PFG - Earnings call transcript Q1 2019 | Principal Financial Group, Inc.

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Operator

Good morning and welcome to the Principal Financial Group First quarter 2019 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 call over to John Egan, Vice President of Investor Relations.

John Egan

Thank you and good morning. Welcome to the Principal Financial Group's First Quarter Conference Call.

to principal.com/investor. are related Web on materials at site always today's available call our As by two start I'll mentioning financial first supplement. quarter changes to our

financial how an results. enterprise business, been with and reminder allocate Investors. distribution results PGI's changes note with the Results were recast investment to the a effective currently want effective for conjunction company X, to financial organization. under so quarter integration of comparable on Fargo These basis. with have reporting we As that stronger deeper with the are acquisition evaluating process the in impact the project. January management business units. There certain periods XXXX, prior global and teams investment This also total approximately X, realignment net Wells they changed planned company shared assets Retirement from Also within XXXX. acquisition Principal moved third management January services and scheduled expenses supplement global in evaluated is to investment to Principal of reflect income wide among XXXX, Claritas we to no connectivity we was that $X.X our the billion International Brazil in I The and our combined best are PGI. close structure Global to improvement financial Trust Institutional

Global Amy the International; Luis will U.S. CEO, up Q&A for the Management; Schaaf, provision, some Deanna Safe Principal Dan of questions. remarks. will reading Friedrich, Valdez, Tim and Income Harbor for Solutions; Renee include Others the Insurance prepared open and the Solutions. we Dunbar, Retirement Houston; deliver Asset Following session Strable call Then available CFO,

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

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

Dan Houston

position performance with growth, planned Institutional capital welcome announced the on we call. accomplishments deployment. and to results that for details will Deanna John, that our highlights share on follow Thanks up everyone us including the continued Business and Trust some financial Wells and morning, X. the Retirement and Fargo This I'll April of acquisition

to start a good for Principal. First quarter was year the

X% a non-GAAP a period on basis, nearly expand X% a network business our to business retirement or our and to operating billion a XX-month We creating increased earnings value nearly our of expense strategies protection strong basis under in reported and earnings distribution gaining and array digital customers balance continued operating AUM investments investment pre-tax and efficiencies, to lower solutions, $XXX with compared advance for ongoing million, pressure. a down tax billion. On ago a strong XXXX assets operating discipline, deliver to be of but shareholder up year company ago, non-GAAP management rebound results and good billion revenue total earnings trailing capital, $X.X X% quarter At strong effective in very rate. growth Compared XX% in reflecting first record $X macroeconomic $XXX reflecting factors. non-GAAP sequential up despite were the were stewards a from year

by increased or trailing the and impacts X%. and currency would or foreign AUM XX billion the operations acquired during have a disposed sequential X%. billion of months, $XX $XX increased On basis, exchange Excluding AUM

China $XXX This or $XX to a Asset quarter. billion $XX is despite first increased $XX currency in AUM billion joint year offsetting venture the in AUM our quarter drop more also the first foreign negative billion billion record the an in market than in quarter to a of $X from billion from to in impact unfavorable ago We've appreciations a performance. compared increase XX% added the exchange. fourth

As AUM. China a reported included in our isn't reminder,

third the color from Lipper. including further management again quarter best franchise, party on As noteworthy during multiple we fund received our awards asset some recognition

was These had Star. a in our principal quarter responsible Association best Asia to the Estate recognized rebound Management call, the AUM in best funds, Partner awarded Additionally, contributions Sustained and at also of fund Asset were rating, for as star the At the compared Morningstar four performance, year fourth the the performance. performance, the funds, the of Asset performance, Southeast recognized Launch of median year-end Chile of level and This for accounts, our in equity the improvements target discussed Best leadership in longstanding our at were collective Fund by American at ETFs, one-year five recently the fund five the our three performance first investment the improvement XXXX. Morningstar focus for mutual we Slide dampening XX% XX% Nations the end year XX energy rated median, managed manager the our equity a XXXX international continued strategies, above Best and investment Latin XXXX. which solutions. a Management Year Principal or Principal Award our equity above were highlights median fund in Asian trusts separate Energy was of XX% reflect XXXX XX the respectively and year, for efficient awards, property of actively in for X above delivered on point gains House as we date XX% and as CIMB superior Real to percentage and quarter, commitment Best of and the the reflects having of received Investors for the high-performing investing to Excellence and buildings.

conviction strategies, important reassuring us for investment in recovers long-term short maintain to It's Given our downturns. after process. it's on when performance focus our

Moving sourced prior of fee, flow, sequential flow, in and and positive the to joint XXnd delivered that positive This quarters. our and record consecutive positive net generated RIS flow, outflows. total the net record. billion reported flow year sales, to relative venture year in and and billion its growth we included to the cash outflows $X.X cash quarter quarter flow. net $X.X cash first net driven in net a in in China the $XXX RIS in its company cash compared recurring $X.X PGI sales strong best fifth billion turned net cash consecutive net increased quarter by quarter Principal XXX% on or million from RIS delivered second quarters spread retention, of was nearly and deposit the million International after of flow quarter positive is five positive ago of billion our quarter. not $XXX consecutive cash $X.X

two in mutual best our business the U.S. net retail fund was quarter flow quarter years. than cash more for First

PGI bond have As investment in currency on strategy in hedging due $X at-risk approximately international to we we've client prior billion with high cost. grade discussed a single calls, the

the expect quarter. second course We the entire withdraw client amount the to over of the

strategies client easily to hedging where We manage in relationship. reflecting client other The mandates absorbed. be to additional strength award this for continue other can the of costs more continues ongoing the assets us

volatility As and demand we're all capital in aware, for options continues and of management including pressure PGI lower-cost industry investment increased the asset to experience markets.

to see pleased We’re our our address headway with pressures. distribution emerge We're benefits from restructuring multiple teams. fronts to on these starting industry

add the key across more positioning for in international dozen institutional by collaboration We U.S. Asia. continue inform the retail majority markets. key Latin success a our in quarter and encouraged International America the we're of resources with strategies I'm Principal intelligence building help new our particularly continued vast markets. in to between Other to sales than in our first increasing included these and PGI the process and launch us and business progress investment platforms

offers Guaranteed Principal through of quarter the Customers record portable. if cycles. investment can seeks also keeper. market during our their new to maintain retirement investment a lineup option performance and preserve option first income differing and compelling rate solutions even We launched new expanding to It's a capital also for plans. support This the the moves fixed crediting plan

Principal ETF a goals. a unique As development, notable guided factor partnered We rotation Wright the factor portfolio. investing for we model approach Dorsey NDW achieve customers time to launch created to to NASDAQ their the first with help

distribution our inflation. in We model portfolios. we also against earned different success added generate XX see diversify, continue to XX than help continued in different This income, alternative platforms, with broadly, specialty, our offerings capabilities quarter more and the reflects options wealth, we getting third-party total interest investment More XX as placements recommended on investment clients our platforms. risks, first downside list, solution-oriented strong and address build to protect and nearly

execution will Business. I and some Institutional the Now, with starting highlights share acquisition Retirement Trust our planned key Wells Fargo of

trust this including administration non-retirement and Benefit, institutional than more institutional and products retirement of business XXXX, non-qualified year-end across of custody, benefits, several had billion As under $XXX executive assets Defined and footprint participants provider. will top Defined to assets retirement our $XXX plan of making retirement a million over a doubles This advisory. combined us U.S. and asset retirement X.X increasing our our billion serve three business, Contribution,

grow to could to us more it level participants Given organically. the have current this environment, a decade competitive than taken

Beyond revenue the retirement adds and businesses, adding diversifying to addition of custody non-retirement source. trust offering a scale our the

reform retirement world. position will and million forward for further discussions one new fully with to services, the is strategic XXXX. leadership largest our new to opportunities Importantly, financial expected customers income the markets. acquisition in in the employees acquisition U.S. pension generate in our us advisors. revenue to and and new integrated serving enhance rate Principal is savings and solidify our working run capitalize once The look on clearly around acquisition This We of retirement enabling of $XXX

we As launched of investments, accelerated quarter. simple part digital invest during our the

retirement advisor retirement with Our wealth, savings the income. product for introduces solution and first robo robust services

rates guidance potential first retirement launch focusing for have Fargo digital the don't or deferral our flash to participants higher only opportunity. participants designed With in the tool are we the voice offer to people the continue And on provider. X% This where for many We block first of or four more our business protection it initially an foray participants education. November who take to in to make for at themselves customers last we at activated savings U.S. improving new use education It's the Early the the twice our XX% first provided of retirement participants Wells prefer outcomes. weekly we've and increase our and to our provider or for our We are advisor through became a Average easier February the businesses, rate we retiring financial jobs long-term, show years. wellness magnifies with. plan retirement recently who XX,XXX briefing do plan participants. launched Amazon quarter. onboarding XX% exceeded changing that of retirement is experience we're While Alexa. up business are a existing into Principal retirement is the the in retirement us addition readiness results invest plan with business one of initiatives institutional than nearly that do of over advice automatic

policies providers Our acquisitions insurance also first bringing and buybacks our deployment additional enhancing strategic to business quarter. approach investors specialty detail, through more want in digital Deanna investment than debuted in our total $X.X recognition XX-month to In share answers reducing the to also giving ongoing growth, general for cover quarter, experience now stock I capital we $XXX is both addition more investments and to strategies, edelivery million for dividends return continue chatbot our I'll capital trailing in to this center while We've common to the organic returned accelerated billion. shareholders. we in to some access to the the convenient volume. emphasize but the will of benefits balanced term our call advisor. customer call and life more share

best employers for Forward's one of name diversity. Principal America's

score rights human the Equality For earned a year us making a Corporate of HRC's fourth best equality. perfect Index to one places on LGBT work consecutive Principal campaign's for

one Principal long-term. In Executives of speaks as for of most Principal This are executive to [indiscernible] And companies. time we're for named companies Association the first as quarter ninth the XXth start time, National world's ethical we about to a for the one women. the Female the and going the Principal. of why successful top again, company year a good volumes be who closing, was For

us expect of customers helping in progress security. build XXXX to and translate financial steady each into achieve value that make shareholders and long-term and to our stakeholders. continue clients for for additional We I Deanna? throughout momentum to

Deanna Strable

participating call. and contributors I'll to and Today you Good I'll quarter provide results update on financial for morning deployment. Dan. our on key thank Thanks capital discuss our first an

to The share X% quarter. Principal good Non-GAAP a was X% in strong of $X.XX attributable EPS million increased increase were to the XXXX first quarter XXXX. with income very the an from start of prior quarter diluted earnings million, first compared operating net quarter. per $XXX year to a first $XXX or

reported non-GAAP operating the XX% other ROE rate earnings adjustment a guided translation effective basis. XXXX range than was lower Our foreign first our of currency the to at end for was tax of excluding XX.X% on XX%. quarter XX.X% AOCI

encaje expected non-GAAP and quarter in strong first non-GAAP RIS point XXXX, significant variances markets, both operating $XX favorable than benefit result company of variances with included of total very $XX conditions, the to million the of $XX earnings due economic fee from quarter. quarter from in America XX% of the million significant International operating higher of equity lower The significant $XXX performance inflation positive ago DAC reported Latin to Principal amortization increased net million X% to a a in we in Principal As in from excluding earnings. had and $X point during also impact pre-tax three year million benefit increase variances million periods, the decreased but fourth International macro

year during markets quarter. the increase from increased quarter a the Despite fourth strong only X% the equity economics the XX% in this, Index macro quarter. at and XXX average the S&P to compared ago Daily decreased Looking started slightly with year

earnings the much of not benefit As slight and there in did was increase in only quarter. daily performance revenue a a receive the positive the from average, market

results year benefits for Mortality our for and experienced but and relative currency than impacts Principal a earnings created with quarter less favorable were to were RIS a both quarter, benefit XXXX. and specialty fourth PGI in pre-tax operating $XX expectations, morbidity exchange prior compared XXXX. of to benefits. million quarter spread line Seasonality slight but rates Foreign specialty headwind first International's in first our the quarter

sales quarter. in the expenses vision first dental specialty expenses quarter. quarter. in PGI operating compensation claims and said, expected, had typical the higher than As as lower costs benefits expected, Also first and That were PGI's a total higher higher related experienced first

extremely quarter first reminder, a As an unsustainable and individual XXXX ratio. disability benefited loss from low

actuarial corporate the XXXX XXXX RIS with for a $X.X periods. and the other all be basis or earnings to and fundamentals deposits matches. increased more in for XX% and be the sales a margins the and X% investments than plans new business specialty in XX% business businesses nearly in participants. of record trailing year X% from to operating with earnings encaje for XX% contribution fees exclude the year approximately participant half pre-tax to or continue our contribution line review strong exception Expenses were excluding both billion, ranges. first the over X% to employer our net defined Defined benefits deferrals in the than expectations an quarter. a results the were unit annual quarter, increase concentrated first increased recurring of XX% year in with count count with the The businesses. ongoing plan underlying grew the comments better ago with significant XXX,XXX accelerated expect business increase Pre-tax compared of We emerge with in were up all continue and half above and digital annual On second seasonality on quarter. XX-month the XX% guided within the even variances in managed following investments units performance, well to our

During sales U.S. transfer started and strong year the solutions strong sales spread with billion first The Fixed $XXX million record had the quarter, benefits. RIS year quarter had of prior insurance remained sales than including annuity risk sales pension XXXX. pension risk also quarter. $X.X and sales sales for specialty more transfer million. doubled $XXX for record the of pipeline we were

and to customers market as were expected pre-tax of primarily our from average This higher due resulting normal earnings lower group revenue fee prior due prior muted million to from PGI's performance, XX in AUM due We losses lines continue and benefits XX% from a expenses. rate million. grow the decline year disposed coverage run net cash operating operating over flow corporate negative the with acquired increase we pre-tax by At$XX the and block volatility and trailing quarterly than operations period. XX% months. year period to was relationships deepen and to $XXX our to declined

losses we For at This million of expense business of corporate our income the full is guided higher to decline as the to $XXX portion Retirement to anticipate XXXX to debt year, high-end range investment end the issuance Institutional a $XXX due acquisition. cost we to interest well market of due planned Trust of from primarily additional new from the security Fargo the XXXX. the of expenses Wells as of closed capital acquisition be above our do acquisition, impact we'll million. and transaction the and have available the After finance using lower benefit

Slide on and including $XXX of $XXX common during in stock XX, capital million in $XXX we dividends the share As shown quarter million deployed repurchases. million

to and the our above financial we We quarter we best and our and We reflect to evaluating XXXX Retirement the organization. the third business. anticipate Trust reporting combined are Fargo supplement structure close Wells that acquisition of expect Institutional billion billion planned in after in the of billion acquisition taking into deployment capital $X.X the to for XXXX range to $X deploy well the committed $X.X consideration in April

in resume common Last a repurchases we quarter than acquisition shared have announced $X.XX we announcement of dividend the payable a trailing stock first income a ratio. a quarter suspended basis, yield payout night, approximately a we're on we no our and later the at to XX% targeted share call, expect X% XX-month On from As year X% second net have dividend ago. XXXX. increase and

quarter, our range XX target by decision [ph] percentage long-term During capital made lower to midpoint at the with [NIIC] the our risk now XXX%. based we the points of

our associated XX at as the reduced result ratio percentage reform. formula a to was change As NIIC tax points reminder, of by year-end a with U.S. XXXX, a RBC

in of $X.X and in us we capital midpoint billion of liquidity the positions million created capital and excess the allows flexibility RBC of transaction our The $XXX first cash our in Our $XXX very new capital At available of Wells XXX%. strong. available execute compromising holding financial our million Fargo subsidiaries end had of company, without of remained quarter, we've leverage the targets. and liquidity to the

prioritize no and open through range. our prepared concludes remain have acquisitions XX% targeted until is in our organic to the questions. investments that strategic XXXX XX% or for We ratio businesses, position continue our This call Operator, meaningful leverage remarks. to our success. long-term for within debt we Whether maturities Principal expected to growth investing please

Operator

first with Lee ahead. come from The & Instructions] Please question Dowling Humphrey Partners. will go [Operator

Humphrey Lee

the for quarters. year? compared for the Can couple Good A to questions. my deposits question notable the improvement fees, strong. RIS for balance flows thing the and very recurring quarter, taking down the flows one net were the regarding. came Renee of the morning you pictures withdrawals of the good about for transfer of think and meaningfully what is But thank you driver that's in were obviously talk and kind you past about

Dan Houston

Humphrey for for quarter It question. to your thanks position really in question. is Renee respond to full and was ideal an service, a the Yes. great RIS

Renee Schaaf

Yes, you're Humphrey. correct. Thank you,

is, as we me, me, that quarter quarter excuse though further, for to in you XXXX, One you were And contract particular are quarter have favorable. know, the large that ago little you or be very our so quarter taken, quarter thing our needs excuse withdrawal me. year a look a sponsor -- withdrawals If plan third dissect favorable. quarter. plan first that Pardon would XXXX, did a make withdrawals over see one comparison, to you first they if relatively in do bit to were at first

well, but flow net good overall. cash And it so was taken be very would have that a consideration to into as quarter

Humphrey Lee

more you anything guess, retention or withdrawal I to terms in activities? doing are that of foresee helps different client like anything favorable the that

Renee Schaaf

different Humphrey, our you invest participant I if in consistent that ways. make digital new we to sponsor say, made would to the look into in tools We've and overall model, that were the both and the continue investments see at experience customer creating better. you would this several plan experience

example, certainly thing into in for experience capabilities perspective, lead chat plan sponsor investing that And to side. participant using plan and the is their sponsor tools better better new a allow to participants features, a from the would serve same online true the in So, better retention. the investing

say would underlying So that business I results retention model. here that strong the see favorable a you reflect very

Dan Houston

increase only to was still Also, of thing and things might is, great find the that suite. also sales it's new positive it, allows of market. new value this to are at her XX% that and current a And The in sales to in months six called feedback that if advisors in benefit, prospective fluid are we're impressive then, period. Yes. defined I advisors, defined total contribution. more the noteworthy, that doing clients I XX% presentations I their last retirement within team the from sales Renee Picture and list very in that think with number They combining out the Humphrey add deferred our working tool be comp, look of the reps rolled

the got every alliance across leveraging think position good our metrics around I So momentum. our we've technology one with of important and partners

for thanks question So the Humphrey.

Humphrey Lee

the appreciate I color.

Just PGI. up on a follow

about talked billion outflows. So the $X you've

do from impact that same the the new impact the to understand on $X the I clients, outflow, have can that getting side, and offset saw wondering, outflow? earnings the size very just was flip the mandate from you that they billion you expect fees, then that you're and but low You earnings I from

Dan Houston

Tim, you’ve got quick a response.

Tim Dunbar

the for Thanks Humphrey. question, Sure.

client. this before, good with is a talked we've really as think good a I relationship

fit well that the quantify costs with say see would of don't losing strategies much how in seeing that mandate terms to today. the a continue I they're the fees to higher-value added goes fair to revenue. interest way billion, exactly new we're that $X replacing related We We but hedging in the

John Egan

for question. the Thanks

Humphrey Lee

you. Thank

Operator

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

Erik Bass

you. Thank Hi.

this the For looks income adjusted return on fee, at by net guidance RIS even still high-end like ex the still quarter, the though DAC of are looking dampened they market. bit was revenue at favorable range the year fee for a the

just think the So wondering anything results or this are at you range quarter margins boosted that do there’s if sustainable else the of higher end forward? going

Dan Houston

Renee?

Renee Schaaf

for Yes. we're we the look Erik. quarter, at When question revenue net anything for the first would unusual on results seeing XX% Thank you the our return there. that not boost

the when for we of remains so, our very look we And guidance of the to XX% remainder forward XX% year, appropriate. think

Erik Bass

this for strong another side, curious a just suggest both driving and that it think we're XQ, the sales looks a of And for activity? RIS Got like forward PRT pull for really shifting then Thanks. to is is on does I’m activity you it or it. you the strong was and what that industry spread question pace across in year

Dan Houston

they've great it, have door seen say interesting I'll go and fallen X.X, to sort answer X, back. it's the I Renee interest think and on rates it's up knocking of we've these that me I at tested X.XX, a will been as question. and but

balance strong want already from only unload but think These sort liability year. thoughts of things They're aligned are with sort it -- I pipeline Renee? an of their normally this they've sheet, in and things for a just in they They're to incredibly balance it's wakes quarter was good the the their of again, frankly not it up. motion. process.

Renee Schaaf

would, in about of sales a to the single sales see benefit sweet and We smaller only was bit think thing when derisks there. of transfer sale. see spot. corporate fall at million or large sheets. risk has not other by This $X give a was comfortably quarter. PRT look very We trillion transfers I There's small robust that $XXX pipeline many that is and a out little we are sales the about I balance that just saw do of pension interesting that been Erik, pension within Yes. And the sized very continue industry. really to smaller did portion very our you color plans for that dominated corporate about of from defined you this first a

see I moving think So we'll forward. continue do to pipelines strong

continue to as very be these that look profile within sure comfort disciplined very are and we to at the also that our opportunities will careful and returns make We range. risk the well

Erik Bass

the Sure. Thanks for questions.

John Egan

Thank you.

Operator

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

Alex Scott

Good morning.

I had quarter-over-quarter, fee for looking just it seems on on like mean while fees. the PGI I was mean dropped question the more now. First just rate sequentially at than a I it doing a calculation it has

fee something days do I'm something commentary any there it's with fear So just maybe with for drove the or I'd pressure in interested to have repricing be or to a if -- more there that? like there kind of just any was the of get activity just maybe feel that it trying just if that. is calculation? Does

Dan Houston

comes you into take want that mix And well certainly to that. go and as Tim

Tim Dunbar

Sure.

suggest the first for and did transaction to here you as that of is estate. predominantly fees. Those would I are majority say the on commercial rate real fee the large drop quarter related So

would So if that pace. mortgage you that's come think say slower activity about first loan at dramatically quarter commercial up that after off picked sort we're seeing got and I started volatile back. fourth quarter a of

that the So, throughout a we issue don't year. see long-term being

bit level And performance has our that's -- industry little pressure you been as of in smaller we component than been would and had to seen there fee and less that's a what but a so also much suggest of fees. the in update seen little have been fee We then, you've that bit a but it. we've continued

Alex Scott

helpful. bit then, still is, a a the And for year way the add dimension, up you I question corporate compensation it. do higher, much so just you range to in my how the and XXX follow XXX I to expect think other in can full good came to guess is about That's continue, segment, mean

Dan Houston

course of one Deanna is and to. position a respond question to good good a It's Yes. in

Deanna Strable

Alex. Yes. Thanks

I As now guidance. do the on we call, above be earlier to expect on the mentioned

So benefit that throughout play That the the in quarter GAAP larger towards one did of gets really of seen decline was due will two the And not we the higher pension was pension that really have that plan out that the drivers call market seen in have the will a at more was really year. one the the increased first known [indiscernible] outlook and quarter the that, to expenses. The continue that first that XX/XX. of year. security for time and it our go expense one we on was as determined end

other and impacts actually corporate due The to the the will of Wells acquisition. driver be

will We'll we have we as due investment have debt corporate. income that capital fund we'll will our issuance also into So lost costs the additional excess some to some that have come and financing acquisition. also due transaction to costs one-time lower

And so many, very of first many loss original us have impact volatile a years, to XXX. the of this seen that transaction. you the is targeted corporate be quarter that proxy, the will say that obviously Wells in absent be range above will good But cause quarter-to-quarter. to XXX would I for as

Dan Houston

questions Alex. Appreciate the

Alex Scott

Thank you.

Operator

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

Jimmy Bhullar

morning. Good Hi.

this decline. had quarter a just I They quarterly think I management five on obviously flow. positive to turn asset question straight First, after

just undertaking So business color year the does you've with the you of this? some been changes or the initiatives if past on drove this do the any have what or could anything over give in management to

Dan Houston

hood I job in and direction distribution the understanding Dunbar excited think could and Jimmy be an We're outstanding and and gained. have Yes. about where Tim just under some of efficiencies Halter, Pat the PGI looking extraordinarily done in change

some been about With that so him the in motivated has group you also realignment I'll and that the And blanks. excited the tell is and leadership. I'd ask fill to highly there

Tim Dunbar

lot clients. structural And a with a we've the trying align have thanks lot changes Jimmy for to the question. our management of some of made, some changes really the we and about group talked the

diversified creating the are relationship of that bear model so And in and really focus has solutions all the to that long-term boutique brings. been bringing

our been the on been excited And products. and really probably that this positive of of of about that we've achieve. And really starting most see we've so we quarter of for of platforms are one flows range positive products that is I'm things, something to trying some seen to the some signs placements has

like equity So not products high positive yield, but of assets a flows, diversified see real yield only even lot of our oriented our we some see did preferreds, products.

So REITs, a and equity so large a U.S. income of really capabilities. broad flows, cap sets international, decent has really which blue across equity chip cap some product range small

second half cash the future. leaving, some year, we're we feel so second then headwinds And flows. that for the that's with a we'll about about optimistic of the Obviously quarter net good still client but have

Jimmy Bhullar

Do retirement plan. Okay. well then, And in see talk on of an there more part there employers act new the secure combine they regulation, as there's that sort that better as to of about that a potential or is employers. offer smaller lot affects bargaining a threat you smaller of how and pension a opportunity leverage can the as as

Tim Dunbar

time it execute ask world. pursue good additional that policy. executing point of just I'll want It's to not increases coverage American how on a Renee exactly only But on understand how there's if the workers, time. that the of But, for here We've We lot strategy. vantage one Jimmy, that but to add around changes increases that. important we're color we plans. this idea on the regulation strategy. is, our U.S. adequacy a of and to a And some we it Renee? lot long on the business important topic, in the multiple for employer pension MEPs, it's occurring in spent been an

Renee Schaaf

Thank you, Jimmy.

smaller As could excited the to just open And will one the evolve MEPs we extend of the that with potential of the very pension think coverage what States. aspects United that about in is there's reform Dan we're serve be said Americans employers. But better retirement that this a the positioning is another well very aspect that moving think and reform of annuity is believe will part and we forward. plans of to important I

plan harbor know sponsors defined clear it's plan safe add the not [indiscernible] a for contribution design option to plan. annuity you today, As not there's

interest kind forward. income available have So this of the Americans to it's in them of believe we really best that guarantee to moving

about U.S. through worker. to so, excited provide ability open MEPs, solution also the higher retire And but only the that not to the we're about

John Egan

questions. Great Jimmy. Thanks

Jimmy Bhullar

you. Thank

Operator

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

Dan Houston

John, you there?

John Barnidge

on group for please? a compared you're Specialty what in incurred for loss muted. group year a phone bit increase you ago. seeing as My dental little to benefits rates is Sorry. rates lapse life talk Can and about there

Dan Houston

please? Yes, absolutely. Amy

Amy Friedrich

the for Thanks question, John.

I think what probably we're a really here is mostly getting at comparison issue.

quarter dental back say I we lot I line. and think we of that. first comments normal quarter from didn't dental as year. this see first much vision see vision but first quite a of seasonality her year would Deanna before, of to mentioned for quarter And last for it in our we're typically seasonality

We in first to point that lot disability that low. pretty first of For would group moving year feel at of quarter things had last a last year something is good like of back the rate. happening noisier little made indicative a by loss we're product terms we product. quarter say But a kind was this of unusually now pieces ratios, run I

things on the be the happen XX a to. always seasonality, good to to these back given tends too So guideline given months trailing reminder a businesses, ratios go quarter-by-quarter that can loss in

Dan Houston

And the well ranges. within

Amy Friedrich

Yes. And a as question lapse John? then have Did well you lapses.

John Barnidge

Yes. I Thanks. did.

Amy Friedrich

Okay.

Let lapse the at then me question Q. get

the some with quarter-to-quarter, the will things that into can have of businesses One cases lapses. larger from we impact have happen our that

we that performance the for that when lapses. and of I We need. at I as was look when are our we at some we case what we mind at so increases profitability business the And business of look and asked Group Group this Life rate that Life, by in block. Keep for look year Life rate first at increasing against Lock, impacted Group quarter larger look

that lapses any with happened comfortable I'm first So quarter.

John Barnidge

follow the you continued of sticking my and strong seeing progress it's much. are landscape maybe group you're then a the very on And Great. come competitive there a with where from? lot demand up bit, sales pricing Thank the seeing really seen. you What

Dan Houston

Amy?

Amy Friedrich

Right.

but in. So we're the in that markets the is that irrational not landscape competitive

mostly that the marketplace. we're in markets mind we're in keep in, So, in that sized small medium to

to case don't we larger cases. the don't some in hunt that tend So, the those to of we be on tend in and for jumbo jumbo be

do we're really, a really attractive to the want business market. And so, come really the get able we rate. on I in think to that pricing growth the type at fundamentals especially of back small well the of we typically look the I when I price would

In fact in I'd there argue out in the small total market we're best value. offerings of terms probably one of the total

John Egan

questions John. Appreciate the

Operator

The with question from will next Ryan KBW. come Krueger

Ryan Krueger

acquisition changed on the they you typically on past, larger record so seemed In case has Hi. retirement Wells I cautious and a your business, hoping a give strategic. on question had how now? Thanks. keeping Good some why on morning. could more more that the was view perspective

Dan Houston

that on block, to modest looked because with amount it nicely Fargo than large business question. retirement that Ryan the trust of you welding thanks at their actually excited cases tell out Well, can't you've focused are jumbo we institutional reasons. of have as Principal small you different Wells lot a for how for inserts and about has. Wells pointed medium And Fargo then, have plans. if really a I we We to more actually

in So our lineup. sort a of there was a little total bit gap of

what So that feels. we're about excited

additional have they a the structure ESAP of tell have this us was the existing they fits structure. Additionally an that non-qualified gives just in in flexibilities. you in It also prepared mentioned terms hand our place. would business that trust that some glove fact like place, comments, fact I as in program the in

for relationship it top maybe given worked percentage group is in of the lot the consultants, have can time with I also that, Renee. you management just a and our a add et a for that strategy teams comments. mind frankly the participants bit a But additive weren't bringing So other I to first advisors, whole over and relationship more they and realize cetera. of We for size, Principal we'd terms love And the feel seamless of advisors, quite that large we with of make historically transition and value. additional really a create for managers took of have than that clients, consultants the some

Renee Schaaf

many Yes, Thank from with I This acquisition is comments. really perspectives. would Dan's Yes. you. different agree so ideal

to wide retirement range we've of reinforces that capabilities when of from brought a the off, needs. First in characteristics perspective, the keeping makeup, in and terms size, in clients of a you our at traditionally terms serve it industry. marketplace, the commitment to terms of various the And record look we

large Team our we the invite industry to level amongst the important. to platforms attractive capabilities the having keeping in competitive me you I'll and to last that our all the to members at platform so to recordkeeping and ability in that talented and XXX struck about competitive, are add the everything have a what had the the had that again was employee in cost, past ability The the deliver customer-centric that very the invest And to remain scale enough. abilities continue margins. Trust can't us Adding much group. in experienced mention and We very very channel the adding the market favorable we and more I scale that allow unit making to us. is we business access week energy can't makes enthusiasm the And advance Fargo the to this to have thing we're both to ability the also retirement institutional opportunity the ability consulting Wells tell is years do is, And to center we the of this to pool plan of to planned stress the come. And into that and our lower customer us of line. sure in that serve to commonality and the will the and in that sponsor terms participant I

about excited this and the we're So acquisition. transition very

Ryan Krueger

very Great. Thank much. you

John Egan

Ryan. you, it. Thank Appreciate

Operator

Andrew will question next Credit Please Suisse. Kligerman The ahead. with from come go

Andrew Kligerman

bit. Hey, good RIS for morning. Maybe on fee just a staying

to maybe calculate. year. see and XX it that you two fee of in going kind the I revenues we one points versus know average and going where little was or two, you give and next just will of then has to maybe daily could XX year kind on the this it basis in in do 'XX, that could a little Just or something the of three that calculated you guidance color We levels XX the assets about divided years. And by fees quarter. a and last a do balances average we next XX But, points other as of terms it basis was in give prior get or over us see with you quarter the where

Dan Houston

Happy to Renee? cover that,

Renee Schaaf

Sure.

at we maybe comments look to some off, we expect ago. moving about a in First let's look quarter year forward. quarter then and what But make one where first at when happened compare first a you I'll what that take quarter and might

down is daily average The to mind S&P the that was in X.X%. about first keep thing

so performance can year-over-year that very market fee a muted on had for had of an impact expect levels course to the that -- us And you that deliver.

was a a gap X% rather. a So, gap year-over-year, of about there that portion the of quarter-over-quarter

of So a result that market most again very performance. a of as muted

we operating same pre-tax that and to very as the fees a fees impact our a to also commission The the your trend, a it so plan visible line, sponsor. view to our It the isolates to advisor, about to earnings it plan absolutely that's impact draw transfer paid of and that result outlook revenue, the other when mentioned very reduces reduces removes I on but that this the necessary does commissions in it And about the from conversation fees advisors. thing margin beginning favorably. remains the same. as quick to X% to we attention this would it, we X% is compensation the to remains that net is, the anticipate the what the it just And seeing and think makes decline sponsor we call, with in a commentary that

kind So, that continue. we activity of to would anticipate

between from X% and within investment the on nature. open heard revenues that pressures forward. management you've then that gap historically reasonable envision guideline from decision, of in that account looking the to net passive to talk decision that's decoupling a typical reduction the investing and architecture of results We the due the investment the growth recordkeeping industry things that's moving management us forward, fees X% and that growth And revenues. values So, about result

as due So, to commissions maybe a to X% X% we X% arrangement. would due say, you compensation a to as revenue can to expect to fee-based to moving X% pressures simple industry see shift a gap about well

Dan Houston

for it why I have reason. we also this very these we to on businesses speaks scale Andrew, feel to think have

Andrew Kligerman

on And sneak very and just And XX rate XX about one liner the pension Deanna expect it. risk next just could level helpful. these forward? next Got at smaller actually staying question shifting over going accounts. to XX of about guidance. Can a we in then low I then, Maybe And the talked before to end were the competition question. the tax maybe just just But transfer. the talk

the when you that competitors is aggressive? than but the You pricing mentioned it Is many after you typically how better see PRTs. jumbo, of do smaller go one these

Dan Houston

Yes.

wouldn't think I a the basis, the the we to would want both those, tax end, but when range. well tax of point on in speculate the within be to say is rate me take range. on but look the full well going still we time year at rate within that at lower I Let this

they for few invested three there on it But to marketplace. ago, return nice line And the or today two for capital capital adequately question. in Appreciate was but more than the in very still what there's how key getting billion really $X.X transfer billion. I pension and business does into of the small. half risk kind below than a about groups and Think two greater And different On large break there a a we a years think these of We consider dozen say committed get are. about compensated a would are competitors be We're know very each more this case to business. a use know of is it. where the competitors we of who half they than again business. a we we're competitive lines they're There at. to getting

Andrew Kligerman

Thank you.

Operator

The go next question Evercore. Please will with come Gallagher ahead. from Thomas

Thomas Gallagher

Good morning.

Another follow on up RIS fee.

thousand either between majority lives your growth. in the like a is to disclosure actually little can about net what comment these have gap mid smaller. the Is plans look that from it outflows and revenue If Are is lives I small. just look playing overall. field it me you and to in a like for guess coming And you growth at at versus that versus So sizes, that the X% related about talk terms asset or I to mean in flows to fair be I bit sure looks business if growth of asset But, either a you I looks plan growth. if are to made you is, revenue all a you seeing that X% grow in difference it the going vast of larger plans. thousand that's economic characterization, large or

Tim Dunbar

see flow actually I'll of in the to specifically cash good speak Tom. Renee We your market Yes. each but have question net segments,

Dan Houston

both that see Yes. and mix remains the question between some of plan, of actually we that the clients retention look segments larger Thank these for the of sales good in seeing we'll the of quarter, one you tend will smaller in or business volatility very at both in migrate business of segments. see some these And we're positive. plan When have growth Tom. the that the we naturally, In any certainly mix we to just difference we sell.

With a would see of quarter-to-quarter. mix around in it But plan. sales, that to is that any if that the $X.X respect vary example that there's you'll by will first nice of the collect. vary you midsize look question all. plan billion dominated revenues in not the large for quarter from your single So, we really And record variation at at

asset towards to the imagine is up up they to share a be share you planned And assets plans, larger favorable might pick going not with as with open market. smaller you than a of a ability more we well. pick steer to capture plans tend record-keeping smaller certainly we management our it's oftentimes in or only tend the less size see that what win in but As larger market. But, to the and architecture

and comfortable showed and retain So, that. mix in very our we our growth very our and and certainly with both feel ability to business to comfortable with and small our the approach plan large deliver ability in

Dan Houston

retention part asset the size relative on the the indiscriminate fairly on of Tom, noting, worth thing it's other employer. The

you on are can a job or at a part individuals comment. quantify small cash a flows able of medium who retiree. what who up Thank $X.X just versus follow have shot that, if flows you're thousand changer it's quantify have to that would larger for point. of flows, can much your if something of terms lives out large of in size think plan of below how that really a and appreciate Whether and billion it's and to good in I break you been are Got that's your know and we're advice But, a looking at provide you. We the, benefits. this a the you going you. not

Thomas Gallagher

Thanks.

Operator

question Suneet Kamath ahead. Citi. with final The is go Please

Suneet Kamath

just the to deal. on circle I Thanks. want back well

the some to color amount couple a incremental in RIS there So are going on be to you're block. Any years of fair as or past spent to plans. on of incur money those Certainly you going are on would today the didn't you've that you fee over digital helpful? as get -- getting you have know to anything expenses to that get be have digital Wells

Dan Houston

to promise might and class fronts. With on to you we the starting add but to specificity. take in best and understand the as onboard augment really during might commitment what that of capabilities Renee, due additional all want question. Yes. that to on Great, some our expect, color it and great some of you lift diligence, you And real is as get is fully some speak

Renee Schaaf

at we we've clearly as think everything to our we principle overarching do keep make integrate customer forward of any to minimize center at businesses, we an sure and When terms the disruption first path about the And to Sure. thinking in this arrived the is business usual in service provide the we how principles. to service four we that clients. can those that really and excellent will about

offering are The to that to talent. next as paying both the thing and from to the we put mentioned, to The attention together and compelling are a we second very have marketplace. is and this about ideal take concerned extremely operations best opportunity of into thing, an team we Dan lot the

to do team want the Fargo make and an just we view view up to make as trust a very to we And create retirement This We this can don't We their the sure of experienced unsurpassed well. marketplace. from is opportunity the we everything are as Wells last business. this onboarding picking then, that as business. of to all, move we an institutional smooth And value to integration needle. opportunity our

And very as so ahead can the will carefully approach a you unfold. thoughtfully, this to lot expect hear months and on very this more

Suneet Kamath

sense. my up like if to Got growing fastest on on See the mix And looks your follow slightly fee. been over is make piece. it's now at that disclosures a then non-proprietary I is third of and the again your percentage RIS of Based it the assets look are disclosures.

that is performance, passive I that and does to it active fee-related where that. So guess is is

Thanks. does you that of today about think couple goes that I the years. $XX.X think where do next it's over

Tim Dunbar

Yes.

sources the of quickly in percentage again has small advisors growth multiple skewing earlier. for, Renee are for and larger they percentage sponsor of pressure provide in plan of proprietary Principal medium as Asset over downward few. So, Management. you're the and customer be maybe described going objective the the there end part A of it's revenue put what and on difference The it one, the downward large customers on looking the if for our But, centric, they've over on totality. to drifted last are that slightly to towards you're size

performances in that hiccup continue to good still investment thing We period. and centered I QX our still platform as a we we would position continue and the putting and within puts those the But, bit can't been well. rather it's a options say will investment And in company DCIO, on I X our PGI. little customer The shown The of formidable forget a strength a that's we're present be the competitors and are assets of for on And competitive, manage are the us X, look at so of capture full we an how a of on service, as where you assets. and it this. X performance the again results is our to but growth investment offering. lot but attract engine through to fees not that lot last relative

the So thank question. for you

Operator

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

Dan Houston

do what executing of that digitizing And you. about as starting year. we've fruit that about and that's we're parallel pass some Thank we're to talked does Good. this. good to and on the cost, excited is start growth multiple deliver. from One we speak bear is of but the our have business perspective our have again, We and going around it to

also on as the retirement onboarding it's very about and trust well as enthusiastic big And I part position in Wells with and both franchise the favorable that. emphasized executing We the their a customers, remain Trust customers. putting Fargo successfully of advisors clients Retirement us their a and their

efficient would resources in with here our our as we continue expect good the customers. for a needs if third The again, to all is growth initiative, can then, excellence customer as as undertaking quarter our clear outstanding there value for big sign clients. a service. proposition we there's aligning a of as us is you first be around for operational at lastly, that And And initiatives the you principal delivering the looked

And so road. the the time forward thank to on and you. seeing that Thank with look you you today taking for

Operator

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

now may disconnect. You

Principal Financial (PFG) 26 Apr 192019 Q1 Earnings call transcript