PFG - Earnings call transcript Q3 2021 | Principal Financial Group, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

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

John Egan

Thank you, and good morning. Welcome to Principal Financial Group's third quarter 2021 conference call.

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

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

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

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

Dan Houston

week, our targets John, celebrated additional of and with will third results a financial the and morning, Last everyone quarter. the third current follow as progress for public XX as Principal details capital as Thanks, quarter and performance Deanna our on discuss financial and to key position. This years company. well our I we towards will welcome the call. strategic are the making highlights

today. billion we've serve four provider Since million in financial to to our the we a $XX from $XXX by times eight to evolution insurance XXXX, $XX a has AUM been nearly $X remarkable. increased And Our number customers from our than trillion. million from services of more has times IPO global mutual increased company nearly

time, two we volatile and at June, up growth and integrated society the the in into customers. long-term into deep markets by customer our strategy the of how Day people act what decades, our Investor product last and a and our grow geopolitical solutions, planet meet select us access footprint, drivers, on puts our the strengthening a position shared growth leans higher and retirement in needs financial through deliberately crisis, and the that the At ESG complexity approach focused our and global offering, advancing for we grow evolved portfolio, a to security global stepped worked we've way and to and we've of a on carbon At to and changing markets and robust same strategy the Over communities business that's our and financial pandemic weathered benefits financial go-to-market reducing guided more have conditions our businesses. future. we management of center and do which advantages, in benefits are positions focus customer competitive established asset and reach. at how and leadership value our enterprise and We our higher growth, long differentiated our our U.S. the today to shareholder markets, emphasized global a through protection emerging create win, capital the and U.S. efficient the more

near-term targets. Slide financial As are to X, shown achieving on committed we

retail of excess executing engaged and XXXX. more insurance by the U.S. exit targeted on the $X announcement earnings our reaching blocks. actively fixed the return the share business market significant nearly the share retail great capital the of strategy prior quarter. conversations XX% end our our In confident, of through per coming the U.S. secondary guarantee the counterparties And We're XX-month have offerings. focus And Excluding a end in target and range. a executive our towards with of X% we've delivered business in U.S. now of our return solutions individual we're universal management strengthened business, high our progress business, way XX% life our of third to to annuity shareholders fixed capital as end and business retail, deferred the insurance equity. on in and With We're to on our to on owner months. annuity non-qualified we'll to U.S. basis, are on sales variances, solely life is trailing at compensation making life see of we've XX% segment XX% increase transactions billion for

ranked & see of fact, business strength benefits our count market, both this the our beginning With insurance case premium focus terms strategy. in of in we're quarter. top already Principal provider on case strategy life the the go-forward underscoring In intense to Associates recently executing our on serving customers, and Ibis in small third and

the in Slide we to $XXX Turning of third non-GAAP million X, operating quarter. earnings reported

business retirement more migration net XX and prior and was the in the year net quarter, flow than billion XXXX, months, of many quarter increased cash the of earnings quarter positive with flow variances, driven flow quarter businesses. $XXX of all units. billion, our AUM by We the over XX% conditions, business billion total $X.X significant company the retirement with our Total of improvement U.S. trailing XXXX, reflecting a robust the institutional of AUM across in third market quarter third Total compared managed strong over the labor billion the growth closed net X% of investment across assets. trust a increased third double a to and Principal. including cash Excluding of performance macroeconomic positive cash AUM in $XXX of by including third $XX

and record positive in general sourced billion with $XXX billion account. outcomes AUM institutional, and billion across quarter. quarter global cash mutual PGI our results platforms testament flow of our AUM on $X.X flow was managed PGI through integrated $XXX for third to net fund In are a record a quarter focus cash of delivering positive generated managed Third capabilities. solution asset management, customers debt the and our differentiated

ETFs, As shown accounts XX% separate for long-term XX% Slide and the we investment trust deliver collective above mutual for period, five-year on investment the XX% for Principal and strong three-year X, as median XX-year. funds, of performance the continue were the

our four Morningstar and rating. assets. XX% or five funds, For level to had retain attract fund AUM performance star us rated to a continues Longer-term of position well

real estate demand. flagship including Our securities, yield products, preferred in to be private yield assets products and continues oriented and high

XX% participants, to These in retirement In employer retirement opportunities quarter. We to over and well more in supersaver RIS-Fee they XXXX. saved the ESG XX strong a less. investment retention, variety are trends despite IRT with the record strong to retirement the they are deposits quarter legacy combined product these This transfer in deposits $X only capabilities recurring the half contract expanding on to shows of debt and as demands. have looking matches said X% contributing market third retirement increase reflects plans study direct RIS-Fee and participants vehicles categories lending that said compared approximately third the for our billion principal deposits XX% from block, our as client and cash of of positive deliver migrated recurring flow meet the U.S. growth volatility during the reported increase their in deposits evolving last over across pandemic and and save capabilities of months

the and flow AUM diversified retail $XXX captured asset billion MTN million cash net Principal are total RIS-spread all net pref. during investors value as of we’re and GIC nearly China a hiring and and we continue quarter, classes, to higher flow cash International billion our revenue Benefiting under sales see seeing see benefits pension nearly for U.S., robust growth in almost XX% demand the sales net record from included the equity, $XXX and of of year customers third businesses in block AUM billion with quarter, generated we benefits, had of a including for in sales. we in constant quarter, AUM trailing flow group was employees. across $X.X protection, through quarter. the year-to-date, and AUM Additionally, million to the we’ve that flow. growth funds risk debt These increased X.X% look which for basis third With of and for Outside BRLXX growth of a X% the of issuances trends which U.S. X% solutions more of net cash Brazil benefits not group in than higher in continue the notably ago. positive increase reported flow in add was added in AUM a billion products. these billion XXX $XXX XX-month in compared AUM transfer market flow XX% third million $XXX currency multimercado $X.X now cash reported in to account cash negative strong wage in $XXX In value cash for of is funds. Brazil positive Despite favorable our on the

Turning used bond our our on million commitments. that issued initiatives first quarter. sustainability to ESG the We to continue $XXX bond Slide and be X, green make efforts. will social reinforce we ESG our progress The during to proceed support

municipal bond impact the launched also a during We strategy quarter.

primarily Our account. net a the as to is first offered U.S., clients high managed separately in which worth

the client We’re products products enhancing while growing the and focused products strategies these developed world. existing around ESG new meet on to for demand

about We’re opportunities lie ahead. very the optimistic that

will in build businesses, many our our to we over our greater this bring and to for now translates turn are value to of portfolio Deanna it into who create our momentum our into As greater I’ll drivers growth continues how results. evolving focus Deanna? to further go shareholders.

Deanna Strable

our contributors financial earnings million losses. the on reported morning third Good current the as on morning, the quarter $XXX diluted attributable or our update performance million per I’ll quarter, $XX Dan. million share an Thanks, financial Net non-GAAP credit well $X.XX share. was as income key to call. realized in and quarter, Principal with for million of $X the of to third of everyone position. $XXX This capital the to capital including in operating losses net We

share, quarter $X.XX and of levels and earnings of Excluding XX% growth capital XXXX. of X% we’ve operating ROE Since XXXX, the significant and non-GAAP increase respectively deployments. higher variances, the increased to earnings of through per million X% third basis $XXX nearly to end points compared or XXX diluted

capital operating higher ROE in as slightly rate businesses. manner due above grow more deploy We’re XXXX of our on earnings. range for quarter, businesses, a XX.X% The and purposeful track international the by to resulting capital was earnings to primarily higher shareholders end our XX% return return XX%, guided taxes XX% reach to reported from third we tax excess non-GAAP to year effective targeted our to

rate tax range. year full be the expect to the guided We within

by primarily $XX was offset partially during individual impact the by impacts claims, earnings reported a offset and encaje a from pre-tax we rate very partially by primarily than Slide significant impact had $XX primarily impact A interest updating variable review, to had quarter. assumption Variable a favorable $X.XX Unfavorable integration income investment the from a of than fees. impact annual to As of number benefit X, income and was diluted returns economic net cost favorable million assumption driven America. lapse shown non-GAAP result negative on in as These experience by actuarial rates. variances was per unfavorable favorable assumptions and $XX variable the lower a investment due Latin prepayment of net million life, IRT million higher third very share. operating the updates after-tax quarter, review were pre-tax annuity million assumptions. COVID-related in The driven net from alternative and investment pre-tax expected $XX expected performance to in positive third

the deaths quarter, elevated the U.S. ago. insurance higher $XX impact rates tax point While after group we RIS-Spread was in million net our life U.S. thumb, due than and starting approximately our basis assumptions, a COVID-related primarily we specialty with where solutions expected XX,XXX In points of the in benefits. to quarter, approximately XX be rule claims COVID the higher didn’t change year interest third is than rate long-term impact to

the with impact rule cumulative since line our impacts in pandemic While start volatile right overall of thumb. have our the been the is COVID of tracking quarter-to-quarter,

Looking compared benefiting ago at average in S&P AUM the factors macroeconomic was the from The the quarter flat values XXX daily RIS-Fee X% the Index second increased and in quarter. XX% the average also increased and revenue, PGI. quarter, to year account and third daily

positive on third $X tailwind $X Foreign basis. a million to to second compared a were a and rates slight a a earnings XX-month second pre-tax compared positive reported headwind compared included negative trailing quarter XXXX, the exchange a operating but $X Impacts basis. XX-month trailing million on million quarter quarter, to XXXX, to a

impacts comments business the significant the to following Turning units, variances. of of my exclude

pandemic. due uncertainties action took from reminder, to XXXX As a we the to reduce in expenses

Some like and hiring bonus accruals. third-party lower, of as the intentionally other advertising. and reduced marketing expenses expenses, including as expenses And travel, were naturally sales-related well cost, we spend salary

As the past revenue comparability variable impacting some pre-tax well revenues amortization. as higher the by these net expenses, flat year-over-year. quarter, have was increased year, DAC RIS-Fee increased including operating ago earnings have over offset were compensation and of of expenses with growth and results year

While we’ve didn’t quarter. been fully revenue the now in the associated fully the account transaction since IRT And value. is our results thus average in value last reflected migrate account reporting until closed,

XXXX. to basis rate ago. expect our declined a And annualized fee basis to we points between average points in compression two As XX year result, fee annual a from approximately points three basis be

the now participant based block fees. revenue mix is also sensitive equity more included market based transaction Our as IRT less and

the trust custody than migrate was outlook. later our reminder, the and business quarter will first of IRT a assumed As XXXX XXXX in what in

we As revenue to targeted earnings some fees, continue $XX quarter, in fees emerging, guided now the result, integration margin and Pre-tax the expect million benefited year in started end as at costs growth and operating are XX% fees, XX% benefited XX% year synergies margin. be a from delayed lower will synergies we the full in and and net third performance margin. our achieve of well from management the margin our that pressuring earnings to disciplined performance producing $X earnings expense we’ll strong have We TSA boosting that XXXX XXXX. continued as quarter. and and full already a Expense range. confident a to PGI million from management and in have

Looking quarters quarter our typically seasonality PGI from higher expenses than quarter anticipate we that and ahead enterprise certain of want to and variable investment fourth to impacts you of like IT. to income fees. the favorable other other I also fourth another remind and compensation are performance marketing expenses quarter, due

this our impact the be lower expect typical fourth We quarter of XX%. will seasonality X% to than

capital focused to to XXXX. available cash Slide excess holding grade capital, plan and million target to and end capital had to X, excess XX including the on the $XXX company, on by in higher excess of obligations, targeted of our liquidity $X.X are XXX% billion Turning $XXX than the to our to At next of third ratio capital our shareholders we subsidiaries. down billion at risk-based and returning our $X.X levels targeted nearly of quarter, and we million end $XXX of $X months year available of estimated cover in the capital XXX% be million billion

when to maintain late to a of and expect pay will to We XX% continue $XXX debt in long-term leverage XXXX. XX% million down matures it ratio

the in As billion remain over to during the $X XXXX, from We returning including beginning billion billion quarter, share of of to committed in in stock we million $X.X quarter, end $X.X $X.XX excludes shown of of capital common increase impacts $X.X the common This the we paid year, XX, transactions. stock or on stock $XXX third of of billion share dividends. capital Last million to including repurchases night, $XXX announced potential dividend dividends. $X.X fourth Slide shareholders. deployed payable repurchases billion $X by of $XXX the million X% the we and to a the a and billion quarter. $X.XX Since dividend common third returned any to

full areas meet and deployment refined where we dividend the Principal and to achieve capital strengthened will advantages we’re and approximately invest Through dividend focus targeted Our established for yield returns. XX% payout ratio on our in ability competitive targeted the has X% to our strategy, year. is track

path have capital high creating to We a efficient clear long-term becoming company, value a growth, more shareholders. for

the Operator, the about areas growth focus, and path prepared profile. differentiators, We for our This on please are focusing allowing remarks. improved with concludes open our excited returns, forward, for… risk call established

Operator

the [Operator question of and Lee Please Partners. Dowling go first from come Instructions] Humphrey And ahead. will

Humphrey Lee

My your and Good about for capital you my thank morning, deployment. is first taking questions. question

shareholders $X flow you and XXXX expected and draw to return excess generation in to the But XXXX. given the in down billion the cash RBC, reiterated plan intend capital You to free the capital end your flexibility disposal. about as Like at seems you right and how think be of year. now substantial capital? deployment should we between next There excess the to the size

Dan Houston

Yes. your Good question. appreciate And morning, Humphrey.

capital of with see I we And dividend when think the rigorous strategic $X very Committee look review. to Board process share buyback. the of a billion and you the through were the best way today targeted what of up leading is at it deployment we is went Directors this Finance through to

to through business lot as push it’s But is through next our acquisition, bottom-line of XXXX you potential XXXX. at that. want and be when organically flexibility year, is if mindful ratio But equity January here is to it guess we today. of add with have where comments. you in And our Deanna which as and for why she we throw see the also to wants me updating we’ll way be debt we’re outlook grow ways on We let the to a my that into that, financial move additional refreshing well

Deanna Strable

A couple there. things Yes.

lot bottom-line got the that I a have right is we to of think you flexibility.

payout that will we as And use capital third in capital matures buybacks, quarter on to to of excess we we our we of addition remain that million pay that continued In $XXX to and debt announced to deployment. down about committed think has dividend XXXX. have XX% a ratio that our prioritize

much numbers. those down But to path levels again, both we’ll we Holdco and Lifeco few again, to and the and targeted next we quarters [ph] through at capital end move our of XXXX. so by the the the getting the as very of are on refine continue committed And of outlook, into

Dan Houston

have you Humphrey? follow-up Do

Humphrey Lee

the Yes. overhaul for the of in about the of My the kind the Chile. have is the potential case been Principal? be business many Can impacts the about withdrawal second and question you in by talk on of dynamic proposed would just There headlines and on one scenario, the overall pension presidential proposed candidates. system worst what

Dan Houston

Yes.

to before. great of a touched because you’ll in it’s that provide And little really to It’s if trying comprehensive response, a we’ve a probably going think I question. me, on a allow it’s here terms elongated I’m So one question. important be

shut Just as is led a – that The this XX-year-old world PAYGO of biggest worked so pension percentage cap was working has or There a not gap well plan wages. income. quite too down. it’s and in actually reminder a payroll low model. system compulsory scheme in well. on Chile, to Its recognizing after was this having roughly compulsory building the in annual a the actual $XX,XXX around The of the Chileans was out up

works. model, was has So was that help the sector It complemented public goal. in it – which AFP voluntary that with scheme scheme that was to achieve potential private a a added to it people addition

voluntary, I it compulsory. was not said, As

Well, will comes and so government withdrawals, XX%. the be. have other alternatives those two election, AFP structures the treated certainly now being in withdrawal, of road annuity outcome ways it’s abruptly fourth withdrawal. have There of for as favorable addition timing to in the and that on a going basis. and been don’t looking But now although change. approved and trying speak And know very they’re these to contemplating second here a the a there’s impact along a they’re we this we relief AFP participation. AFP withdrawals and presidential were on withdrawal what some which tax we literally you know, And one magnitude the also low annuity pandemic COVID down debated, for contemplating we’re to a know heavily is relatively provide then It’s to as allow solutions and three

with to try improve and government educate have So answer working to The model. existing officials directly AFP to the decision key now the ways is to Humphrey stabilize extremely makers on question might be been your collaboratively the question. we

government. rights forward an to You Principal that consultation And did have as did look our investor or requesting conversations. again, with we those you invoke the may Chilean read continued

enhance the is good basic proposed support relationship. have rest all of Chileans modification pension interest We solution along obviously, that. the us. though that working a for an solidarity of with in the a We pension amicable We the industry, huge the retirement that protecting or There a model. priority want is the would

We’re squarely it. behind

think first about see a pairing that And be be employer with If could with you removing financial be multi-pillar folks of idea how security. sustainable to system. congressional of to then is XXXX based can the and a hard the system will session that there that lastly, and quarter working retirement in that’ll the to quite additive enhanced along you occurring try an working cap, promote

market. So decision very track definition a magnificent a just key the good job his with pension makers. good an and good down Principal Chile by is team record has working have policy. of had They’ve done there. a emerging relationship Roberto Walker

benefit So from allows to we hopeful still a remain us there market participant. quite solution a is being that that

this We at in the not To-date, way notice not which significant. are. what a tried financial the large you’ll are to time has collected. necessarily have in part they that And quantify with have fees been ramifications point

know this as for of visiting mind that institutional wanted than more been So our them. with to but investors a top probably has I we've know, you been of lot

Humphrey. helps that hopefully So

Humphrey Lee

Got Thank for you the color. it.

Operator

The go with Please next Ryan is question ahead. Krueger KBW. from

Ryan Krueger

is, at morning. Chile by but that thanks. big business in not earnings don't follow-up for I big Hey, quick is your affected annuity Chile. excess ask withdrawals, you If know this Good on how I – How could the point? just you one are AFP

Dan Houston

know find annuity. here the the I Deanna, quantify then besides it’s in supplement – quantify we'll it for want if that, you to that and also for yes,

worth us a pension for because participants have higher average large there which in the payouts has more the again gives actually of annuity number annuitants. you we have occurred endeared way, us. know, we a And we in part That number that put The span on a allowed scheme, with balance system other to on the us the do on that in expedited of participants. and mentioning Deanna, point a gained have that and allowed opportunity us place relationships in those as have the those AFP piece? do manner more to digital you literally

Deanna Strable

Yes, get to of But answer. can AUM Chile remainder you, that in back Chile if well $XX supplement, exact is AFP We billion. the of around of a couple fund Ryan. you our on don't have comments see the is I Page annuity. and $XX billion, look total XX you'll Cuprum would be our here. at that The as as balance our voluntary mutual the fund

So some it of there. – portion be difference would that

The having other of on obviously the viability Chilean pension for customer less that money have long-term has AFP in expand the comments base a thing strong to their been people impacted, system. our is upon fact the Dan's critical

has less and been customers. some we've the for partially done Our our digital of due customer impacted that outreach base composition to partially to the due

had zero second into next that of as the wide in at quarter, was XX% was and the Cuprum their a AFP to closest for competitor perspective, participants only it X% and of industry just balance put of end So XX%. fund

focused And I think security the that. to and that's so relative customer, a proofpoint the testament long-term a again, we obviously and of financial are on

Ryan Krueger

Thanks, Deanna.

Dan Houston

a you follow-up? Ryan, do have

Ryan Krueger

custody migration quickly? be occurs, the have you relative fairly much cost target, you RIS-Fee, million been expect I any would to trust of and On Yes. achieved cost how sense $XX to achieved give the date saves saves guess, and to then once can remaining us the

Dan Houston

XX edges. And on pretty to Renee have record throw some milestone have to be if business. challenges. that this this over was growth, the of Yes, you're acquire a Whenever migrated go I'd quick quarter I to that. years going of big successfully to past say remiss who it going you're block I'll didn't organic

to frankly and revenue good very the expense hats So synergies, Renee feel And appropriate for off have about her that. but add doing Renee? detail. the team Renee I'll and we

Renee Schaaf

thank question. for that you Ryan, Okay.

the the XXXX. We net are expense to of million on synergies end track achieve $XX by

you of have that an understand about rate have on far And to But XX% run is so recognized basis. we annual that.

So savings in you'll so million the we've achieved quarter, $X any see about one far. about of

Certainly as of record fully system we sunset this the in integrated, terms it think Fargo business the pattern continue on emerge been of In streamline and keeping trust Wells for the we the automate is us to us the to the to reduce side. synergy on will duplicate then has we once headcount. term, But allows the continue might customer allow It to gains processes, board. how experience. duplicate some That'll begin emerge. longer custody to

So see synergies relatively expect to to from expense you can will of XXXX. the smoothly emerge that now end the

Dan Houston

Renee. that helps Ryan. Thanks, Hopefully

Ryan Krueger

very helpful. Thank you. It’s

Operator

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

Josh Shanker

Yes.

into but Sorry to America it think about little earlier, that outlook? still on go further. little they're Brazilian need if the two a how and indicators impacts Can I a we they're not help I can go details helped wondering out they're, you talk to South diverging bit again. some I'm of inflation whether John some But converging inflation. me or whether not, your

Dan Houston

see in There's they divergent, helpful. been here, Absolutely. the stayed which helpful didn't the have is inflation of another. that on top to things quite two in addition and was We current that one quarter,

that a ago The year interest quarters saw X% roughly is and other from the move rates we quarter occurred thing from actually a up quarter. the to four roughly and six

that two are indices without inflation to back So and Deanna, improvements the for on interest course, additional coming any a higher in these of line rates inflation. separation. detail modest going

Deanna Strable

come But in converge call, of the just fourth third the and go back top Yes. we each after to Josh. we quarter, we – on yes, few if other. further as offline can they go a comments I'll the need and did in make had anticipated,

the pre did indices we seen of kind So when had again, of see separate. much two some more we what those current cycle

be difference. do over outlook our convergence, there than but XX we is But to expect experienced periods expect a more bit where little modest to of we've have some continue a that last So could that what you would the months.

again, anticipate what So what in the in but saw quarter that would more third tell you up here we going follow detail, can and we we forward.

Dan Houston

interest for as the of for of in market as inflation. deposits VGBL rate comes industry enough, when which flow. in movement, ironically still share the it We're to well leader spite roughly XX% PGBL the is favorable And the

results here by macro Did some a events. masked have operating you strong So up follow Josh?

Josh Shanker

Yes.

I gotten has held one if the is has that XQ XXXX the out it you narrowed gap extend in held gaps just or persistent, included not but – So the just presentation quarter chart worse? that

Deanna Strable

again, we that of third other on right the will they out, No, were for but each extend quarter. top

Josh Shanker

Okay.

Dan Houston

or better. get Didn't worse

Josh Shanker

rating little it's of look, on, your your performance not Principal deteriorate just it the then And bit we performance? on did think about whether third or and bias a a revert you're in talk you will quarter what the strategies or invests whether and or XQ. if can how long-term, wondering Okay. which not about But excellent. I'm current it is

Dan Houston

is how my and of on long-term bias Yes, it's invest guess do everything in we we that performance. in term Pat? a terms short

Pat Halter

Josh, for thanks that Yes. question.

terms in think the the Just of is I really question. one your year, on performance specific

third bit from second a is a a our in the quarter its their or to any performance. performance. to diversified the have We benchmark. bit One continues teams suite few concerns that very, strategies Long-term, relative to beat a the to the with have quarter. strong dipped very little process our peers, international predominantly with international But with Don't approach that. perspective that in that taking the performance see behind little respect below

quarter of capabilities bit the category. little sort international in investment a are that The other third of two sort

Now origin. very a investors international really, way quartile fundamentals and cap bias to fundamental bit a category, strong hard category. day again, I small are of lower in and our origin, there's strong what in that there. again, seemed looking been a relative of bias, keep With rated name little terms of sort the in And little preference have for. And a more to then our cap, we a to strong right third bias winning risk now quality quality just think a of from Again, small bias. up on be quality international quality

philosophy also. stay very capabilities investment our So our intact. U.S. out process, our round numbers for then are approach, two And equities. good continues just to those Long-term

first the in quarter well second and do XX% second quartile. quartile, to third continues equities funds first of U.S. or of terms Our those very were the in still

suites our to like and And our So high preferred, at rates, debt, five highlighted Josh. go-tos whether performance flows still and our is frankly, really all in will continue Feel significant And star equity to with their making driving quarter. us. it's that good suite. third we're long-term and munis, are as U.S. what net growth, us, feel about about that's the And suite good the retain international market activity see star pretty continue looking produce at a when flow to in line investors or you Morningstar I four cap and their continuing that our five our, grow net flow they're small with really receiving. activity ratings really decisions being or the emerging capabilities category or positive cash four we're yield income like cash areas to Morningstar

terms aligned still of to They're we're actually, feel non-correlated very what looking yield. we're for So interest. They seeing for looking our are experience good investor and interests. capabilities asset, in breadth still And exposure. of the investor the investment with I think, relative depth, about

think offer set I solution our think of inflation investment capabilities protection. also for that. a they're looking I suite for

is today global looking And real of well estate and investment to I And sort a think have, for capability fit capabilities we desire. need. long-term So that offering think that some a nice exposure. that suited are for they're I

time. the starting the interest in new And infrastructure. me I good numbers feel to one strong, and listed like builds our aren't think really at our I So also, things our I about continuation capabilities, point we're suite, in of think think concerning year see, this

So good front. that all on

Dan Houston

the asking for question. Thanks

Josh Shanker

it. appreciate I answer. Clean

Pat Halter

Very good. Yes.

Operator

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

Andrew Kligerman

Principal XXXX targets billion of questions. few XX% free Hey, some to to $X.X capital my the the That from management, over XX% questions cash on company. about parent from XX% With the good billion parent represents to of $X regard return earlier A follow-up morning. the to is be the the that to subsidiaries figure Investor company Day June the timeframe. XXXX would capital earnings. to roughly through understanding But XX% flow

room on So both little just to to as on flexibility particular, $X.X that XX% range. least hence, at there's for XX% probably in I about know it's and it that that zero number want shy bit $X.X of talked, and flexibility I then that billion I think given a talked is north the of billion another you Deanna earlier. about And because in that figure a buyback? Dan possible

Dan Houston

Amy, want go ahead to do you and that? take

Amy Friedrich

Yes. Thanks Andrew for the question.

term, stay a work XX% and we the in any that can our be they by make to free and that that So, transaction. do feel businesses We into XX% volatile one post in across that we components can over But period. range, to remain cash obviously long we're of flow lot continuing be sure to and range. there's go

could that timeframe, timeframe some So think through to upside but as years. number you've of not again, in next there some couple around done will I every we're the There we be the particular be math, that, think to saying the as volatility range. that relative be could

Andrew Kligerman

and questions. on think earnings. the of you it's is – to respect on right that then would? there made around to did Excellent. capital sitting how X% And I'm that Could Could you not think business, And be if decision if Chilean with up that then [ph] you could extracted just following that? I – you and clarify in capital the is AFP decide I you exit, if much that ever

Dan Houston

I mean, Well, yes. there. speculation in there's lot of a

out in to of the on X% that and I and you get deployed we'll the business. think between currently approximately back and are earnings balance difference range capital Cuprum X% sorted the the that's that –

item but As you in Andrew. for that's know, up good a we annuity have also there follow business Chile, an

Andrew Kligerman

is X% annuity it well. all the mutual includes meaning and in fund And Okay. as

Dan Houston

is It Yes. everything.

Andrew Kligerman

pension? The

Dan Houston

is. our It’s delay and entire it yes,

Andrew Kligerman

you. Thank

Dan Houston

the question. for Yes. Thanks

Operator

The Benguigui question is go Barclays. Please Tracy next ahead. with from

Tracy Benguigui

I'm Yes, of life saw updated with XXX,XXX have and year. fatalities. the views insurer of death We another the COVID XX,XXX to next on bulk the first XXX,XXX if of you curious COVID half year in XQ any forecasting

your quarter? third activity Just elevated in just the maybe trying given to about the forecast, updated think what

Dan Houston

Delta that's the variance, about And thoughts. and modeling original certainly at Yes. our think Deanna, as given look us our further all we to projection, something

Deanna Strable

obviously, I other can by agencies what governments other only Yes. forecasting. go mean, are we and

pretty to see you close would there. what And so be we

XXX,XXX as would But rates. impacted and well Our current obviously around have very by in XX,XXX XXXX. be fourth that's the as going quarter variances the forecast to different in vaccination

thumb business. I heightened still younger lock the bit think our see the could think, third the we appropriate. and over toward in so update as heavily And weighted those to block, wouldn't our in those we'll a next There's rule is outlook. I is be our continues what because on. ages, of our process few rule and thumb start dominated to the that pandemic, the XXXX. of quarters by quarter still But it more composition heavily ages. of But We number continue higher in We more little continue fourth outlines quarter. We'll younger But skew we to quarter just did right is if of since of go in current on the into volatility deaths our a thought see of that.

Dan Houston

Follow up Tracy?

Tracy Benguigui

the you'll if process brief in Thank coming you time And discuss plans, turning are these that I'm the the spending get ask conversations block it's months. that bid your of hear us to able you in spread? into and deal to yes, wondering to be could But where most you. Yes. good

Dan Houston

Tracy. sorry I'm

the part You again? that you broke of beginning your at – up ask when you question. Could

Tracy Benguigui

alluded coming you the I of months. in Sure. kind mean, next that

bid I'm your shed get spending you ULSG meantime, deal of that be in wondering in spread? blocks. if us light you're – your going ultimately most could that just to process, to just You're retail able time where FA some with on the in brief on block these in into those ask conversations And the plans your

Dan Houston

you the respond to well divest to as the to annuity that the as better owners retail ULSG. and those that that recognize There's And for Happy as made point can. to decision way Yes. first best businesses. try business, I out, we

first say is strong in I'd The very assets, the interest thing interest. absolutely strong been there's

actually blocks are and And are there's the the bids. so advisors through And of pretty more first you round of our now conversations quite the as And healthy. very the conversations window begun. of take – straightforward business. think The has I ask of bids place. that'll round These question, was second refinements for our good undoubtedly, ourselves starting

certainly our I while don't as in same at So would But creating an thought through pace, And contemplate transactions. we'll shareholder look ability to be of capital confusion. right the the value increasingly We're proceeds. in There's on said, there's a it very we execute time, the confident it's process the it We're where opportunities strong on long-term the to think shareholder lot We're track it. for creating moving long-term assets. we be. as with interest we've efficient appropriate expediting value. at in

And outcome the more able investors, give to so helps update if you the that. sure as with of anything changes, Hopefully and clarity next be I'm we'll Tracy? on that

Tracy Benguigui

you. Thank Okay.

Operator

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

Erik Bass

on XXXX? the given the tailwind adjusted an emerging more earnings power business expected drivers On into and was you. were XQ positive a roughly the of color XXXX the hoping markets, somewhat flat guess you versus RIS-Fee positive heading I little I then from some talk thank bit synergies of give there surprising could which Hi, kind basis, just and earnings flows, the found XXXX, about XQ then

Dan Houston

this, got the we've including the earnings It larger matches reflected lowest There's of of revenue of the growth case of I spite is into the employer Good great in We've lapses really growth. those doesn't a Erik. retention, deferral, really think necessarily it in value strong I market. we higher And It's – proposition mainstay and that our of. all operating all which fundamentals still being to the TRS business, of retention. question. customers. morning. Yes, can There's interesting backdrop returning. expanded And there's find record higher

the some additional in so Renee? And insights Renee on really position to best provide is you that.

Renee Schaaf

at the of you that to ago, share were Thank for insight components this And you Erik. forward. earnings you flat. about then look quarter some when with earnings right. one year XXXX And the and through quarter that Yes. walk business going how let absolutely question, to view third – The you're additional me compared

lapse, shock the IRT line off, tailwinds had was you and by from did nice which right past the first markets with those noted, where the notably by But were First tailwinds as we we offset year. see equity expected. in over

anticipated with So basis right where came shock our on lapses a acquisition revenue model. in had we

see compression expenses work We time environment. also noted increase in in the to fee her as normal returned other comp we during as very And normal and comments, same Deanna more saw a did period. we

is in comment a third that revenue I'll up make The that have we time XXXX. other true one did quarter

adjustment. a And from so again, is a XXXX, quarter XXXX third created one you $X compare when time million second it revenue quarter about reduction. to And there revenues this

turn let my now comments towards me about So the think business. how we fee

point as – the made you values, applied account look against that a XX revenue comments year our Deanna if point year was see about basis ago. one you from quarter a of drop basis that one a at So one

So it in account third about look expressed XX quarter XXXX, if was that as points. you values, at basis fee

business sizes Third that quarter in points is XX fell combining large that an XX size. behind to points. that driver of to block small of plan characterized more legacy basis The our year characterized are primary to is about we that that medium basis this of that business block IRT decrease is with by

at method. on look basis point have a point a plans typically when lower it so price And large you

to blend when completely you business the declines, in this began with was we rate logically expectations So line fee acquired the unfold. when we and the as business. two our together, those And see

expectations. We normal our also in compression again period that in line with time saw fee

applied forward, also run place a basis compression. two as to point the point to about that So good fee rate is we Deanna basis revenue, against point, we think normal your XX expect modeling. revenue moving that to noted, a basis headwind would with three see that XX for start Then

attention the the that's – the how about So revenue, to turn our let's margin. think if to

by our more we're able that noted, to our with and deferring doing customers the are at core is trust integrations, we're custody the And much the deferring provide integration, customer our of in onto keeping of we in as migrate value center the keeping experience a we that for platform. do. smooth So everything they

at that year this through the will integration XXXX. but year. to the do we range continue believe XX% look range first at the of for that we be what you XXXX the and entire that will the means to is XX% full we TSA then the When guidance, we at XXXX that quarter low expenses So end margins, communicated in

think IRT do. our it large closing thing in the our is important retirement perspective momentum I the position plan as increased market. our exactly that in It to think client from as sales, strong of the underlying to provider. capabilities see, of acquisition I what wanted scale, the to fundamentals business particularly that it's so did increased it strength we that it And speak our modeling. strengthened plan we think all for a us reinforced And tier top strong the across retention, strong sizes, strong the I recurring this underlying created I'll deposits.

We are strength of what itself. the of with business the very, terms in very see we pleased

that hoping helps I'm Erik. So

Erik Bass

just at were the It's And to wondering mechanically November, AFP new does all have a of the that there how And power detail. but just if looming how my make system? does up, to in, just election much changes helpful appreciate end happen? Yes. the I follow changes President much. put very Thank with the guess more go Chile then one time, for back you starting to and in

Dan Houston

congressional still It approval. requires

I an it. isn't, there the is So and I don't nomenclature that them modify believe, wrong would power here, the to give executive – order maybe just simply

approval process. the House and it does it Senate require, So the goes through for the

how think enhance undermined country, I is to are to point mindful people the system completely as of need there system. that But least a realization that lot isn't that AFP with every broken steps are debate withdrawals. on existing and And this time, at now, hearing these taken been So by and can a they in their all we're that's out realizing that that there's advocacy. by their in and at what to voters the a think And like well. locally, this be it's I in terms be reinforce there improve regards of what things President this I of vocalized think proclivities have of

on. additional comment, helps. that One in forth and So Renee back I with hopefully wanted the weigh that Erik to to your,

proprietary roll line those captured very a captured of have what to per you know, scale and and other within technology. that those be, And it's rollovers. down so – necessarily as asset We're the our and parts PGI increased within which not management pulling So that. we've me we retention levers those RIS. our why to done drive We're are well lot economics Fee on cost of leveraging asset other participant, around ins all they're would that RIS and

of probably significant. on value RIS how So mind, my is there's in and of to that need again, the question work refining we creation long-term But to those answers Fee help. really the value the no Hopefully we demonstrate platform platform., continue just,

Erik Bass

I you. appreciate it. Thank Yes.

Dan Houston

right. All

Operator

The question with Tom next Please Evercore is from Gallager ahead. go ISI.

Tom Gallager

Hi.

point you the to on revenue to we we run rates normalized RIS adjustment time for the one forward, the $XXX that that Should factored in back $X be segment adding you normalize Renee of back Deanna, up $X follow is million? showed a that made Fee. $XXX million. Just adjustment, that When million in we million to add revenue a about already think run go think for the should rate? the I or

Renee Schaaf

Tom in. been that's already factored

may little of go bit deeper. terms a In

million So from the was quarter. swing $X.X to $X third quarter second a true million, created actual which revenue up

is be sense? what reflected would $X.X forward. So going run in reflected that we when that about see already make we adjustment think that rate Does million in, revenue

Deanna Strable

for variances significant the adjust not that. did we But

pressured x million. $X.X the be by earnings would that So significant variance

Dan Houston

That makes sense, Tom.

Tom Gallager

Okay.

baseline to the So, assume forward is guess to going $XXX is build is, a I off? the million of punchline good

Renee Schaaf

I Tom, communicated XXXX the will I a that then where to at end and then guidance determining that XXXX give being described that the term, how at And we intact. in earnings in of and would using the the using you then basis how guidances XXXX. points the is longer back the on remain growth go for looked to about what guidance thinking unfold. Investor Those do view XXXX. of anticipate Day XXXX further And we the rate that revenue will at end run as we range margins and we revenue year for think described guide low full

Tom Gallager

And at might fair comments and were open to my enough. life the still that the is, you last on color? them. you follow give doing going is for that can insurance insurance any has is consider Dan separating more life just or you where something I package, on just transfer it fixed you only, evolved side annuities the think were what ULSG That's thinking you you up Okay. made about broader? And Is or all are together. are you to still risk case

Dan Houston

our we've and out What the very is of transactions other which things think about on potential within intact, at we bids block remains obtaining separate life would could the something insurance which There's apart the the the talked today. strategic be we closed which said about we're review. balance do in business, for current annuity being business, company, is block. still what buyers light importance is the what we've its ULSG we the of currently as fixed by – our strategically and potential there retail Again, much to contemplated from

relates it our combined. were structure, ideal would they we As said if outcome to be

However, Deanna and throw are to second But the having combined. know round standalone our over shareholder there obviously objective of to if value me investors. for combinations and bidders the to it maximize let she said that, to we is again, wants And see add here that. that

Deanna Strable

a is clarification. we together. The just our for structure customers best the will marketing what think We're and our actual shareholders. depend that on we transact them Yes,

of combinations And know some do of same they separately. so versus But we parties we're of may those. time, if because together these different at entertaining marketing them the them that differently interested them think we're contemplate

told capital But laser would and and we that on executing we'll we're have other shareholder provide that options our returns. there's focused if about. impact on positively you So blocks make consequently value evaluate us obviously those

Dan Houston

help, That Tom?

Tom Gallager

you. That does. Thank

Dan Houston

Thanks for question. the

Operator

John The final Piper Barnidge question with from is ahead. Sandler. go Please

John Barnidge

XXXX, strong Can XQ of sales? driven about or is coming kind pre-pandemic you that in demand now growth from? It's you. where Thank the distribution Thanks. talk group above

Dan Houston

you off Hats Amy, team. Amy to Yes. to that one? take and want her

Amy Friedrich

really for across pretty of because terms Thanks in there's question. nation seeing attractiveness the terms I of traction the the just all you benefits general good it's remarkable. glad in We're products. strong group growth, Yes. noticed Sure.

industry, think these has products the really support a the help helped how entire mechanism. see I pandemic provide

employers lines good And or where the working in would them, with together high so or industry. does across paid growing can is well, the make voluntary say they're really high that across midsize smaller really the packages particularly I of demand it's whether putting for is Principal ancillary areas the and which packages. business or sense employer

growth piece total is revenue other is say that in by the persistency. would of really The strong growth sales complemented also I terms strong being

our or really adding and in Our that places of group we saying, lapse increasing types good, particularly we're the things into it's good the for do wages of XXXX. in particularly revenue growth as growth, are numbers fourth We're either those business customers where head notable, sign seeing look jobs. we with all as a who quarter mean

Dan Houston

have follow you do John, a up?

John Barnidge

hour. for the Thanks at the answer. we're No,

Dan Houston

really it. Yes, Thank you. appreciate

Operator

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

Dan Houston

Yes.

the The and products American. demand, first for in these the challenges, have we as Latin about some U.S. demand services Asia remaining we say, of thing high I talked both just as well as and the

continue want that, to said continue And these can to on grow capital earlier, and to those deployment. disciplined I be We markets going be to like our emerging know going challenging. we're capital As businesses. make emphasize sure we're for and we're more some getting That's of intensive can organization. a that. adequately more capital businesses, paid these capital we priority compensated in capital the to When we intensive deploy for

you day. Look appreciate Thank certainly So of your the that, we to on with forward have continued So visiting [indiscernible] with a you. support. many great

Operator

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

all disconnect. may You

Principal Financial (PFG) 27 Oct 212021 Q3 Earnings call transcript