PFG - Earnings call transcript Q4 2020 | Principal Financial Group, Inc.

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Operator

Good morning, and welcome to the Principal Financial Group’s Fourth Quarter and Full-Year 2020 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 Principal Financial Group’s fourth quarter and full-year 2020 conference call.

to are related website on materials principal.com/investor. at always, today��s available call our As quarter, an we on last to Similar posted with on our additional details our U.S. website deck slide other details. and portfolio investment supplemental

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

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

upcoming would of Additionally, to the non-GAAP found some comments this Reconciliations during call outreach financial like aware refer earnings release, measures investor our two of in dates. slide to U.S. measures. We financial make measures and made may to GAAP comparable presentation. most non-GAAP be directly conference financial the the may of supplement, financial you

and hosting June Dan? XXth. XXXX outlook be on Day Our our Investor February will on we’re call held XXth

Dan Houston

as customer for fourth we with position strong This the growth key family additional our place. XXXX, on of and and our follow we and abroad. unrest fourth and work to manage morning Deanna proud quarter our through and results, long-term details and in and are our ages, was truly on on kept with our promises excellent well. impacts the and our to financial our yielding this strategies term dealt to for creative world. well advancing COVID, our to employees ways and our benefits extremely service transitioning for around and fees our maintaining our service to employee and waive exceptional support just new XXXX, concessions above In we withdrawals all response else, In Trust prioritize customers, and the pandemic, position, of and quarter all kept employees integrating and are our focused throughout financial XXXX who business, liquidity premium and will from safe, we customers, strategy call. these including investment staying is one the customers. everyone full-year to political of the details as highlights our line, long customers and such with I your XXX-year and Thanks, discuss that capital head challenges tangible employees. COVID, how portfolio. objectives, pandemic. John, I Retirement safety granted performance global as right we as to will We found our often individuals history. social and Institutional well-positioned Bottom hardship remote our digital of on for have you XXXX full-year welcome healthy I'm to the and sizes, continued here hope a businesses

them impacted our principle. hospitality differentiator continues a retirement work have of medium-sized including within the from be we to less the to have and COVID, combined and As to we exposure discussed on been small businesses most U.S. The ability resolve strength for travel. insurance unique industries businesses, with and that and previous our calls, serve

X% SMB block Slide earnings to been our variances, and employees. X% currency business, non-GAAP flow and within businesses our full-year of pressure, expense lower Higher less account was retirement were In are full-year of group XXXX Principal growth Starting excluding and X, in sales. value as foreign fourth to were for well recovery. fee positive, significant headwinds, with operating it in offset resilient in benefits turned fee net from billion, non-GAAP Our cash increased on positive $X.X delivered beginning operating and ongoing compared actions stronger group guidance, SMB as the flat, of the quarter, your our account customers partially and revenue have and values, leading were management AUM than by and XXX XXXX. earnings ongoing even

reflect expenses align nearly results revenues. $XXX with our expense benefits continue management full-year of our We million our from And to actions.

savings IRT billion a $XXX solutions. fourth also record billion by managed PGI closed were and with volumes to end was over business sales buybacks of and the This $XX speaks XXXX. As positive increase billion net some We managing the we an billion financial reset our a revenues. and PGI the during with consistent billion, respectively. in market increased to migration just cash and AUM the of some expenses XXXX, clarity of million restarted program share ended favorable XX% driven repurchase the in-demand $XXX of year company year at or $XXX to record of dividend, $XX the Total in-line remain sourced naturally XXXX. shareholders of to the in Full-year with strength increased able our the with million retirement and performance, during with macro quarter. strong in record will the deploy prior stability in XX% quarter. AUM, expense will environment the from very the a diligent and This we flow, products year. we increase sourced were $XX year-over-year Along position our $XXX a of

XX% for investment separate investment and above the At well collective funds, of XX% X-year, Our and distribution XX% as for were time for teams, were principal as one-year XX-year. our XX% mutual period, for X-year, consistent the ETFs, the quarter-end, accounts, trusts performance median performance. the

compared AUM forward. Principal We XX% fourth star not Hong in International level year-end five AUM. fund achieved AUM to funds attract AUM performance be rating. of four and trends. in was with our or and constant going our assets positions our AUM to included quarter. by of is $XXX had Mexico, of a continued well the Southeast an finished Morningstar XXXX. This XXXX AUM, This us basis, retain star Asia on joint currency which pressured China $XXX billion to X% market increase Kong, record was year-end. a the in China strong Additionally, continued for reported billion at venture, rated

strengthening developing institutional client our working and process, solutions, new to network We harnessing our growing our address diligently investment needs are customer’s digital China. distribution network, our by product in

and quarter, billion billion for with was of in total the the sales, billion driven quarter, For an was the a flow the net fourth by strong net $X.X full-year an positive $X.X XXXX. institutional $X.X positive flow and including was in full-year, and full-year company increase of volatile retail the billion, a result difficult $XX cash billion during flow $X account from PGI $X.X positive fourth cash managed year. for sourced cash a flows. outstanding full-year, net billion cash PGI general along

client million, us XXXX. billion Including fourth of and have the flow million spread for the retail, fourth clients the $X.X We distribution $X.X XXXX. and continue and as million full-year. in net channels position and general for quarter, full-year, RIS $XXX billion we to positive cash risk and was institutional well benefit $X.X quarter largely $X RIS-Fee through $XXX into account, types were of $XXX that multiple billion in in from COVID-related MTN net by in our withdrawals. RIS move issuances retirement, spread had transfer flow opportunistic billion the of hardship driven fourth the full-year cash $XXX quarter negative sales pension a million

increase RIS-Fee Principal Excluding flow within these XXXX, have in quarter, marking with constant our we And of it $X.X consecutive our Mexico, as flow account flow of do X% to XXXX. strategy generated billion International during the make record now solutions outcomes positive quarterly business flow I'll a of Kong, value $X.X XXXX cash the of new cash positive would IRT flow. transferred Cuprum business continue was basis, flows cash net of a XX% billion some net X% In for a customers customers compared highlights number was hardship to Asia. net with our on to net throughout strong business net been Digital withdrawals additional Brazil, execution in XXth of Southeast year. guidance. in share Chile, to in fourth full-year net currency drove business. the integration the and easier with XXXX. us. and starting had Full-year and Chile, we to be beginning This your increased to key Hong quarter cash cash a

our We continue customers move to platform. to over

client discussed. in A of And positive. the year, two to is and this successful emerge participant feedback second we've importantly, overwhelmingly majority IRT we the in the second December. later been to to business The migrate the of quarter anticipate occurred migration waves begin XXXX. from synergies first slated has Most migration as previously

provide and expected on next We during details synergies month. additional will the our integration outlook call

uniquely life ease]. We an more benefits. Life, people employer we capabilities employers a a to are pandemic plan, retirement single number to this investment participate customer XXXX service, for of awareness Individual received Combining plan applications market first with a one pooled insurance mortality. in in paves plan of unrelated get integrated designed record and [Principal the pooled the as increased employer administration, to access the way our of In management to retirement

nearly we were to delivered demands, and product goals, with tripled number our retail and strategically makes the when exit alignment business digital from business the of or term, applications enter choosing our policies in of announced retirement India. electronically. all it our ensure the For business to we client year, We expertise investment sense. beginning portfolio review are a or Yesterday, and exiting

business India asset we did value long-term not scale business management While our within deliver improving, the have to for shareholders. recent been have needed results our

universal interest focus portion and our are of and examples a Life, Additionally, actions recently life discontinued discipline. small rate Both most sensitive. block Individual guaranteed our our overall sales new these products, in of strategic of we lifetime the

core by employers XXXX. their as in best of the the Our to employers Forbes one money by some management women work year diversity. Principal shown best continue for to best in XXXX, for was party by included actions awarded investments for values places list in of the straight in our third and pensions and was ninth guide recognition. PGI noteworthy

United towards XX we the governance outside Slide is important and progress the the and Campaign Carbon perfect by also Disclosure the to leaders. Principal earned and to also many Foundation's score Index. And Top for named we of Working We culture, joined in largest XXXX Project. by also demonstrated recently with viewed startups, U.S. presented some Rights Play our investors, women innovation Plug XXXX social, corporate time made awarded a change this and company especially This the initiative. XXXX and Mother climate recognized our distinct minus environmental, a cultivating a that a commitment list. becoming to other leader with customers, sustainability corporations and XXXX. long-term Human Compact, we've Index, We been the how Media, recognition relationships have Principal increasingly Equality challenges. our thought received from XXth businesses, Nations Award efforts. is an Corporate expanding highlights has partners, ESG on A Corporate on as commitment Equality were Disability from Global executive are Innovation world's rating to their

financial communities democracy the customers in the forward the advocate Guided and to financial continue We a model, business challenges. need diversified our our we us policies they risen access of to bipartisanship, behalf and and that serving customers, unity customers, security. provide times urge especially power transition strong employees, position and look to winning States. our on to by values Our strategy, promote greater we core with during United week, have Last prevailed most. as these

for We call customs contributed emerging Before nearly and thank Valdés, and Principal. of XX has over of your and best international take and to provided Luis Deanna, me success. leadership significantly I'd retirement. Cheong. Deanna. happy couldn't leaves to moment Thomas wish to you, markets, I for years in and let He Luis turn teams you Walker strong family, to also more a local cultures Luis’ leveraging turn to embracing has technology, and be a leaders, dedication your local With well-deserved over personally who the including our legacy the that, passion like to it Roberto and

Deanna Strable

position, impacts impacts I'll presentation and and morning business details current the full-year, This continues included financial Dan. Thanks, Good from and contributors details quarter. everyone the quarter additional to conference to in investment key our we've on performance call. of portfolio. for discuss the our morning, impact of COVID, financial again this COVID our the our to our call

for Quarterly non-GAAP earnings credit on remains realized billion per of net metrics was expected fourth to per $XXX $XX full-year $X.X we're in than most the the million to Principal $XXX fourth the better the operating impacts Net the of included losses $X.XX $X.XX and full-year. million income uncertainty gains out, While Reported of share of diluted share. billion diluted we million. will onset minimal million continued quarter quarter play included or pandemic. capital how $X $X.X attributable the or for at the of tracking trend

higher per X% diluted diluted other than non-GAAP solid the respectively. significant end quarter were variances, a an earnings unprecedented to in review This the $X.X full-year with $XXX $X.XX billion included XXXX flat of $X.XX Excluding fourth impacts share, assumption and or per or share million year. the operating of and actuarial

earnings Excluding XX.X% the for range. full-year non-GAAP was XX% rate within to significant the quarter, tax variances and the guided XX% for fourth operating effective our XX.X%

share. and These earnings than of during a prepayment shown diluted from several after-tax, the net fees income lower higher RIS-Fee fourth quarter. million pre-tax, DAC reported $XX included expected expected amortization investment As per operating significant Pre-tax benefit X, returns, Slide benefit than due had a $X variable alternative higher $XX and we in to $X from benefit on million non-GAAP from a impacts million had equity in million net as variances encaje negative Latin million and and performance COVID-related a higher-than-expected net inflation and A RIS-Spread USIS, $XX was more negative the impacts than claims International a $XX million in impact IRT Principal of markets. million integration costs, negative $XX by increase in in negative $XX million impact million point-to-point a $XX impact from from the impact in offset to RIS-Fee other of Brazil. in $X.XX America

are available supplemental the slides our of on details impact website. Brazil Additional inflation in the

and the a our offset pandemic payments potential customers the a from in could benefits While final benefit protective vision of These impact income both investment updated well group a in-line our in in in as [$XX results volatile details a the $XX negative for COVID-impacted were operating claims personal with life, variable Slide claims the and month from dental specialty quarter, COVID-related on and negative from the partially impact RIS-Spread. our pent-up credit, including unfavorable from quarter, fourth and XX% individual disability and equipment final dental claims DAC as million] that life. XXXX. reserve on million, relatively impacts we X full-year. negative demand, continued the the the well premium for financial as in as fourth by thoughts million impacts favorable million impacts pre-tax and gains earnings and $XX ended by have the quarter experienced expectations quarter-to-quarter net fourth were business $XX amortization and X provide of our

tax after half pre-tax morbidity to specialty every XXXX, to heavily The months direct COVID negatively $XX RIS due This fourth in earnings company the quarter. reserve our U.S. estimating impacted U.S. better COVID a favorable slightly Over in during COVID million deaths negative impact million benefits now the and spread. of quarter XXX,XXX we're deaths, in a the deaths of the to sensitivity $XX non-GAAP RIS-Spread U.S. XXX,XXX In for earnings year. first gains net than the COVID COVID weighted XXXX, was to total by more XXX,XXX impacts a $XX netted million. operating approximately has after-tax nine individual with mortality impact, COVID last reported and life of

passed were another current X% double from We we for in point billion billion. increase recovery. was Full-year business recovery of the higher had some in deposits We manage the Chile expenses the law expectations account withdrawal. withdrawals entire employees fourth Compared impacted quarter better percentage to approximately for X about your the And take move we Principal be $X.X sensitivity with to sign COVID-related fourth withdrawals. in-group despite in compared third took nearly growth To business, of action earnings. sign COVID-related XX% our International, XXXX, positive our revenue we growth million, continue year, the A businesses than and participant $XX we In $XXX of see. million quarter the of reduced in-group recurring COVID values, immersion included pressures. the COVID with AUM retirement our the expenses all at improved the our good million were This typically increased beginning beginning X.X to is over rate in of group and margins overall In even XXX recovery year $XXX comfortable than to the growth billion less participants this as negatively of by X%, benefits faced in fourth revenue in throughout quarter, to the just the This pressures early another This $X.X hardship and fourth including to businesses impacted resilient during the X.X% quarter. December of quarter, allowing X% mitigate of fourth the quarter, participant aggressively. our withdrawals contributed year. XXXX, in block. by quarter. of

we that the X% of than but Excluding to see. XX% quarter average variances year, significant than were lower expenses three at seasonally every other the X% the Fourth quarter three a operating typically fourth was higher first like we level. the quarters see than lower higher quarters,

the daily the ago average quarter, from AUM at in more quarter, quarter and XX%, increased XXX PGI. revenue fourth X%, the factors growth the value in benefiting S&P RIS-Fee increased year XX% to account and and compared macroeconomic third than Looking the index

included improved trailing $X we positive negative average face compared to $XX negative quarter million XX-month headwinds, to compared exchange and rates a million, third quarter Impacts pre-tax a rates, to year fourth $X a to to fourth million, this basis. Moving quarter, again on compared earnings continue foreign quarter ago. XXXX, but operating to a XXXX, a

Excluding at significant plan and below guided deposits, given to very growth ended on throughout fuel in slightly in count, of in The that range These management. International of full-year and performed The participant growth in of in were below were the margin XX%, growth volatility strong $XX for by than the due in year. XXXX. variances partially reduction fourth the business integration well operating experience costs Macroeconomics million for expense in growth. the the offset challenging exclude or and million than and and pressured both legacy earnings fundamentals business. and markets in were and the XXXX expectations business macroeconomic a primarily related saw $XX the and impacting net non-COVID lower strong operating current $XX low contract results range. favorable PGI’s significant Compared than the of year benefited better quarter fees early million quarter revenue liability $XX the full-year following comments gains IRT revenue to most Despite range margin earnout was impact. the excess guided strong on from our Total lapses, a X% $XX XXXX. unit for count recurring Full-year interest with business. environment. reflecting throughout growth million to the variances. the business from business million fourth units slightly growth in-line for our management guided the the XX%. all rate XXXX, margin we the environment, was full-year to pressure RIS-Fee year IRT net reserves the Principal both at higher revenue pre-tax X% RIS-Fee full-year PGI’s slightly will future reduction ended relatively RIS-Spread’s due legacy

the and International’s currency full-year full-year pre-tax very non-COVID XX% group claims. disability a XXXX full-year fourth and revenue were life increased impacted X% mind, both impact claims. fourth over with quarter related of quarter in Keep XXXX by Excluding and XXXX operating the Principal margin, foreign from benefits especially earnings benefited favorable translation unfavorable

of $X.X XX holding financial to impacts At Slide billion and on play our next ratio of Turning million billion credit than in and and we available year in remains the months $X.X the at to available as we The liquidity liquid be our of double $XXX assets. to an we expect capital, drift we even target capital X, capital We XXX%, of cash $X.X the continue excess billion million had end end cash total more company XXXX, started. out. company, $XXX million credit to ratio and than year, cover the of $XXX XXX% estimated including in obligations, position available elevated at stronger had ended excess subsidiaries. targeted the RBC our the losses and risk-based of to of of from

We expect our toward the RBC ratio targeted will move XXXX. throughout XXX% down

leverage XX.X%. AOCI is Our excluding low ratio, non-GAAP at debt-to-capital

debt Our have and well-spaced over maturity Despite history. future. the pressures the in next XXXX, of ladder the our debt in into and we one company's last a the year, financial $XXX uncertainty until positions remain maturity strongest schedule of isn't million we

needed through of capital uncertainty. manage We have and deploy financial this economic the flexibility opportunistically time to discipline and

XXXX, stock restarted of $X.XX capital and deployed fourth XX night, fourth $XXX million unchanged on we with in from common our we quarter, authorization. the and in quarter on repurchases. to payable Last buybacks shown stock of approximately dividends dividend the a dividend first in to $XXX our and $XXX yield remaining share quarter, have million X.X%. million quarter a current the and After is program announced resulting in repurchase than our the the more share Slide COVID pause with uncertainty, due XX, As million we common capital

As in high spreads fourth our mortgage XX%, gain portfolio, are maturity takeaways: third partially $XXX the well-positioned. million debt And our U.S. net pre-tax U.S. impacts portfolio This total fixed tightening At loan we company, investment changed. investment A slightly $X.X strategy from quarter few of X.Xx quarter. were unrealized of from unrealized value The billion average XX, increase an as in and gain the of increased our further importantly, commercial includes to by loan portfolio which Slide an a a service position. a ratio rates. billion remains offset shown the coverage diversified the net in hasn't on $X.X improved during another average quality,

have manageable to importantly, a high We diverse and exposure and and liabilities our long-term. sectors, risk other are alternatives

and We This in quarter were have full-year the forced disciplined to and $XXX estimate start the liability million The on impact lower losses that $XXX asset with crisis. the fourth quarter’s drift in approximately the quarter. aren't management, drift call. is of credit from range credit we The from sellers. given million million, than losses last is credit with the $XX significantly and in estimated million $XXX estimated improved now million, range $XXX $XXX impact the third the million XXXX we at of in-line

of businesses throughout and Our of us served well in with growing XXXX. across November our December. integrated our late emerge strength the diversified and model Signs business recovery with many financial and in discipline combined year momentum

our optimistic please for into questions. and the more provide our guidance open prepared on for XX our outlook on year will This heading remarks. Operator, We’re the details XXXX, call call. concludes February

Operator

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

Ryan Krueger

still in capital have Hey, clearly capital deployment. was middle good on Understanding the morning. you pandemic, position. question but we're first a of the My strong

capital your start the on to So, emerge once priorities we I could management comment hoping from you pandemic? was

Dan Houston

got she to out This as It’s And in in pointed Ryan. prepared ask board Deanna morning, million. comments. lot is of I'll a Dan. respond XXX good authorization. her runway remaining of We've terms Yeah,

as and also drift, want always historically, heard favorable approach in tried for very insights? balanced Deanna, find some take frankly, to very her we've But to we credit give deployment. You a and comments losses, related have credit ourselves a as to position. we capital you

Deanna Strable

but in strong and Dan relative market we on which very market capital us deployment future range I'll our the more expected Yeah. did the with line quarter bottom you'll options capital to fourth very on be for disciplined of balanced currently start today, re-enter quarter the due certainty to in are where obviously early XX continue sit our but as we as all ended, strong in as market we March At is, We million have here buyback deployment deployment. to the see and suspended the purchases turmoil, February at where outlook first in there reiterate more capital opportunities call in XXXX, table. well our position, the the a our external capital and position, I we’ll and think impacts. start

Dan Houston

have Ryan, a do you follow-up?

Ryan Krueger

just on a to is target, to excess of Yeah, your XXX% towards both? the RBC drift sub, out down that the Deanna you or trend the due take credit expect one of to comment or guess, that dividends expect combination I

Deanna Strable

It's of both. probably a combination

given probably but saying lower XXX]. we And was] we're to expectation. this the quarter, of it's has did said million, that the businesses [I expect on around very market been around, expecting say drift – support unusual range us XXXX remarks [XXX we million; Obviously, even XXX with XXXX. hear a the helping government through did that cycle, prepared You do some we done from quarter, impact in our in this. again, a and impairments Last XXX

that some company there think will we do will we of we So, be to also the impact, company. dividend out but life the expect holding

So, it'll be of a combination both.

Dan Houston

the for Ryan, questions morning. Thanks, this

Ryan Krueger

Thank you.

Operator

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

Humphrey Lee

you in taking my growth growth signs and question you My some recovery thank SMB especially with remarks, is, for you have terms RIS-Fee confident of Can market. benefits, color provide how in And you reached you that you what an saw in in specialty recurring positive seeing your deposit talked in-group line inflection top morning the of questions. additional about prepared Good first clients? and in are from point? your

Dan Houston

matches, economy Humphrey the large employer the comments, the have We Yeah, about as in-plan that more and and recurring gone was these And you to term back, these are We of we've SMB's drug like green incredibly within although of your where, said a know, that's the businesses. you're know, it these sized and shoots, some so And XXXX long, know, green time, there this resilient. in asking got lot growth, you back that. was of small-to-medium we've in had I that for deposits, by point and XXXX frankly, prepared seems returning on question. reflecting encouraged just you very intense. used exposure it fraction shoots in through a cycle the been we're

there's insights. additional Amy some fundamentally then So, those go strong we Amy? Renee have that feel very first, recovery place, with but in a and I'll of

Amy Friedrich

question. the Yeah, sure. thanks for Humphrey,

and for I in that we think things I'm their positioning for. getting that that you is harder are it a confident the to the And recreation things small almost is good feeling that that. the those lot that we're finding going necessarily travel industries time like like those gray like in going and having be harvested those industries, market openings and benefits of pretty white Keep a pretty providing manufacturing where industries, confidence knowledge, I'm not tourism color of of have in are and mind, a of be they level and business the and they We're positions seeing right now. small-to-mid areas from will feedback about for and kind asked to some the again, where continue. industries. in owners provide really, staff the most, size

see we're good have we're growth. getting in and So, is deep industry a broad ones where business is footprint small least the to going what from the we that

Dan Houston

Renee?

Renee Schaaf

Thank news you the pipeline, that's the pipeline as just question. see a But bit. plan a performed did took that tag and rebound. much last at the we our we how begun really very to positive on result look true we early the the When see And course of little market, over that as the that's in that year, a Yeah. And the mid and decline to that for is pipeline small year. has for significant the COVID, as of for well large. for

point of course, recurring at deferring, climb in see respect who strength the the it did actually again are So out. some deposits, participants when we and reached and that signs back showed continued but number of decline, that May, showed to the it just low of in-plant look recovery. of then since to With we signs its enrollment

same we we're those is seen very Dan's So, to encouraging matches, year quicker the begin And market. in-plan one plan level sign. deferrals of are a to point, employers ago, are nearly small reinstatements with the happening reinstate that we have at would very and seeing which

good signs all So, around.

Dan Houston

follow-up. a Humphrey,

Humphrey Lee

Yes.

second my So Luis to Principal but him questions, question next in Luis his related the to before congratulate upcoming would I on and is wish like retirement chapter. for his International, best my

asset management the [Banco re-launching is, do reports question [sale partner my – in your Brazil Brazil] business. of] So, media is the suggested

your two-part a have Does a on impact that partnership? guess And I be potential would the operation sale JV in business? So, of you interested any question. also,

Dan Houston

deliberate deployment knows to a do Yeah, we be as to successful within has build Luis but approach you and maybe capital going thing capabilities, the Banco, to in take organization, Walker, great want has about it's what thoughts thinking have And very frame don't a to It I scale. they've is on bit acquisition to Roberto build and further great on about to on you Luis these partner And our little anybody acquisitions distribution. so years, question. them been our about one all what and know, around that PI? a well, I'll or of say think

Luis Valdés

and and you Ben that look in. in this able Sure, we I'm same experts, your Dan. [things It’s best We're every Having are, mentioned, said far. the for as that, Humphrey particular have Two the eager to to U.S., look, by arguments always largest but good we out continue we're Brazil there] Latin to managers. Brazil. be that for of put to particularly referring with be going are know, strategic and very morning, not you together. in opportunity country thanks that economy to have going might we pension experts long-term is us. a single America, opportunity asset wishes. saving

any we're have a future we partnership So, in one, Banco with going order in to in our to we our might pay ways to. management lot in one we Banco. of platform any runway explore, do extend to own or Brazil, asset attention long including have explore about Banco, opportunity Talking particularly given that different this a

say We're eager to more about the about come, Brazil. I would come years to very in in So, country particular. that that

Dan Houston

the question Humphrey. Appreciate

Operator

Bhullar ahead. from J.P. go come The with question Jimmy Please will next Morgan.

Jimmy Bhullar

Good morning.

matches, of have view do getting deferrals First, going hardship just terms and abating when on how better high mentioned you the and your DC that's you what's potentially? in market, fairly but and withdrawals, seen that trends see on you

Dan Houston

Yeah, Jimmy, Renee. good morning. it And it's a great to question. And I'll throw

encouraged withdrawals, worn have a of those provisions away. hardship that remember that Just now had within Act lot CARES the actually it

what Renee are. is guess Renee? frame So, my her expectations can

Renee Schaaf

access provision funds the the included And just allowed Jimmy. XXXX. a particular Dan referenced, you. of morning, And thank Act provision That it end for all COVID-related hardships. required at a sunsetted that to participants simple XXX(k) penalty And Yeah, without good as financial was signature. CARES

withdrawals hardship So, at on now, COVID-related end stop XXXX. we've been they to a that came of reporting will the the

requires will, more but plan, to hardship a hardship stringent withdrawals for We of normal course, see continue normal much evaluation. the withdrawal

historic to we in and on so, that need pattern, to a that the comment anticipate future. And be will withdrawals return something hardship more not will likely will

Dan Houston

You know Jimmy [indiscernible].

Jimmy Bhullar

the of through – then the in third the January? [Indiscernible] third quarter first quarter first first the through of

Renee Schaaf

Yes.

withdrawals, came So, a XXXX. the end definition, yes. Hardship of by stop to in

probably net something the withdrawal closely the forward accessing stringent going aligned see overall that And small, for relatively now, so hardship flows. out those be more definition stands more much see will If be to economic we'll not have respect we'll And that cash be it'll again, our uptick, funds. with will we conditions. with an and a pattern

Dan Houston

Jimmy? question, a Do second you have

Jimmy Bhullar

Yeah.

Just benefits. on specialty

then you especially through people business initially, in surge to and went with you where through do and [loss product expect in as your year, deferring trend recently? were dental So, claim. up dental there noticeable the catch the in care any And trends], this trends last margins you of in sort cases how Are were COVID patterns the you to seeing year? had

Dan Houston

Amy, please.

Amy Friedrich

for thanks question. the Yeah,

about You think a things know, say to fourth just quarter. I couple

fourth consider higher as the don't of of those right a those we'd in terms dollar restorations, they didn't like a what and little as did were in or quarter, What severity. procedures, normalize about severity do we a I saw dental We lot metric. December, fillings was or but quarter would fourth in bit utilization talk we more things think thought normalize had sort of frequency a extractions, a so activity, we disability end business, particularly of the at year. lot, on the the much

XXXX got comfortable offices so, their they've PPE, good their with in back measures down care – and the are safety people put I'm they're The flow in dental patient dentist. got what And a terms science for are dentist to is using are going it right they've offering comfortable open, seeing expecting of place. the

for to that So, begin hope normalize claim just my will for is back XXXX patterns dental. to normal we expectation simply and

Dan Houston

question, interesting sort high of that Jimmy, get out requests economic you're the data is and was number requests. million. recovery at for poking that. I down point million around May to unemployment this thought saw peaked watermark macro One that on XX.X That benefit I I in X.X was now

And than to in it's considerably. So, my business. significant towards although And sized of higher in Hardship growth still guess loans, etcetera. that down pre-pandemic unemployment tie the number measure, that's request. going is is directly the small-to-medium withdrawals, benefit reduction number

wouldn't for XXXX. the I significantly that the be Thanks to throughout surprised balance of improved question. see So,

Operator

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

Tom Gallagher

Good morning.

is margin bigger level to First unusual unsustainable XX% growth about I at highest in revenue guess or this or in we relative recall question revenue over expect in into I was being we XXXX? a above quarter. roll something side this expenses increase the it on the well as the margin should the there PGI anything whether your target,

Dan Houston

Pat Well, – know in. all Dunbar Halter we stepped is retired I and Tim

Pat, higher from on That's so maybe for here? question And count margins you. we can my

Pat Halter

and of confidence for Tom, message vote the Well thanks Dan.

aided obviously quarter. I think fourth the strong strong market performance the Tom,

management, expense revenue, net We’d also strong a minute think was really alpha fourth the I that aided generation strong also very generate in about cash our talk additional I'll quarter, flow some think which a cumulative strong. to started had just I and

absolutely terms was strong of it a in margins. quarter So,

right margin now our know, quarter you long-term and the fourth the in to XX%. XX% As second third half of above quarter year guidance were XX% is

in what about attracts a in I going quarter. know, think, the our forward been do expense your markets, so call first that think, a terms is in Tom, in trying from as going of revenue, question, benefiting question And in we we're with talking fair we more to good results, forward. we net an of And favorable obviously you outlook flow. expense And up alignment strong cash produce continue and expense the to be February. some add, to approach From have have investment the to disciplined go we'll from coming our definitely I seasonality continue have margins controls. terms the perspective, good the and But which expect

start And of we terms structures we on in in probably back we the think have that terms usually As reset probably additional obviously, have have in for comp you have incentive teams road then that's some clients. of recall, I payroll expenses if will back see of do vaccines see some and first growth. on a positive potential and we as them, And a developing distribution compensation invest, we see is growth, to travel, We see the through for coming to to the on our have to little we going that expense of quarter a taxes reconciliation going margins. long-term important some bit very our invest Asset we get continue impact the will of a forward some Management Group. part expectations But side are too. the and

come more feel right Tom, to So at we're that now. I good on where but about

Dan Houston

you follow Thanks, Pat. have Do Tom? up

Tom Gallagher

spending to nice this question, know, a I guess, push I but XQ, from big directionally. there lift similar was but patterns, when on just in have seasonal margins RIS-Fee, year. do, Dan. I we typically different XQ a you expenses go Yeah,

more a Would – and that in So, do. bit when improvement we RIS-Fee roll we we pretty drop muted to margin in an see extent be expect in the didn't you that normally the we than big see normally see? big at uplift XQ a or will into least XQ expenses, to still

Dan Houston

want on you about February provide know thoughts And have in to Renee, we'll there? I the talk call. outlook your to more

Renee Schaaf

we reset. quarter, will the the first you With to Tom. question, for expenses respect see of absolutely. Yeah, Thank course

had think And of previous that have I line seen anticipate to of expenses see with that now out the by looking the you're there. you're pattern or unusual what we're anything we and with other quarters We've so, at particularly don't be of I to looking out that's Revenues, first margins, are anything or going revenues. With market. course, so a impacted end, respect at block little rates, nice a for the models, market ordinary tracks remains which Remember lapse of right that nothing the see the bit we’ll with of so it to business, because in far of with out that that still but of the really there. rest this way our anticipated by the performance are IRT pressure in-line how be on so of that quarter, seen quarter. the

with can get So, particularly our ordinary quarter. that's the out seeing of I'm in into remarkable anything more call, anything or first the not we outlook upcoming but that's

Dan Houston

Insights. helps Hopefully Tom? that

Tom Gallagher

It does. Thanks.

Dan Houston

right, the for appreciate it. All question. Thanks

Operator

The Please of America. go next question will come from Josh with Shanker Bank ahead.

Josh Shanker

Yeah, thank very you much.

question. First

in thought costs we that bit the acquisition million the at for $XXX if a close, And come guess end? better more was that On looking? retention transaction at is the earnout should potential considering be anniversary IRT integration, would transaction when the than how two-year there the was I of of modeling

Dan Houston

it Yeah, thought that that than might suggested. that that one got a around I'll of would little question. we take from earnout transition. an better There won't what and belief be That I what modeling We've our quickly. seller earnout. was appreciate bit experience structured the be the

we in completely our a an be earnout better end but that generated was second there seller. Renee included Josh? already would a would you that what framed had fact we've have retention not the likely So, modeling, investors, originally Do as having question our within numbers for earnout, that the up have to would suggested, we not and

Josh Shanker

Yeah.

should ongoing I – This an we ever, happening or quarter what's guess, ongoing quarter and, understand whatnot? life very being that numbers? the department? the first in is is term to is anomalistic, obviously want Just contributor, something consider in sales I guess, of successful fourth comp terms and the maybe

Dan Houston

drive we stories this about one sales, business. but where in, only helps was that of technology good solid invested can this talk Yeah, how those not we've

Amy, want So you to help there? us

Amy Friedrich

Yeah. Thanks the question. for

accelerated really are straight made we in through term processing. glad the So, digital we life investment

the to us was keep demand. enabled that was, up do what really with So

as And it things or that an things We're our doing through processing can some of imagine. the would be We've accelerated made straight done are and that really trying it of digitally. to the you of much you handle process, easy through it's to some can distributors. underwriting sure all with extension sort simplified make that we're that though

and distributors policy. front of e-delivery not So, a It's way that our the this all intermediaries facing just digital through it's of to get take customer. the to advantage

a I we so And of got of little culmination year a of when bit and whole think quarter, the a of making throughout fourth fourth fully sure bunch quarter business was it processed.

market overstated to of term very our matched is So, what would I the with we probably high for model, would life. is bit say a think capabilities terms little in but fourth quarter interest

I continue of So, assume sales would to growth. life that portion up a our healthy really makes that

Dan Houston

were side, And – technology all a in applications were the medical XX% XX% noted there of were on an I done e-delivery applications that of format. just online, Josh delivered the and

So, area. within the Thanks operations questions. really for life the efficient

Josh Shanker

Thank you.

Operator

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

Erik Bass

most market to earnings the thinking XX last this earnings Hi, million levels there, but were was underlying of quarter-over-quarter. the I talk I normalized about favorable hoping thank you. Principal some could the XX drivers million of and for you I and power think currencies think quarter, International and quarter

going other about be So, forward? should thinking dynamics are we there

Dan Houston

you Principal a extraordinary, FX And these encaje, appeal and the related that of at but changes, been been glad there's world, regulatory frankly, just been inflation around you asked fundamentals growing. and these currency every they're businesses Because, amazing leading you of know, challenges, back there's there's headwinds numbers, you lot question, look International. into job and it done to the you quite underlying time an dig Luis Erik. they're I'm Yeah. has

And this want that, to Luis, you help us? so, for frame with

Luis Valdés

question. Erik morning, Good yes. Well, a is this great and

We’ve out right. in you're the rate $XX third run our as a quarter. pointed So, million

you of cash that can XX $XX and we flows comfortable that reason activate Now, net China, had quarter. delta fourth market in saying that the money China we're to main The quarter. the of for million that funds billion representation more is customer much negative third is a delta $X in better

So slight America more that for Delta that mainly incurred expenses certainly the offset have the expenses, than FX. severance we additional that is other tailwind Latin in we

there China. is the hard So, question. situation a allow you your if clear working super in for overcome we me, to answer are in order And

whole by interesting very developments different and equity had year. the different for in like increasing funds AUMs funds have in funds We XX%

our We more in customers. adding products to order better serve continue

So, negative fourth that and customer but overcome have particular billion] cash China, quarter. I'm quarter we that in good flow of in positive [$X to about net we the still amount suffered third

Dan Houston

to technology. the of which One proof pretty I in points China, back extraordinary find

an you the new quarter XXXX, digital went of a money we purchase to customers. equity had online didn't In they other back If market equity fourth words, purchased account. product. XXX,XXX They

quarter fourth the equity of was X.X investors solution. For an new product through this year, online that number million an purchased

Luis So you it's creation Do much again, the intact. very about underlying still we talks China, value think have follow-up, Erik? when in a

Erik Bass

looks can equity color flow we an In you. really some I like level. in softened there's being at if just second could PGI, fixed rebound trends in the more particular, was switch but provide around it a Thank after you Yes. think Maybe flows income the quarter. I been have asset strong hoping class to demand,

detail you if there. hoping provide bit a just was I more could So, little

Dan Houston

want Pat, help us you to do there?

Pat Halter

thanks for Erik, Yeah. the question.

see think quarters Prior in was quarters, offer of a estate. vary generation choice. terms we that And I we lot alpha real value things value, quarter we great income. of lot strong of strong is, being and of that And about in provider like fixed a platform this quarter the of our our a capabilities of flows choice from One global quarter-to-quarter. offer a a things also in we sort had

providing And And so think that in enough asset going solution-oriented my this retirement, that as capture in we retail, marketplace. choice, can guess, management be choice. a our firm sort share provide of the to continue marketplace, and and institutional [indiscernible] segments of the global throughout take we're money my I is, very to there on all and motion is the world

real income, those and strength continue asset little starting we're So, alternatives in interest well some the a to again. bit positioned we pick my estate opportunity see think We in globally to actually of think will investor from both in fixed our quarter-to-quarter, up in classes candidly estate alternatives. see we Erik, guess, again a and pickup some shift but equities, is in real we're

Dan Houston

So key our your aligns demand strategy that I well, well feeling today. think what as awfully you're about method confident of is investing consumer with

Pat Halter

investor flow Yeah. investment base also. have in starting and are in started U.S. becoming investment That's in it's it's global that think I of of really from Dan. We and well-positioned our we're in really a the seeing and Europe, a corporate take sort support think terms great of in great ESG, processes future definitely approach all really an it to to hold more strategies I ESG, of capture follow-up,

Dan Houston

thanks for Erik, questions. the

Erik Bass

Thank you.

Operator

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

Suneet Kamath

morning. Good Thanks.

looking strong is the a of well your are earnings performing it pretty Just deck, despite, of margin, Slide know the RIS-Fee show this feels is at so down the XX It based markets. like you lot business on you normalized year-over-year IRT equity about XX% seems that like legacy business.

in through, terms help versus the related some you how shock on excess lapses? maybe of can you're think the So interest of is us much of seeing to what reserves pressure

Dan Houston

understand pressure of want you dynamic? to on IOER. this Lot help Yeah. Renee, better

Renee Schaaf

pre-tax quarter absolutely. adjust the you you a you are over the things of question. review. – at look Yeah, of are operating And that. quarter couple impact fourth fourth and adjustment actuarial that you thank When the XXXX earnings, for XXXX that take impacting out There

performance play, a a into by as reserve then right It the revenues lapse model. there. had helps is and we but definitely we it offset running First off, comes thought of that $XX million result a is shock nice help lapse deposits, would, Shock and a course where originally IOER about did but when that negative also market from revenues, impact is the upward. that lower of has

this the and So fee pleased we're the of fee we that compression pressures line normal of course shock with and with there's lapse business. then see just very particular

This in be allowed positive we're serve in the when one is all the unfolding this of only overall, line us United acquisition positioning future how not propelled plan of we States, of when providers acquisition to growth. IRT at has the with and performing are and remain it's business leverage we we to how very plans this sizes how pleased look and this on So in market. capabilities add the top given this look transaction to really fundamentals our is us different for the platform considerable it's and number three to us retirement also large us to presence a strength of integration,

So, few of can when see business the acquisition see fundamentals we of unfold and course we begin the look the this are that we'll ahead, next we that over anticipate that to very quarters. solid and the

Dan Houston

our around of on ends I the few end the Suneet, also we'll the next have the at of the XX waves, arms you'll think, metrics, the when which reset quarter. we of second February, completion integration see the of

model follow-up, metrics the use measures think your and I outlook Did assumptions you and So really have you'll good Suneet? call. you can after have that in

Suneet Kamath

that. for That Thanks did. was I did. helpful. I

the as opposed is from to count, just wanting charge from AUM. AUM, based is in one of of fee competition, hearing player just not coming to that fees things not plans space head another compression So, some we're the but the on from retirement

that count head just So, rationalize maybe seeing on opposed is AUM? a as try as on based companies expenses, thoughts model charging if that some you're curious to to better

Dan Houston

that's for but a think Renee, don't time, thoughts large very your in case existed the long a I market that's new phenomenon, there.

Renee Schaaf

Yeah, absolutely.

different want bit little activities on want market, more based fees on you to charged get and plan plan a or to as it fees more assets, participants smaller have we rather. based So, ways larger based. that tends them activity be other to sponsors the to Dan in a that as be of variety tends into market to And mentioned charge see or the

do how that it’s plan point a remain in normal it's constructs, used objectives think flexible, pricing work market that is to sponsors something our plan best we flexible the and to are part dealing of we to that their I just will with figure though, ways willing and we is out we're with. the reflect we're

Dan Houston

and commonly used, we analysis finalist revenue our we Suneet, handle it on this a what most are year nomenclature to these our the different are, there the about a any sales that comes a questions. XX% required know as presentations past business like new which plan, so TR that's is on to takes know revenue new the complex margin Principal. of economics is set Seems targets that's that Appreciate and always of case, what we in piece know more the

Suneet Kamath

Thanks. Okay.

Operator

final Please question Brian ahead. UBS. The from is go Meredith with

Mike Ward

Thanks. is Hey morning. guys, good Mike on Brian. for This Ward

$XXX Just expense certainly result. in reductions impressive XXXX, million of the a had on question

expect you pick Just you XXXX bit? any to that had up a curious sense if recur of or maybe of how little much in might

Dan Houston

Yeah.

XXth, we you we certainly go-forward. had expenses. to But XX% million we'll So you we you'd outlook on about or not? would thought million, of said to give what anything that like chat about $XXX Deanna, or of that we the in our $XXX on have else when prepared comments if have the add our

Deanna Strable

No.

numbers think to I talked what close last as quarter really are we well. tracking our about

gets some ended current would have we so So And is on that it's is net expenses what from million our XX%, down fourth pre-crisis, at the obviously expectations we about that revenue thought million would you XXX, year down $XXX what $XX XXXX, quarter. have of the anticipated, we with of in happening COVID-related. compare to if that that we

really revenue outlook margins at again and upcoming is reiterate focus our those call. our on aligning revenue, expenses on but with our will targets the So

Dan Houston

question? second a have you do Mike,

Mike Ward

question. strategy a Thanks. high level Yeah, just

has the lately. Industry in there and So, M&A an been Life uptick Retirement in some

view could you you two you businesses, business, complementary these actually franchise but insurance or I to wondering today some year wondering spread some a maybe underwriting ago. of comment your of some Thanks. Just versus more interested opportunities and if know be core how and or or I'm risk know on evaluating less you risk might maybe hedge if are your in much

Dan Houston

to Mike. ourselves a risk deployment. third by question, decision to managed of just quarter. witness do the closely for we as divest and what And in an our look review completed literally in our at quarter obviously you We actuarial analysis the Thanks We the could understand every business Yeah. India, capital portfolio, exist. we risk

our at we look we aligned. and when they these point, block are They're do. So, life what are annuity complementary. block, core to And strategically your to

owner Life business out comp deferred part are executive Our the helpful. very funding in that of solutions, produced large are vehicles our division

the but customers smart We those for us use are at looking These to sheet time, to we we how the be businesses, do are balance in provide intensive price income we guaranteed party Our purposes our retirement. business present about options, want it features. present for third component good at much we appreciate and various time, feel we very very but the but model question. how and finance parts, about and the reinsurance evaluate

Mike Ward

you. Thank

Dan Houston

So that, bring sorry. we'll with I'm – Please, operator.

Operator

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

Dan Houston

Yeah.

us for just venture our you expand And and our ready to be ups. available go, He and partners. Luis. the appreciate going Luis to read Principal Humphrey, as to He'll and I grow job. sounding by. to of we out couple board your to to Chairman a Board I of an be shout the Luis, very of remain you a Roberto had noise, lot close be there. me, certainly for help in again, helpful presence. comments International will great and to the I be extraordinary years. I for international still I relationships write to Thomas your guess. quarter was of joint next thank to beat know our continue Sorry will is He with this punch

of global pandemic, a noise. to We a going be incredibly lot in think midst to try transparent you're get the you. I of with

appreciate thinking but to certainly on to well-informed you with outlook be We the your conversations want we XX investors, As is. our with having the what support. look February, forward deeper of

to an So call end. the with Thank bring you. we'll that,

Operator

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

You disconnect. may all

Principal Financial (PFG) 29 Jan 212020 Q4 Earnings call transcript