and increase was the contributions, or would I it in with whether change yet in was it sorts to as you tax

in The in business I investment digital. know just having second an don't it's to was us if make who's the itself.

to And and every and goes sector. flowing public it they frankly one across industry I a the think talked back traded every about it’s company, last investors.

let that, Deanna ratio And me so with to hit RBC itself. to the over turn

Deanna Strable

as account admitted, and reform. John. did right, the we formula couple we level that from and into significant percentage have question. re-measure DTA the there RBC caused took on that impact Thanks the quarter, in we that, the A our a, But Despite for it amount did the a was on about our minimal million of had very point Good you're at I’ll the our DTA DTA capital. a or mention morning. impact tax based only companies. that things total gain of company in X life risk $XX have

wildcard I that is that. about XX rating formula the that within that the just it's well have think said a insurance could as that unclear. point contemplating other we obviously for is would update capital percentage the provision and tax And formula does the some past point talked based all at there from going the a forward pieces as in estimate and Having is our risk current impact is that. rate, that companies NAC impacts impact moving likely we've reaction about timing it of and NAC agency

kind wrap we're I capital think a feel, a in it I to position. up, very strong

capital is very a Our risk at as have strong based as level that the complex. capital well the throughout we

So, we in tax that our withstand going can reform position forward. any RBC impact of capital we on feel confident

Operator

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

Alex Scott

have as And seen in you've First I characterize you and segment? degree, that any of kind was competitive business, interested pressure in considering your there? the to will sort tax to And benefits result less that guess DRD of of I to that some pass-through is you the question incremental? on just outlook would away expect fee going for that through in flows flows.

Dan Houston

market I and perhaps than related in cash that. question though variety question to so all cash on And said important. give a ask revenue I've case where I'm And response overarching in has far flow, comments, for large the do prepared net and asset operating These payout. service reflect full does as growth business is group institutional we this the earnings would net Deanna you broadly with for Yes, to uneven your net would to management see in different to because Jim it premium. to weigh and is It the Alex. on most related It it's business And Nora the the quite more the of and it's that. and become to good in margins on is volatility. flow it your reasons. benefits and Luis, flow. her mentioned cash it Appreciate retirement question I in in going

we're So, orient it over net talk that, me about to service. ourselves with flow. throw specifically to But that we let to Nora going volatility full and need to cash see

Nora Everett

morning, retirement Good Alex. service on Yes, full full the service, side, business. Sure. our RIS-Fee

talked rise has And of on flow case it with in went there on been we've there at just one handful the market $X $XXX about transfer north of impacted XQ went saw that that for and a been has between our couple X.X. XQ cash quarter that XQ of by large billion ago really that actually was the to 'XX. on larger case case, a in about I actually last out about cases. about the million equity We X.X calls, between net As out block, and fact spoke after split

cash lumpiness of look core flow at outs segment that full cash But beginning points pleased to this when used that, that SMB block, we're So, the see net and net with going net but SMB of end that continue that value account going be revenue our as the Dan’s there into there SMB that X% momentum the on. core the flow the end see cash lumpiness this certainly we very of our net well the flow doesn't that at we year. at the year well. case flow the on to remains it's this metric ins out. focus growth isn't extremely to the core X% to cash flow large larger within as going we're that, and confident to focused we mean we're And for point we’re in Dan and in It year at

Dan Houston

a PGI. take will at you crack Jim,

Jim McCaughan

AUM over revenue and I that late outflow client In it by for $X.X the The could in mandate the a it's Thank the words, was of The talking one a about was in was very $XXX,XXX certainly. so Alex. $X.X billion. illustrate for December, just rather one this year. that think commoditize sense mandate. where currency billion outflow, Yes, other in movements, on you, thanks a in a two year forward I inflow. was one-time question, straight

revenue there $X December, pension small million The a clients million other was with a large inflow, big in in into being the for $XXX year. international cap one

can pipeline. we the that that we think good which that, reason fee rich asset growth confidence are my pretty have that’s management I and have got the revenues to, the specialty that And running quite fact good particularly pretty a continue refer illustrates with growth. for classes Dan still underlying revenue

revenue lows, So, development I much see strong, very pipeline so in will feel regards that remains for pretty but underlying quarters unpredictable you in -- particular the the good to really shape. is is and PCI better confident in as quite results

Dan Houston

had you quarter. Luis, nice

on, are things your sort to outlook how in of and additional going You give America? Latin want some maybe Asia color and

Luis Valdes

just net cash much than me pleased would we much, Okay, are billion that $X.X very our you sure on are are billion let one very pleased about $X.X that we better Dan. looking that ago, if we of customer quarter-over-quarter fourth back, on we’re quarter. because one the the one you looking quality much one-year more the had year ago. And Alex, year flows Brazil. of and in rely are tell Pretty you

is from LATAM, And of other see Now, which X that counting in billion is is that not billion could Asia. coming from China quite customer $X.X our $X.X we is a flow. had net coming the and billion you there cash combined

would first for our is I in time normal. I a Brazil, to a quarter every that LATAM. little to time are pretty X.X much that because rate quarter. more billion So in single pretty quarter bit much summer of have say first more say X we is the fourth in would kind Certainly, billion low back XXXX summer we run

So, all and positive customer a that, putting flows. be and pleased are cash companies net we see but countries we bit have our to that to are little about conscious operations very

Dan Houston

DAC tax wasn’t in just composition although that, to answer benefits when change. the say it around. weighted, on might material would I the DRD, little be you DRD, last the part Impact questions and of Alex, bit your reserves, the a frankly differently took a

significant So, that any has I see don’t impact on us.

As a it onto a is we're of favorable tax tax the on have it relates credit, your valuation to foreign to would if have situation. acquisitions, certainly not go to going models

to a you up? have we’ll something have Did internally. through that’s work follow So

Alex Scott

out. just information were up more evidence"? with, and that provide the competitor around contact if their on you finding on guys We assume guess been one [dents] could Can in maybe new had Yes, does assumption for in associated finding what they just around pension sneak reserve, where you your whether your "missing an paid I business reserves lost processes announced and was business. there improving commentary a have end pension some would being an I process the in,

Dan Houston

take an is we and very on payout It's specifically service customer. it business. I'll it to seriously our ask it matter important speak out Yes, full for Nora something

Nora Everett

Sure.

use two to in and with Alex, block And regard the and sources. procedures risk competitor look confident individuals. pension our that situation, we're transfer had familiar and response at businesses. the reserves obviously design those the adequate external We've thing holding their speak we're and we to this when around But reserves very details. DB the with place both internal we can't of for processes locate we So, reserves, both to

Certainly, confidence to level high. is we'll our monitor situation. So continue the

Operator

Research. next from Bass with The question Autonomous Eric is

Eric Bass

heard in and lower you're along one least first just benefits, after-tax reform margins tax talk thinking employee just their on that of how in you competitor, from Can we've specifically, pricing. terms guess talk taxes at the about business? about about and passing one, benefit pricing I and

Dan Houston

take fine. that? want correct that's Yes, a at Amy, you to

Amy Friedrich

hi, Sure, Eric.

terms when on do basis. we study clean on that rate. What your a do business as of you on of do annual we business our marketplace the is, quarterly, those look patterns, do small reliant we that have sized think is the a basis manual to at expenses medium and the in I an on continual a

is up like into picking fairly you a rate happens pricing. quickly moving it your up end and what so, things And tax

of for small a consistently. So, block manual and using I rating pricing kind are their they at would that reliant case more fairly consistently. see who look into of people especially They that in and on would move

you it a profit that would come Now, some not period of to a is into assume always be off time, benefit pricing back year, But kind all that XX hold and make some of the would some two discrete living competitiveness. can to say decisions. would years itself, reasonable for the I market that the over things months, of

Dan Houston

This component, that think just follow you reality so grand scheme a is, pricing. one are up, is component. into relatively that the have are things of I go variables many there the Did Eric? the small

Eric Bass

Dan, control, a thank is? by hoping more maybe you. on bit see what I could in recent changes thinking little more just in growth provide more and That's earnings the a color on helpful. having incremental about was the just stakes contribution and detail International, you the or acquisitions you little bit expected ownership opportunity Principal

Dan Houston

Luis ask I'm you and Jim the asked also going speak about CIMB those we're both question. to glad excited because Internos to to and opportunities. I'm

a thing partners. CIMB, XX% a actually majority Jim's that them allow in been I'd Principal partner Investors, Principal partners ownership we years. context. they Resources By look the over as wonderful As to stake with International the very and to capable to as than going good with or we CIMB And more like team pull in XX Global in is to at it taking area have for relates distribution work say to of going is think Luis's broader a to more

for our of to bigger broad organization after asset much a entire as it range across at options across go look sleeve the pie of classes. I the So,

again, me very further talk ask So, about acquisitions. to about enthusiastic that, those Luis let we're but

Luis Valdes

tell order very in control to that franchise get Yes, let additional we're over me Asia. you Southeast excited in our

feature XXX is the million people, X% a year-over-year. we you, about that every with we’re footprint, X.X%, region that to growing which in a footprint year Just talking around almost cover

than growth, So, not control and it’s And the of Jim order of to kind vivid very Malaysia, our with up Singapore jointly Indonesia Thailand and in in our part is a taking with and what a in of doing are certainly just PGI. fit, we speed planet. process

expertise, in have things But distribution really markets. with about region, first finish it just much the had staff last seems need like so in CIMB, which forward, was to premium asset that’s going long-term the those management more pension digital. saving have the but we to products, a really phase it's expertise, We establish about and years knowledge pretty operational more be corner and tremendous we that a

us. seem me to for up if opportunities kind that many, of this it is many So open is, transaction for future

Dan Houston

real Jim, you little about bit for estate, a your our now want commercial to business. complements talk that enthusiasm European

Jim McCaughan

Yes.

-- thank last the For you.

the very, commercial For the if very estate, that's you’ll ground, U.S., better, been private will leading things acquisition brings before a Internos is asking already though very doing and way, have the integrated real clients, private highly equity around The that, be point world. And typical our do a you of specific that efforts. on to think to for focused real can started U.S. modest us position Internos a it for debt. the be last a to real our group both XX years, estate acquisition. commercial pan-European in Don’t them And us probably has we on but strong. boutique. into Principal focus as be semiautonomous estate got We leading in

within globalizing Principal. in is as towards as the a you real can think step Internos, provide quality important franchise. we the that end leading it and investors I it if me high very Principal think is across already And really Europe us comment very services but to International, well And CIMB, our thus forgive real fits States. on I Principal company going estate if one enable a United to Europe a estate that’s will be for are

player, to the we are is more lot management the the very And a have a the leverage CIMB We not already and to access in the stake our fact control will been global best management doing with joint practices do in lot working assets asset we global about will are function. majority or partnership successful that taken all on stake venture, believe taking a more has and be our there close platform. majority effect in resources, strong some We of a parts management better that far. able local asset make than even so we to

Dan Houston

say your already Eric, XXXX our from means provided what they you’d that, have about guess question, are think that perspective? what and anticipated look outlook, I these I at you. moves it the would into To way around you have I last best as a financial we baked

the question. Thank you. appreciate So

Operator

to with and the TomGallagher Just way The RAS the question flows about targeted next forward, thinking historically. I to on, would Is for the think going should about, know be appreciated? the that case - think way Evercore. non-large X% Q I come wanted on clarity you've understood you're Tom case not what’s about a considering to a large there sure make going Gallagher from we will the business more XXXX? good range X% Any

Dan Houston

measured with that then and XXX,XXX back over their plants they total, nearly X%. SMB will that participants But grew those year business with They I the you that That market. grew about way Appreciate look step having element works really I planned this fewer volatility. core guess plus, X% But their and and if of turnover to with market marks of Think I in X% second. XX,XXX the the a in to XXXX in employees. introduced is Tom. question. plants line it when hit then plans this respond past XXXX, to billions XX,XXX, by start one within in by SMB would Yes, to the X% I'll than throw at here Nora participants they that well number the XXX.

me. institutional for this be to element the clean a So to volatile. going have Nora be be and definition, by that really up isolated I'll But can it's to

Nora Everett

Yes.

about amounts not. contributions equity obviously the on percentage. but market our driven before, this As by where Tom, talked we Those payroll growth withdrawal put based are a pressure hired AV the base are markets reminder and

There that the XQ $X SMB metric. gets materially Dan's two within on in one us anyway range. range, end sitting would is our the look overall the already at and the that that the billion itself you you out here that lift large outflow. percentage market. see But in the the a of total point, an this the that you're to still by outflows or strip impacted core to take So block, expectation that block our that's at case when be there larger impacted But take pressure by that lower well look But if of today. has that at to could going end down the year

been So entire to We'll obviously block. we've as just metrics transparent as we're to be historically, going tough to it have cover a watch the but those is variables.

Dan Houston

Tom, do you have a follow up?

Tom Gallagher

Yes.

And Nora, so, on just following up that.

positive the So, lower including net you're now? to right on you the of end be it still based flows, what know fair that towards Is in today, you large the would but on from overall based X seeing assessment sounds scale pipeline like X. in

Nora Everett

based assessment today, sitting on fair That's absolutely. here

Operator

So, Citi. Suneet will come next question with Kamath from

Suneet Kamath

XXXX the technical, a to want if that modeling. about on bit we for think too up XX% than Just guidance rate. that's we but what higher to XX% I given want the tax follow don't you've little to get I think were

to So big pieces. is to there moving attribute any the XX the way to the the XX that decline in XX terms you maybe from could XX of just

Dan Houston

that? take Sure, Deanna, do to want you

Deanna Strable

that. take I'll Yes

to the correct, You're XX to we've guided XX. previously have

Our rate to new effective total XX. is XX company tax

but expect, me that, lot pieces might I let moving most the underneath just significant. highlight a there you three believe of As is

from is down XX of obviously rate tax XX. to all, First reducing the

that around XX%. have BRD reduced We

foreign X% ETR And rates have tax X% we'd jurisdictions effective to is and of historically, in for the that your you to our is model to one XX% around, had probably, rate. how harder range. into get that hands X% benefit tax So, really our now on about our the go

X% tax we we credit, have a that don't we X% now X% there. so, where a probably jurisdictions to increase swing was are a that I’d all rate it's helping ETR And say ETR. had probably foreign tax foreign to X% take about actually And tax a our rate those jurisdictions. reversed in for it we caused have by the now in tax credit, previously about our foreign to and a in and in obviously, Previously, of the X%.

So, obviously us those be XX% to at those that, moving ultimately of of the going that but XX%, look I'd major to that. major that pieces to the continue are say we’ll But got what and would forward. parts

Dan Houston

a have follow-up. You

Suneet Kamath

rate lot the driven I Yes, RSI-Fee terminations, questioning. different? but this on the had you M&A, that’s that those tone talked Maybe to as just previously by little case follow-up a was but look competition? thought wrong, going declines some that how on folding a and wanted case when that on helpful. anything larger to I into large about just of that of tax Is driving in it in what’s their am pricing? market. just commentary? I people tight that what’s And on it Is wanted see

Dan Houston

would acquired have in the think or acquired And we still large away the M&A company. represents customer they that and go I half of market, they larger where about it. don’t business. might lose I know say, you the anybody one, of case piece was when that. far were we why has got still biggest buckets is to you done really the our a you and three often -- times about

formation. --there business to size business we of small on new a plant lot Just as really is that, note a side medium business, and is

lose there benefit it. but certainly also that’s We are we where place another

there investment evaluate underperformed gamut is how we job these think, are around you this has ourselves and of queried a available with that one or perception, capabilities performance we open extensively, I you technology I doing The area whatever again, of on, customers complete really cases whether or we may to third some focused publicly reason our have those we you fact the is way do large case in like sort for would that’s want And third a category. a the they we in tell M&A area that that the and robo, have lot and are hold competitive smallest parties that. lot good so of in from we’ve second But bucket, customer end information, be markets is to for were exclusively not there. the then of and add performing offering services. we right architecture Nora, to on to out in we products not losing of a that, or service feel hire most

Nora Everett

a Yes, one of practical is very business. just this and aspects our

have make a can change. key or decision You

an You advisor change. can have or consultant

as that comes into as So, day or aspects business have we this there to can impact just of that whether you much talking see about play. a pricing, day are levels service practical so is

Suneet Kamath

You point. I for there not the I isn’t the here believe S as two turns the been cases normal think have mix, is actually large just or plans, very you it quarter but year? one mega the that that out size, in got distorted results as the is tone at somehow not is mentioned reason is it's competitive, have this performance to our the no good, so offering call. of but one

Nora Everett

high. remarkably rates retention remain Our

We retention at have the very, sponsor very strong plan levels.

So highlighting the extremely to point, cases they leading. the cash but is strong these impacting Dan’s are industry on that flow, we’re retention larger because and block

Operator

question from will Morgan. Bhullar JP come next with The Jimmy

Jimmy Bhullar

of couple questions. I had a

that then low gone on competitive and MetLife prices with PGI XXXX? And and and earn directions market? there international performance First, bidding, might for those a regulatory be the comment on expected what seeing headwinds on maybe were contracts you're but about was or the the environment could expectation talk some your business, what's just in right were I like political in seems if Chile, in Can it in the think like Luis, is your this seems lowering the pressure, just your but you XQ fees were outs given structured. elections in and

Dan Houston

election in questions them early know you and and define. with in for the as But good don't about Chile the things presidential probably fees? order take Jim, to want better you two same why go talk business are Yes, ahead perhaps performance we

Jim McCaughan

likely, fees The of XXXX will have the equity because but Remember big mainly Jimmy. low real XXXX you not because the incidence. and we indeed of years. cases, debt in periods of thank more or assets. most in sale have have on been and fairly even performance both X incentive and ones remain have fee incentive the in low X And Yes, or you outflow the estate and some when income assessment

to the comes that means when predictable, if the it pretty exact that So even hard is forecast. is structure somewhat incidence amount

something will of there an of primarily XXXX We over most we these to seen is fund see fee are And incentive possibility we piece more likely and to we'll would longer well. to was up some take But is I wanting be smaller into to bit annual levels carriers. in think There is again move XXXX where pretty and we XXXX fees. that few that's a incidence. profits far the term back as an than annual only and drop get good as XXXX XXXX. XXXX have in performance course That the good be level happening, that then because hedge as normal forward when more lastly on as and fees what accomplish I possible. And clients on. it pieces of wouldn't news concerned. for fees is others of should clients that But that count performance multiyear long in a And incentive

that two has the know hedge predicting next market carry year of segments that a will to But more incidence optimistic that matter come hard you back world results. fund As drives it's decent find incidence. the or also. that. But are really of But rather the to particular the we're over that's than the

Dan Houston

just in were down Excellent, Chile. Luis, you

Luis Valdes

that think the next we political Yes, Jimmy, think in and more that certainly me we to years, going do Chile much four in environment positive let is be tell essence. you pro-market during that

small sure, do replace likely for I going the in March that approving personal bill current going This which piece next that is think to but think order they're of administration do even the pension is my takeover not take. the that in the I current XX So have quorum repeat congress. didn't the that to we're and Last to week very in is is administration they legislation.

me to other try to going not pension any it bill. attempt that they're to apply that seems particular for So,

is the approach problem taking information other a about and Chile. already So administration news the some much good have and they at that, is a pension much, also the have look to how we holistic in

this really particularly, things other and that four. the ASPs out one contribution So some pillar main of that need with you, rates interesting. and has we broader ASPs pension lot think pleased ASPs, to certainly to they are a are pillars adjustments just as instead the said I reform of the other that is going we they Chile that, And with the to is end. work problem much of so has And be more more much compelling that,

eager We working fees pressure about on and the to continue on fees, very going are honestly. be to

valuable As position in differentiated. I is said to you our the Cuprum many times and highly

strategies In top long-term We’re of number investment in out five. four the We one service. in companies were just two, again are Chile. customer rank performance, the number XXX most we in profitable

Having but a head forward best of making all is time. said decision looking to of that, differentiate our if ourselves we the going customers [Providas], to not so be in that competing company. MetLife easiest the So against we I say is in Chile that going pension as any would we head, with are and are light time, every and what we’re

Operator

next The Wells question Securities. Fargo from be will Sean with Dargan

Sean Dargan

until of look be? you daily you investment on checking to mean on to how I participants I of that longer this IRAS, Just where to going things digital be kind in do pace need is the has to specifically at solutions, the Are of your expenses to or a come. allowed of terms question much about offering, and had you that balances where paid need When where you gone product competition you one get their guess compared basis. to in

Dan Houston

And don’t we greatest capabilities about consumers it had has ever add run non-traditional reduce is threat would of When that I to I one leading we purchase come a at other say because from the class things, really our to to probably rate think and they best-in how good players, and think to look unrelated current our also I goes reflect expenses frank, this, Sean. trying new away on focused has have had, be I now expense are services. today. that financial on

the we against access we is are the so And what I been experience, raised has relative where its environment its to simplicity, think any customer how up an convenience, it.

consumer So this back and about Jim’s about taking do digital December it's the to driving two-thirds on expenses. XX additional is third our a of management hiring with driving the benefits, of everything in are initiative, to revenue with technology about of this individual out a it that our expense and It Principal. businesses. data back don’t area about although as has new sets going as portfolio do people It on again we life, spoke every touches to it's the come within group has think I to RIS-Fee rate with down. and skill portfolio And lot scientist

is offset rate and be will can fact are reduction don’t base, elevated. we’ll months coming months, that and impression, at is going and you revenue being expense out. will leave expense it's expect upon reduced, in XX going we that enhancers What XX the want I those. I we in somehow, in we new expense think and and it's to XX months to and I the after see to build finish where those remain other areas it We think taken and at think XXXX run up revenues to

So, hopefully that helps.

Operator

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

Dan Houston

They're there from I We solutions, annuities its and introducing our Yes, around under-saved pretty demand retirement greater. protection, through life and under advice. intact, because think it's couldn’t perspective the the our know under-protected. remained It's security whether management financial very be are and much that certainly world, simple fundamentals around asset

our are interested the do they shareholders as on. think didn't or those of And to the that find goes I for successful businesses lot wall them as be sure solutions is have future. customers time our these what as with a getting areas. to course company need had We and get to making people everything of are that and of under in behind the But investing in want of after it this to what irrelevant each we do ourselves success

So appreciate Thank out your seeing interest and we you. the you look on to road. forward

Operator

Thank number at you and in is or today's for The will international the for in replay call. for end Eastern call today's today. February XXXX. to This X, dial the is gentlemen day thank participating for and until Time participating replay XXX-XXX-XXXX beginning PM XXXXXXX approximately of code conference Canadian the be callers. for X callers, you XXX-XXX-XXXX U.S. Ladies conference. access available

disconnect. You may now

Principal Financial (PFG) 30 Jan 182017 Q4 Earnings call transcript