PFG - Earnings call transcript Q2 2019 | Principal Financial Group, Inc.

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Operator

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

John Egan

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

to are related website on materials principal.com/investor. at always, today's available call our As

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

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

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

Dan Houston

months. $XXX deployment. $XXX ago six continued to capital John a and Thanks, growth. brings year earnings results non-GAAP for I'll accomplishments Deanna through and This details share follow our earnings, This In of position the financial call. that will compared million the everyone X% quarter, on of an some us welcome morning, to and second performance we delivered to highlights increase operating million on quarter. non-GAAP with operating

expense strong we of and on the capital. discipline, our business with be reflect businesses to demonstrate I half the stewards good shareholder balance investments in of fundamentals, As year, first continue

efficiencies. And oriented of customer-focused advance reported to investment, and continue we our an solutions. array $XXX ago, expanded protection to customer execute or year business total a experience, to X% strategies retirement, management distribution billion increased creating or global we record gaining network billion. a strategy better AUM, company solutions Compared $XX our a operational under as digital Importantly, our assets while

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

the currency our X% is ago compared exchange, Excluding foreign of joint midyear. with impact venture in a billion China AUM to at up $XXX year

billion increase of flow negative cash demand the is investor in as $X equities. despite current net This has shifted quarter, towards

we money majority Solutions vast China Income negative flow net funds. the of as AUM of the Global for had $X by positive the second in from the Under withdrawals is discussed, offset previously company cash in total International was and As market Principal more than cash in Retirement billion basis, Investors. our Principal our flow net in quarter

spread. company ISP. second been RIS withdrawal its by positive sixth sales net total in driven quarter growth and previously large RIS our strong deposit net $X transfer in sales, the of billion communicated, positive. consecutive flow continued risk quarter. retention, was reoccurring PGI have And would in delivered Excluding cash pension cash record flow, This

cash savings, flow. improve around reform XX managers and using by of in Net confident the see a most But million has opportunities driven the benefit operate. International in the Principal private importance ago. long-term increasing increase $X we than positive recognition the is our the governments in countries of pension growth, we year over improving to trailing discussions net RIS $XXX flow months with compared of which an Brazil. to net by asset we world, involvement in our of being for pressured of returns. remain period XXrd voluntary Primarily the flows same positive Over XXX% delivered of generated the more quarter. cash consecutive cash flow, billion of Its in

source Moving to billion. flow net negative was cash PGI, $X.X

As continued this billion $X.X strength fund client award during discussed second the additional client and had quarter. relationship. has we The ongoing withdrawal reflecting international to of the last single mandates quarter, a with us

highlights performance. funds, rated Slide five At our fund were the in of a the the our median four for five AUM investment accounts of second Principal recent XX% year performance. quarter end above separate and managed our actively investment funds trusts, continued XX% And level had the improvement Morningstar rating. star collective the or X mutual of for ETFs,

of management asset in with experience product particularly and development. pressure, areas to the pleased sales the industry continues distribution improved on we're to fronts While and multiple retention, our headway new and PGI drive growth

and We in distribution us success key continue our business markets. retail institutional, help sales inform to key intelligence to positioning our increasing and for resources add we're out building process,

which primarily infrastructure, private resources. and goals, invest to access through investment in reflects Principal Global well the We second offers international risk-adjusted as interval launched as demand growing assets, quarter commitment more first for real The progress included Other strategies investments. our client and the with Fund, asset expand Income income to than Of natural enhanced and continue note, a fund, longer-term Principal Investors of diversified real potential addressing new for investment U.S particular of market across its various in private returns principles leading dozen estate, launch the suite oriented cycles. launch the line select platforms. our to

of in educational the and expected their the investment will savings participants XXXX, the plan. Investors our is achieve Trust occur Education Global scholars to expertise selected leverage retirement Principal the goals. Board Funding plan. to management its in to our ability the quarter, manage XXX demonstrates of quarter the This fourth New assets provide we investment to for Mexico, help Edge during Additionally, majority and services

XX Trust in than more our in a This in PGI net strong recommended platforms. portfolios. I'll year. confidence delivering X. continued along in This pipeline, Retirement our than some additional to businesses in party placements, share our Wells us success earned & more mid-year and highlights. total execution offerings strong getting of with with acquisition than flow which different list, the continued XX these or cash strong capabilities, distribution model added second options on alternative more the IRT, XX closed July of and solution-oriented half on we've Starting gives with Fargo reflects and interest investment different now specially, Through platforms Institutional third

the the The XXXX. financial opportunities as to contribution, clearly custody, benefits, reminder, asset and in retirement had across This defined strategic, than executive services. of under several in a end more further again products non-qualified business of enabling of including As largest institutional capitalize one of is trust billion $XXX advisory. acquisition and on administration, us assets defined benefit, non-retirement

in of But new more importantly, retirement doubles serve to industry, our The of businesses. US it such enables strengths our U.S retirement by models, new trust savings as intermediaries. the technology strong improves non-retirement IRT customers, scale, and to reinforces it benefit from in the and both We'll size platforms, and Fargo marketplace us commitment from retirement income from adding complementary team, the and Wells with value create accessing highly capabilities relationships combining retirement business markets, and also clearly to teams the will the ability custody. our their benefit talented

June, leadership the a in forward. we've unified drive announced team to As established business

new by services well and as platforms minimizing We've products, models, to time. our the one, as enhancements forward strong planned Fargo The look and day of identifying help and both ample Wells clients designed as drive adviser received customers, and as agreement working our collaboratively, has thoughtfully also employees, by IRT customers a and to welcome within business same well the consultants. serving services consultant to transition acquisition with services the been retention providing new all by We and disruption on over advisors, employees positively keeping by the notice established communities. and to clients us best

throughout provide integration. to this We'll multi-year continue progress updates

small U.S to highlights outcomes XXXk deliver price, positive launched we during in retirement business, drive Retirement their in best resources employees. quarter our at and medium-sized impact and and a additional businesses As class for competitive the

launched of also our its with enrolling We partnership in service model kind educational self educate, clients. co-designed our first

account retirement do for their to to continued holistic a invest And manage while initiatives it participants Equity bank business goals. give Optum easier that and of we've make easier performance, Healthy make in integration and with. our protection health savings financial businesses our strong we've we outlook, to their had customers us with In more picture to launched

quoting, us market. in better help During the collaboration Limelight to the and with streamline will processes Health brokers, digital the renewal and business for technology and announced rating, a and quarter, serve to reach we employees, medium-sized This benefits. employers employers, employee group more small

focus Lastly, U.S demonstrates on providing developments outside that customer our a better some experience. I'll share key the

just reached reflects in make direct XX,XXX strategy consistent experience, have a recommendation. commitment our a to with customers AFP The a investments. Mexico, aligns products. India, In personalized simplify more the to functionality, for marketplace. a our to access downloads experience broader Cuprum fully mutual make This XX solution our new enabling customers, end-to-end in India, the and consumer and easier. a and digital to set boarding rated and app on but mutual In highly us fund saving a for smaller, days, Chile, In we more launched deliver a process, providing frequent we is App customers fund website Retirement enabled in digital to we and now for gold-based to retirement launched of

with Indonesia, around We're of Southeast in our rebranded second proud we success. and region, Singapore. more security and excited the CIMB, financial the achieved operations alliance the our our management part of joint During world as growing Asia, to people to asset commitment even Thailand, help long-term quarter venture Malaysia, and and in

detail, our to will in more Deanna to approach a emphasize again but deployment. capital want cover I balanced

through billion ongoing $XXX investors quarter. IRT noteworthy we total. and buybacks. growth, and to share in the mid-year, of common acquisition, also Fargo some Wells We've investment share than addition In the third recognition capital $X.X for committed I we've more to billion party million organic through in returned deployed dividends to stock $X.X

Principal franchise, Kong Fund Hong and MPF Lipper, asset In award three-year China with the Manager we American were by XXXX, our by Equity Fund as XXXX. the management global Chile, Kong the was fund. the best Principal Equity recognized best over for In recognized Latin Morningstar equity best Hong

of thank Principal, Forbes services named the in and our Principal for the quick our living and best month, we core to Forbes A Employers foundational of number celebrate large one behavior, within to our employees, overall banking along first with you to ranked recognition that Best financial about our one list and anniversary retirees category, to the also this women, remains for volumes diversity, employers, quarter number speaks this and XXXth as ethical our commitment five their values Additionally, America's success. and customers our culture. for inclusion,

into translate financial to continue XXXX, build and to value for second momentum our period progress, stakeholders. security for closing, us the that momentum and and a success. to half Deanna? clients achieve customers continued of in quarter long-term of In helping I look second for and shareholders was

Deanna Strable

income which morning update and the second diluted call. share, Dan. XX% an capital were on $XX you thank discuss than to lower our income investment. million is participating an prior and to operating was for provide Thanks, XXXX. key method second financial of non-GAAP on Good million deployment. million $XXX year second credit million, an the Net increase million. or of equity for Net from attributable earnings contributors the of our sale quarter Today, $XX results, quarter, including $XXX per impairments from Reported benefited quarter $X.XX Principal quarter $XXX I'll

earnings operating guided range XX% to the second XX% was Our rate our XXXX quarter non-GAAP XX%. within of for effective tax

year. guided the adjustment, ROE We currency to within on continue basis. be range excluding a full reported AOCI, XX.X% foreign for translation other to was the than expect

investment non-GAAP million Second of resulting variances includes significant in income. of higher benefit net This operating $XX four pretax than earnings $XX million. variable expected included quarter a

estate life, were A $X benefits, performance, in $X with million in from million higher fees real RIS-Spread, million expected in International both prepayment America. partially than unit individual Principal million RIS-Fee. benefit Latin million include returns by offset of Impacts in million partially returns [indiscernible] of expected $X $X net by million in than Higher alternative. $XX and by lower inflation $X $XX lower business in offset specialty and

$X favorable from and compensation expenses, elevated integration RIS-Fee, performance. million in corporate, million Wells in of point-to-point of amortization benefit IRT transaction lower million And $XX Fargo primarily DAC costs $X million $X RIS-Fee. A equity and from market costs in including other

first during Looking in at quarter equity the the positive macroeconomic saw we continued in quarter. second the factors, markets the momentum

XXXX, X% during index and X% quarter. daily nearly first The S&P the quarter to increased the prior increased XXX year average compared the quarter, both and

impact Foreign for quarter pre-tax a a compared currency a International, with versus Principal exchange first XXXX. prior to impact year $X headwind million rates $X operating negative negative were to quarter, earnings and the million

a line in million pre-tax On was approximately Principal very our life, review $X individual benefited the assumption benefits, in group measures are due excluding individual our trailing foreign growth International, life. annual ranges. the quarter. XX-month and earnings a exchange, RIS-Spread experience to revenue with our specialty and above second impacts within or basis, and benefits currency of expectations life, in Specialty experience XXXX favorable Mortality claims by for in RIS-Spread, the guided operating

performance large XXXX, trailing Excluding growth RIS-Fee the impact assumption quarter the annual review ranges. fee in XXXX of PGI third the XX-month below our slightly guided and are the measures PGI and the in revenue

the first At the has in decline we market in metrics as market time December equity did rebounded. equity have the XXXX set, of trending significant higher These in guidance the not the we been year XXXX. anticipate the half

This sponsors to commissions lower commission lower arrangements. X% anticipated planned on in results impact XXXX in move and on guidance, growth X% net expense no drag from operating As our revenue pretax earnings. fee is as shift both with to revenue, experiencing a RIS-Fee

XX basis strong investments management all and units review, On businesses. margins were reflect excluding continued disciplined the ranges. business of margins annual guided the a balance our the pre-tax trailing assumption These XXXX or month expense above for in within

of to starting digital benefits emerge. are our investments some expected As accelerated

debt both following million of Fargo higher we At as increased exception driven businesses early $XXX was operating line results periods. for expectations all or May portion on were Wells the comments losses the quarter. $XX corporate with the of a exclude operating expense acquisition. of our in the for from pre-tax security earnings business The unit variances benefit significant than in corporate as million IRT were from finance than better This issued by expenses, with higher well to interest expected. Pretax

corporate Sales business full We underlying continue of the increase to nearly $X.X billion for in $XXX range fundamentals from were strong. bringing to an RIS-fee's be million half end to above of losses first guided the the our XXXX. expect quarter, $X.X be of to billion, $XXX to high the million second year. continue XX% the XXXX half first the year of of

$X.X in deposits, Second sales, growth quarter and was low contract of by flow driven recurring net lapses. cash strong billion

be of prior cash or over to within plan continue beginning year year quarter. to full expect defined to net values, account increased We nearly X% contribution count flow the X% year X% and plans of XXXX

a billion $X risk pension During $XXX driven quarter. the quarter record sales, of second for by RIS-Spread nearly had of million transfer sales

sales the and in fees, fixed annuity period, said, and as from good declined. sales off That third investments XX% declined a of driven pipeline to in At rates performance quarter we've start million have pre-tax the slowdown business, business. earnings this, interest seen remained mix Despite are pension operating the $XXX strong. risk a by prior-year transfer PGI's lower

operating strong on With the asset pre-tax earnings a basis. second of appreciation, improved sequential quarter PGI's straight XX%

year. favorable slightly the of of claims said, the to That quarter first results the the earnings the half typical of While more quarter strengthened expect expectations, pre-tax half of and year operating earnings, for specialty year through first benefits earnings were be benefited than the XX% full end first earnings. low at second we

of committed As stock $X.X billion including shown committed deployed the deployed $X.X and million to Wells and we on the Fargo capital acquisition IRT common the for during Slide $XXX business of dividends. XX, billion quarter,

first than capital the XXXX. expect no already in we we've quarter, of and As $X.X guided share half suspended discussed $X.X later billion quarter to exceeded resume billion billion for them to of deployment our With XXXX. XXXX, repurchases first range $X have of first

from stock X% quarter $X.XX third a in common in increase payable Last ago. night, a year we $X.XX, to dividend announced increase a our the

our basis, we're payout at and Our X% dividend income on is XX% net ratio. a trailing yield targeted XX-month approximately

some wanted recent to impacts rate headlines, Principal. address the interest With I to potential

second quarter same the excluding During the income. our at was investment yield yield nearly the portfolio as X.X%, new variable money overall

portfolio higher periods money the rates yield. yield level when low some previous spread are While our as than the as ideal of much new be the in businesses, pronounced won't was for of compression

is PGI. account in interest revenue related insurance rates by and revenue fixed AUM, impact and declining higher negatively income general partially that While returns offset impact

reduce a XXX to many the us earnings our earnings movements As pre-tax reminder, businesses, interest X% rate other company our interest to of by peers. excluding of An a point decrease basis estimated less than annual impact are fee-based on of making sensitive rates, operating immediate is potential in than and total basis, less generated majority unlocking our of by asset an actuarial balances. any operating DAC

disciplined distribution, pricing, design. a always managing to liabilities managing products, not our through product risk we've by addition, certain taken and In limiting approach and or offering

we in over the interest have update assumption We'll for the to movements in actual quarter, point We'll Xrd rates review starting years. reflect in annual past year. as the complete the our prior rates

Additionally, we items models interest long-term will our and including macroeconomic rates. among other many assumptions, review experience

closed Finally, economics business IRT transferred it's that reported in business, in the will time Keep earnings as to starting the Fargo in the mentioned mind the employees, to take we Wells July to on and earlier, business relationships to acquisition, and The some Principal transfer of RIS-Fee be going this third Principal. Xst. on quarter. from the

However, long reporting for we best continue structure evaluate the to financial term. the options over

by acquisition the IRT is as communities. anticipated The to expected Fargo costs, to off diluted and and Excluding non-GAAP as is transaction share, integration and employees, to immaterial per accretive Dan Wells is integration operating have to adviser earnings well is great being and start a by said, and positively slightly be impact XXXX an as received in the XXXX. the clients, acquisition consultant the still

prepared call Operator, open questions. for our the concludes This please remarks.

Operator

ahead. go the And Krueger KBW. will Ryan come Instruction] first question Please with [Operator from

Ryan Krueger

Wells or the guess accretive terms transaction on had of I slightly comment XXXX. on couple Was I that cost? a deal. one the excluding morning. in the including in Good thanks. Hi, questions of

Dan Houston

and appreciate question, morning. With that, just questions good accounting have it, Ryan I'll of help out Deanna here. on some Yeah. Good the

Deanna Strable

Yeah.

'XX, when exclude impact as XXXX additional say of in intangibles, amortization any costs. But debt that that corporate. one-time does in neutral from So we the transaction slightly second half it as of in include positive the integration does will and well earnings the and costs expense reside

Ryan Krueger

thanks. and you in it's of on then what it, I guess had lapses, it's what seeing any And know shock so comparing to give early, Got you how far you're can maybe color I assumed? terms

Dan Houston

you to a rationale tell bit question your going consultants, well. early, transaction. I It's the behind But with way the I'm advisors, have the it and frankly it's expand Fargo the little not her and to perspective, their only maybe on clients, from will But early. conversations this, Ryan. the gone They Renee our exceedingly have understand flip employees Wells

we've been I of other very going open, going think clients. been we during a manager jobs to idea a so counterparts we've out remain is those with get are clients thing office in locations between is these of home front comfortable strong these much able the employees large and in to and that now, there but with diligence, relationship and due there relationship that lot find the the the you're out find remain

And so a we feel little Renee maybe that. I on where have But would very expand good at. to about we're bit like

to and been clients so many Jerry these of Renee, out you You've talking Anderson.

Renee Schaaf

team. consultants. clients, call, Fargo the pleased you team, that warm strong with far And reception Thank are really and we're the look Ryan. take we When I really a that it IRT between and we your think we've have with Wells with at the the IRT and and this made so progress the your that mentioned, Wells integration where we advisors starts Dan we've for as Fargo the Principal at received collaboration question. Absolutely, from employees,

Principal baked a fashion. transition team us that is allows have IRT the period representing have start. collaboration charge to really with Ready, the do is And the the to fact what a on a off cohesive of Fargo helps into things we come of this the leading the out marketplace very right really long Patterson, in team this created Joe that at us relatively tone transition and and Jerry teamwork deal. And the Wells to that one

transition looking four to And of So we this next and principles. thoughtful, clients, anticipate way were being really as employees a course integration, in planned towards guiding over very the XX months. we and the able consider

that. mentioned, to is that, is First customer And we as clients. it's Wells take talent, that provide to to that any seamless IRT sure of and critical do in and minimize welcoming disruption Fargo our service, team care of make to order the to we the course, Dan employees central

Dan mentioned, integrated from Wells key to are locations leadership IRT also Fargo As have the employees team. working and currently committed we've that we

we organization leading best to both those good Wells to of to Fargo that business have come are do integrate IRT, marketplace us the charge now we surpass when So we and representation to and of thoughtfully prior this the capabilities is what both the very then a . have identify What so that Principal that allows to their models either features acquisition.

So this very future. we're well, we're our to and forward needs growth meeting to the confident customer in look we ability and integrate strengthening very optimistic, our in

Dan Houston

Ryan. Thanks those for questions.

Operator

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

Andrew Kligerman

morning. good press pressure in section mentioned on In net RSV, Question: Hey, there has you release, as this revenues. been on the

competitive were that pressures. there bit? said you elaborate a Could on You

Dan Houston

make comments. a I'll of quick Yeah, couple

job accounting, what had our can creating but as you we're we've Andrew expense are not expenses, good years. at part the different time of is the get Renee than into I explanation. the line, the doing some that also And the those a for contra-revenue probably think capabilities. new same issues while of pressures from will managing see

is part course investment a The other of in change it line up. of

and of around then nagging capacity with But can Fargo business the help the with the help of behind so was record acquisition of reasons, lastly, keeping the one one? Renee, revenue. And less Some course of Wells issue you rationale it's in lot scaling. this that a to generate there and issues is this today business, of IRT lineups

Renee Schaaf

Yeah, absolutely.

the generally all you over out, prior the variances we've the significant revenue look at So, see you that creates -- gap to year quarter quarter, you Andrew account growth that and looking that fees value a there. net we you That's called depending is gap you a net gap will growth, make X% revenue if adjustments $X on the see X% that you period if average running to at. do are And line, see. a at typical that look down the compare current between you're and about about X% million that for fairly and the

exactly X% fact About of X% quarter based a the going be what if we then to remainder in coming that and environment, identified we've very not have. a pressures is agreements. passive of and from pressure to fee to It quarters. seen going And typical in a look is result it's architecture, on fee a X.X% you as basis, mix about competitive from year commissions Dan coming sheer business from the that investments, quarter gap what is of represents open over prior previous

managing thoughtful mentioned, And done job a as a so very And and concerning. there Dan of there and careful surprising as is nothing we've expenses result. that

good we this and quarter. nothing there, So that's surprising feel about

Andrew Kligerman

see. I

So that makes a lot of sense.

So more into numbers. maybe drilling of the just that

So or in two out XX as XX they in XX maybe assets, then that affect of quarters in XX, XXXX and as on fees any we were you of average And ratios how looking Fargo two? points will give Wells that? what basis basis could about Could year I a percent points. the expect sense those first they a basis and were XXXX, measure points,

Renee Schaaf

Yeah.

-- So at look if right. you're absolutely you

percentage, for quarter. see as do the we what marketplace the has very basis on that a that basis And about a as point foreseeable as basis We If a with you past. -- per future. or again drop you the believe that's happening the in consistent fees points, been point look do see in continue one expressed trends a will conversations the the at

and and and us adding to will plan, and scale, of it IRT and job happen the business us particularly in competitive, non-retirement of not to rounds sponsor helps to do us talented But group What And even again, Fargo helps meeting, out Wells gives needs. a really a us to participant lines, giving in next only to trust reinvest our also with better ability us business, more access scale. really, though our the make the it the is with staff. capabilities, custody

-- profitability but So for the in I future, the but pressure the there, future. we and a position us our deal about acquisition helps industry we're to certainly, think confident great growth on is

Dan Houston

Andrew, hopefully helps. that

Andrew Kligerman

Absolutely. you. Thank

Dan Houston

Thank you.

Operator

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

Humphrey Lee

and morning, taking for Good thank questions. you my

to fees, Dan's Just follow starting also and think about yield I of up accelerated the to IRS kind results. remark investments in Deana digital kind by expenses through of offset think as now we the largely that of expense should ongoing benefits investments is near-term? the How in we Should on by the about management? overall some as mentioned coming the think through well segments the running

Dan Houston

your you're quarters want help ahead do Deanna of probably of analysis. But Yeah, love frame a in us but optimism your yeah. that? couple I

Deanna Strable

to at take call Day about Yeah, we outlook Investor both I'll what at year. talked the the back end of you last and

'XX impact in similar the said earnings we as about 'XX What digital very when investment, came was said remember XXXX, to announced you on we earnings into the to be net a drag X% we If we would 'XX versus growth. have our 'XX. we would from

but increase of Our beginning investment investment actually offset goes up, actually benefits. by the that in is the

through some do expense the benefit them run revenue But the line. some line. run them of of through So

bit on but And how be earnings, little neutral so similar, a 'XX impact how 'XX, by and the between segment may a percentage in different, they 'XX -- it the growth from comprises again dollar pretty and of are perspective very amount 'XX.

Dan Houston

their be very tools that Equally managers improving stock tell would you much these we initiatives as are in important where into results. us could to very better get into perspective customer. the on experience, put to to opportunities around the track the better, I would customer lastly, to our then related Humphrey, favorable particular that better helping help in the equity ability thought it development we serve manage be being also with terms the financials, you'd analyze data if the and and like. And with tested proper Tim that's happy to data of --

We're making with it an we track investment and would important. So we worth where equally as thought is on be.

Humphrey Lee

be then I PGI gears in a prepared or of positive it. coming on based year? Got are would helpful. and like Like, QX Pat, it would Maybe they flows be second confident still the And any is sounds in about a remarks, so, it the color there ramping net the may question half. more Tim PGI if shifting should like the we positive in through of second be that your feel, how QX? to trend, momentum think of for lot then is half up kind And breakeven in

Dan Houston

Humphrey, in has right the roles of level Performance I'll have and tell provide over throw will Tim. just go is Thanks and to terrific Pat to I right done you job around we've would that, that Tim, want you getting including quite people details? numbers, get and the the started Halter ahead optimism really he a distribution. the sales good. and we but Tim into turn But and to and some

Tim Dunbar

our as with investment does right about half a performance, Sure, why the the I thanks providing reasons Dan right of question. of clients. for the Humphrey really the year. start And to second solutions number producing it the and And there are said think we're optimistic

to develop macro I our a we talked solutions the have a really strong for and lot client sure that quite trying think relationship, environment. make we approach about in our change

take to to some the starting made I'd we've distribution changes really we the as talked that's hold. think structure. well of say I about

when new talent. win we we our right really win, trying have leadership, sure So align customers making that and incentives to when the

fair a so And we've brought outside. of the in amount talent from actually

And of results what starting of terms that's And starting positive some us see what that. that really meant our to in build pipeline. to it's really is we're

our look If of not we're strategies. at strong. we seeing behind if And but strong. funding pipeline pipeline our on lot just platforms, So across that of that our really a is mandates of a number is one, interest really then products placements look yet that, really at we large

So about we're that. good feeling really

in quarter. fourth Dan how year that But tell of you how we believe cash mentioned exactly we be difficult through mandates XXX call come in will come they in, that I'd positive will Now the do The to the it's net flow. fund. plan the end and

more -- year. about second to going to and retention, on pretty of But of lot initiatives focus Work to that we do, half as again, continue a have we're the work to optimistic related well.

Dan Houston

I Humphrey, on you call and being the question. your appreciate

Operator

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

Jimmy Bhullar

Hi, couple mandate, will I on a second had your what your to Mexico that good excluding the be in half. New is extent management in will questions, the you a that morning. just close assumption the optimism flows $X business think To potentially, as maybe flows? about do asset and that positive, part your think XXX big because first of or of bring on -- well billion positive I flows

Dan Houston

the other I isn't lot one the Jimmy, Yeah, PGI half second can businesses good of of particular year's just assure organization. commitments, you, the as within the framing. enthusiasm relying pipeline remember again here for of fed a Tim was on our by and plan The gets is

the than So again, just just Mexico is more -- our from than more plan. optimism New coming

As the thing for number for to to wisest what this speculate do be be that probably that would wouldn't on call. me trying exactly

Jimmy Bhullar

next Brazil Yeah. if on a talk How pretty And could market unfolding out, then that? in so? in flows on your year specifically market -- just and or environment you you? negative talk this reform. pension the weak were working that plus And a you see the pension a it's you lot been then about Chile for of do how the driving And Latin any what's quarter, see or competitive over there whether the has about that comments

Dan Houston

glad of Jimmy, handle diverse any question certainly because to would or On well. outperform the person pressures, this, impacting a time, And question, I we've will economic as Luis, are underperform, it diversity Luis given some just spread, to But I and these into say before asked and political dive Luis? throw details businesses. of got to. for and Latin us and top you mind that Valdes. American that no geographic very there risk, set markets really the pressures, between over that's some certainly than better businesses and I'm the Yeah, of fee

Luis Valdes

thanks. Jimmy. Okay, Hi,

reform. making to about start pension They're Brazil put in me and progress. Let their comments some

the by they that the program. making at they -- do been were important there under Congress discussion in pension lower at making have approval chamber, so The the important Congress, That they for most of ever, a some pension approved time improvements First insurance committees deal level. bill has are sense.

and Most pillar is would the of is their be bill to in to is reinforce going to that to say accelerate approved of pension I as of that pension pension is order social impact and security Brazil. the very compulsory story. business, immediate the their related it bill pillar, reshape pillar that their one, system, If second third going in voluntary the growth is, or

are that market, for of addressing voluntary wouldn't going that essentially the the bill they Brazilians, Pillar to I it's to issue have one save out that idea any going to not even lower pension benefits be say though reinforce the more, the that going is forward. So particular because

good So pension net our let me industry. about about Brazil. terms the good customer general comment, Brazil, cash the that news news for for In Chile. is terms, growth general And in

that you the customer having quarter just me conventional well-diversified saying heard AUMs total of effectively consecutive positive the have Chile with you customer start in those three. flows. particularly essentially portfolio. Among negative all reported cash countries reasons have And of and the billion has years. cash If we and are continue reported $XX those net net as let these and picture And Cuprum, formidable is flows, XX

pressure an is average relative -- important Jimmy, to facing difference is ability in terms -- environment, our some points outlier XX up funds, one the also in very more and is putting today. our more mind activities number the of of retain out in is some to performance are This that and than it investment assets that performance, no we're to some the to is we not So peers. to and clarify on lower as the us, that of X% of between of XX and Europe with affecting most commercial a basis top some investment than and And and performers net competitive very our investor return our up to short-term that keep is clients. performance

So fixable on effort of and is with a Team and problem that. we're Dapper work judging working that. lot Pigam to we're on The and putting resources

there, second the those is The more streets. on environment fits the that we competitive thing affecting have

As a as to the long XX% salespeople relative industry has increased ago. year of the number in

sales third of implementing we're each In sales constant But panel is in to sometimes and in we are are a short something Chile. of force affecting Our size good today. Cuprum working order our and in you changes the if some force to it commercial term sales three of innovation our to on Cuprum know in the that of in remained those the sales that productivity reason important our areas, we refine, you order areas. working and in say move areas -- allow and positive terrain. all are Chile. some XX:XX me, about the it's for

voluntary Cuprum particular in reporting, for our Chile and that have is AUMs total historically the in had for this business. quarter, currency, we highest Chile in local

about assets is of of our us given for very point particular historical today from gross we for So stand point prospect our in view, managing from keeping Chile. than That are history. fact optimistic the any clients at more

Dan Houston

question, that for Thanks Jimmy.

to just performing coming that asset want years which the comments still guidelines in say, is other I Luis? on addition six within would acquisition, in of The is our thing well to now Luis's is

Luis Valdes

Yes, XXXX, since Yeah. 'XX.

Dan Houston

Yeah.

hitting expectations. it's financial our So again

So thank you for the question.

Operator

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

Eric Bass

growth AUM mean thank I has quarter I positive a question revenues cash the the holding that But flows a seen? months. been adjusted you. talk looking are about could drivers flat the of on in back declined Hi, earnings given over international, was and on in past had FX reported you certainly the other a XX and also Net hoping this headwind. you've some basis the just growth I

Dan Houston

Luis, you certainly to for But that. take the plays and role a go question. thank Yeah, currency at And that? want you

Luis Valdes

Yeah, growth What FX. to are in actual the reported, if changes month if adding was line looking you're you're thanks for pretty basis. X% greatest TTM FX, trailing you're a it about your question combined net X%, have adding you which basis is bring But a the XX assumption zero, like if more looks guidance. a revenues, positive we now, much for minus some our And immediately just our Eric. in we our going and in net are

Eric Bass

you. Got it. Thank

was number for that an So, the adjusting actuarial review?

Luis Valdes

million in most the in FX XX $XX basis. I In kind there Neither reported you is of, trailing negative the the for comparison mean, FX. part a for a in the months important is know, of place PI. FX

Dan Houston

FX we're the a And news Eric? solid be the headwind. building was and fundamentals, obviously these can a just these quite a it's growth, good six, But demonstrating has follow-up, have had good tailwind financial run to is the businesses. participants good. quite opposite, Did still last good great the from you just certainly been It where markets. years, underlying a a is We XX-year in what in eight vaccine currency The results to been a seven,

Eric Bass

just remain this robust activity you of half forward year -- year-to-date. earlier switch in was than curious strong to gears quite the have think could Actually And pension if or did. pipeline I of if year. and is I I the being second a just does normal the to sales where pull been risk transfer, your for just the early

Dan Houston

the pipeline say plan looks the getting business. I'll comments And on of it's yeah, large on. any market, although million pile Few And that so and competitive in have for t we're it's But returns the the a $XXX we isn't just Renee PRT? the sales I good. would like still quarter, on still -- one

Renee Schaaf

Absolutely.

slightly the the the If at look $XX size think as you market. about of you we're they opportunities may advantage billion there on we be industry, XXXX that number We fully industry-wide. was we're to remain came as And is at very opportunities a in more look possibility It for an of as or the market, XXXX. or a the market -- or of that, maybe at selective. take to opportunities. and So actually the prepared you seeing We'll pace our total look if

is we our right are the right that sales very mentioned, in our one that to very strong, to It's is nice opportunities. take, heavy in range way approach date But You'll of of weighted towards disciplined billion in on And Dan and $X the million pipeline any niche, remain is our we these opportunities. market. that risk position success good focused and not see us $X as the a target we the be transaction. our basket

pleased with very we're So the results.

Operator

The next Kamat question Citi. ahead. from is go Please with Suneet

Suneet Kamat

noting of morning. quarter-over-quarter just quite a improvement I the in still one-year bit wanted the terms modest good year-over-year Thanks, go numbers. you're back to performance, investment to down

perhaps you RIT Just And want manage to get business? assets impact the might that some at think do the you thoughts point for there. that what

Dan Houston

provide But to again, might whether to I'll weighting understandings on some is for Principal, investment and to hunts Retirement The being decision-making performance. Tim? this outlier and that options one have was tools the the of year, help past quarter that at the Yeah, used good direct assess example, five. the that taken, is number steps and maybe enhance I have. being the are as The it not fourth clearly that look any better obviously in year all of the most Division. news for the three you to concerns one year Tim

Tim Dunbar

Thanks Suneet. know. I Yeah,

investment to performance throughout improve seen think I XXXX. we've continue

our was you we're asset that do longer producing as for Dan mentioned, quarter think the a solutions the But tough are us. saw And the quarter term. for investment what performance fourth debt. So I management that

resonating investment performance providing the to we're our before, years, we -- really at quartile. the and our both and most the the are it's five them. three our again long-term think like And we part, then and think first clients year numbers the and the of is in for the performance. I numbers, right for clients right solutions, solutions those with And So good XX% AUM said XX% looking and with second

Dan Houston

the of on one pile thing Just I Suneet.

that of ranking. point a is our mutual have other funds star The XX% four five either data or retail

going you where that's -- are that's there. we're good in and the follow-up? flows again So stead have a Did

Suneet Kamat

time this talking seems little onto of Yes, bit maybe to to you that me But the you've Wells wanted had We now potentially we about I thought a It Wells much that with PGI platforms on call it. to it. about for I the revisit more guys. opportunity more the really well, accounts? adding funds your Any spent but talked haven't big time did. of as a

Dan Houston

Yeah. right. exactly that's And

options that happy honor and want closely think some that big incredibly in to tell estate. consultants takeaway about their real want with will the that. they sure and to are Fargo clients, they're you the with I of investment currently we But working Wells are the that if is enthusiastic make what available, respect managers, have we I relationship starting they with

readily Some otherwise options are that of these available. weren't

knowledge the areas. to managers, transfer in have capabilities prospective will consultants, we and on skills we clients, the the continue So the and those relationship and that and sales investment these professionals,

But over. remain we great do be so those and a having skills asset no simply and these across options It these have move will be to of clients. optimistic, by to existing prospective and clients, discussion, And conversations. capabilities just will we'll classes, that presenting like means, we to have number our they in these we our proposition value

Operator

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

Alex Scott

Hi.

in just quarter, performance had the this pretty prepays of I on and a out. income little was I I looking think NII in strong the First It forth rate just pickup base asked, was question I was at guess when even -- so looks environment. the of declining calling net a like surprising, which investment RIS-Spread. I you're some yield, light

commentary there Is sustainable, you I more would I kind it of just be around XX have new any level increase think So quarter-over-quarter? great. in interested bps color this So, was there. was any

Dan Houston

Deanna? it got well. down you've Yeah,

Deanna Strable

Yeah, the for question. thanks

seen did question that variable a of for in we it US spread into account general Once I investment being our income last people looked -- from well. a within actually year night, think together pretty growth the think the or you all your holds business you whether it the adjust thought we've the actually, spread investment and account ago. take and or net income But hear little businesses. the says when higher I

income, XX basis, look trailing on year XX% month And you JV So actually quarter-over-quarter, on month maybe variable up if our it's XX a trailing average a but at spread ago. investment XX% XX% is our XX% a from basis. up

that that of can look in the to growth any that business. I it. like some So not longer we quarter off as it's significant, time, at anomalies a one have in of period on

last below we investment but period. did not that For variable any example, one quarter income expectations, was our out call in slightly say to enough

So well. as I think influencing that is that

think business. pretty that in Going investment level. income I the amount investment could we current growth income close once pressure income, lower some net the forward, if investment you net to on rates have interest is for the slight the adjust there stay darn But in the be variable tracking at of growth

Dan Houston

That help, Alex?

Alex Scott

about that that that the about I I know just rate PFGs thinking next think dropped year? you'd outlook that it's XX up. maybe the the the years, a pull think sensitive offset kind year And impact But helpful. that When since way than some some When year, XXX And ago. peers. you maybe pressure? of how the about should what to of can expect think levers points. is follow a you a provided maybe EPS, that whether I are The this basis guys about about some Yeah, little of a about I move, less

Dan Houston

where a you where went of But Deanna, and it's risk. we we've if interest coaster to returned. where Alex? is to, take lot for Yes. at, frame actually about news rate a think that good we than a roller were little the help quite want bit and longer do year we been a ride you And don't ago,

Deanna Strable

about of the we to actually that in included put take rules and Yeah, I'll out our you it that was we actually thumb back deck have talked slide there.

XXX on on And rule overall impact decline is earnings. thumb in basis has of so our rates X% less point earnings than a a that

and more but Life than mix significant could because it's our the business, business in less business, that the X%. of Obviously, spread be of

I remarks, close I our it's pretty critical, yield is. it's what think The really to prepared our and if yield other you we would money said that new in our thing look say it today, at portfolio darn

impact on that big than if have differential pressure money new overall that's there and was a between so earnings portfolio to rates. that going And rate, our less

manageable. it's very, very think I

some see but is could You relative impact, think peers to our that I muted. impact

Dan Houston

Thanks, Alex.

Operator

The Shanker Bank. go final question Deutsche Please is with ahead. from Joshua

Joshua Shanker

today. for you meeting thank Yeah, the

Dan Houston

Thank you.

Joshua Shanker

you. Thank

they large So the if rest and coming look in in they a know, we outflow margin ahead? margin guess, growing in. this bit the business. if trend for at mandate your little PGI, How they're AUM do, to you then of evolution, means higher have I we read assets and margin the mandates talk these attractive impact blocking on we overall? we mandates? about -- think like, years it mandates. should also margins the the less Are five the new growing we more Do versus AUM, lower had mandates Of think I you these -- Can from but of we want business? course a of about tackling win on so Are what

Dan Houston

that management with starts it's company, so fund mutual a last know, more we many be or have deliberately about a the larger fact We capabilities, embedded business, think an company, annuities, the life of I tends which very by evolution to you it its asset nature when have asset Well, build management within asset capabilities little to the XX retirement, lumpy institutional whether the years etc. the within mandates. out the gone bit our organization, raising

have nature and maybe is are grown are have found most of of the that I can in. versus income, refreshing that the independently international, you types consistently how fixed to And client frankly that those Tim, these flowing of equities, appealing both mandates opportunities real I time domestic, lumpy just with period over more explain mentioned. alternatives, all help of estate us other What

Tim Dunbar

asset to. depends the say mandate is it Sure. and different each on that in class comes I quite it would

So Obviously, into The to fees. on the assets grade mandate lower flow XXX, that fixed going the most big new went income mandate. of the coming those funds. mutual in the an investment mandate out, are was actually be will

see in similarly would those at coming attractive you so fees. And

very as of franchise have a Dan diverse capabilities. portfolio our I investment said, management we think within

we what see some with active equities. in areas, our like so pressure And

some pressure And has been capabilities some certainly, move down passive. we fees as to there specialty the have in coming But well. on

seeing preferred So about yield. high our still think our on real think security those. good fee We're levels estate about capabilities, capabilities,

more going and any try bit in change. a color think to way also so, look one thing think about given both coming how And flows that out. lumpy is of those are revenue on the year, given on I give going in do And you what quarter, we'll the off those and like, in those you to big mandates way and forward on in, any should to be big the but

Dan Houston

point And where you years of to to that's that been stated and have was of it some the lumpiness expire. of last And was maturities. the some couple Did the Okay. a going follow-up? quick expected

Operator

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

Dan Houston

today. gone months did last get call. out call. make do XX the These if a as to we Thank we've way time everyone I bullish you can you. very sure to deployment. you are Josh, a like have you. the very appreciate gives apologize I take taking We follow-up, from this capital We'll much

we we on On the as as the IRT we business, are working started opportunity. were Wells really today enthusiastic first when Fargo

that. divisional have the helping like businesses where for tone and is quite you discipline to And part We'll a we continue growth about customers. talking of excited in the Expense what could the digital up more the and the pipeline, good in half as the then going. economy, looks we our future from year in the lastly, us and past. they're pick these we focused these big latter I'm presidents, like how the done detail of of initiatives, very on stay about in

you forward thank on Thank the the in you confidence to Look your again for organization. road soon. you. So seeing

Operator

will for be the available the Time at X, The dial for August US or callers, replay. conference. to end XXXXXXX replay code International PM number approximately callers. day, replay XXX-XXX-XXXX the XXXX. for participating Canadian is call you for of is access XXX-XXX-XXXX in Thank today's Eastern beginning This until and X:XX

Principal Financial (PFG) 26 Jul 192019 Q2 Earnings call transcript