PFG - Earnings call transcript Q4 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 Fourth Quarter and Full Year 2021 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 fourth quarter and full year 2021 conference call.

to are related website on materials principal.com/investor. at always, today’s available call our As key our change the a been There’s to that want fourth Financial I to mention. quarter in Supplement assets definition AUM Retirement our third-parties changed We platforms. to exclude on managed of our by an reported total impact cash and company previously. our we how from reported on had AUM net This flow

definition earn restated we reflect for Financial services. other assets, and broadened include to AUM administrative AUA and our Additionally, AUM periods supplement definitions. Supplement. providing which both definition the a we is administration A our to for of quarter new fourth detailed historical assets under in in fee for the included time We

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

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

on non-GAAP release, and financial found March upcoming measures non-GAAP outlook US scheduled of Wednesday, Xnd. made in during most GAAP guidance Dan? be this financial some call our slide provide call financial our directly comments refer the the conference Additionally, Reconciliations XXXX We’ll supplement earnings of to comparable may for presentation. financial measures. may measures to the

Dan Houston

go-forward key will XXXX, we and on financial review the welcome performance the of Deanna everyone year milestones This in and drivers current morning year position. for successful additional as XXXX update growth and Reflecting the XXXX and highlighting our on fourth business. quarter John fourth many achieved our XXXX quarter well highlights discuss the the follow Principal, share full I’ll strategy capital full our as Thanks, our for was to on call. truly milestone on financial with with year an filled achievements. transformational performance, details and

be In and US as and the medium of to First This retirement in anniversary that two in to June, as we our customers. balanced three of decades launched provider we when largest later of migrate platform Principal The we completed public Trust a a in with one will October, large-sized serve a top month the completed footprint the successfully XXth IRT business, our customer solidified history. small, growth. plants our acquisitions and capabilities integration better the in a AUM this our integration acquisition platform. remaining celebrated Retirement company, business expanded The across Custody point exponential turning

for Retail Individual of mix our and strategy years, improving capital to we retail committed emerging focus capital we review our go-forward and higher and intense and perhaps our customers. and XX that no exit to US markets, protection. in next I milestone, These Fixed our We capital strategic benefits positioned As clear where on a strategic alternatives management strengthened would Principal most to and have announced With the leadership the asset we and of are look Annuity and have we Retirement Markets, aligned significant growth management is million and established an approach, markets, US business compete And we solutions drivers continue to Retail needs positions annuity management We out completed the well and shareholders. efficiency lead US fixed global XX focus, ULSG on and the capital approach. blocks. our growth over doubt of anticipating differentiated excess win. pursuing a returning this Life meeting

to months, this Individual of into for see and Insurance met financial We seven targets market Retail last each in exceeded and we serving ULSG the all we the we third or of on quarter segment Fixed entered of XXXX return our blocks businesses. our capital Over We and Annuity Annuities from of to agreement outlook did the last an enterprise our focus Fixed more. business reinsure Retail week, our and XXXX. sales shareholders increased Life of the our and for

$X.XX significantly Turning to to million XXXX. Reported earnings full quarter, per XX% than we year X XX% XXXX. non-GAAP delivered the quarter $X.XX capping alone, a quarter And share. performance of and Slide guided of fourth increased in strong per in our share, increase fourth fourth Overall, return a to the shareholders than financial higher $XXX including results, deployment. to $X.X XXXX million year approximately XX% more share billion over billion Full operating us XX% range. of $X.X or per X. In robust operating our year capital our diluted allowed were $XXX strong diluted or the over highlights earnings earnings on non-GAAP

XXXX, significantly strategies achieve funds, across In our and turning above to of trust we collective drivers Now one-year ETFs, quarter. strategy. were Principal the accounts the to strategies. our investment end in-demand third mutual go-forward the continue to Global growth period. performance across Management, improved for compared XX% of excellent of median our Asset separate Performance At and our breadth time

XX-year strong long-term and Importantly, X forward. fund of or and the AUM retain rated are is This attract and well going X positions performance all XX% level periods from assets X, X above stars Morningstar. for us our to XX% performance

within Despite retail the high outflows. to yield, sourced by and PGI in us solutions offset our Investors billion, positive markets. a PGI look drove Retirement solutions AUM of $XXX sourced flow PGI real managed emerging PGI for AUM net and managed $XXX from flows $XXX net million had For performance year, year estate, cash negative assets. were PGI of differentiated cash assets this, record billion. $X.X as strong private continue full to strong performance partially full managed drove of the for differentiated institutional investment outflows positive was flow billion we

We to new provide customers. capabilities continue solutions to add to our forward-thinking

committed example, an debt plans credit our in As advancing Principal with capabilities. on expand than increase XXXX private alternative more a closed eight-fold to capital,

China Asset the AUM Under fourth our definition quarter Principal, AUM by definition, of over on and from growth our end year $XXX momentum Retirement full third quarter. as noted operating John the With record and retail of trillion AUM in Outside $XXX X% increase businesses. billion to have $X election start strong prior would in compared US, our Chile’s longstanding cash in future Cuprum brings across cash earnings level XXXX. Asia, equity Boric uncertainty reported our well we mutual at flow our system. flow of recent net doubled managed we As billion AUM call, cash the of a including nearly of continues strong our quarter, and the pre-tax in fourth been and recognized China consecutive the changed AUM cash for as Management pension in President a in the in net a net of Chile, the year, fund XXX% flow Elect, end net digital produced and for Southeast in Asia, second XXXX. grew XXXX business. We equity positive over than record In flow year the more

pension the to government the actively for customers. any engaged with Retirement reform and sustainability strengthen our leverage our will legislation advocate that regarding new for financial pension to potential policies And we We’re system. security expertise

higher due rate higher our favorable flow making participants, XX% approximately transfer net block deferrals market deposits to decade. on contract of value a in net compared XX% ago, cash deposits addition compared year withdrawals. Full and our was for Retirement account on seasonally the legacy increased block. ASP, XX% withdrawal in increase the nearly contract in XX% performance over Turning IRT XXXX, fourth increase legacy on to the US quarter, deposits a number Retirement, and a from Reoccurring benefited to including basis, of participants retention including to strong a increased from despite primarily cash best flow positive equity dollars an our to the year

With Trust the and million signs this platform is scale run assets, $XX have of now Net Retirement expense we our on business by both earnings which opportunities, have later to about revenue through turned synergistic of we the will and on transaction of migrates capitalizing business $XX basis, target. XXXX month. grow are realized million. of savings these benefited the we’ve The half complete, value the the million, tangible $XX expense The side, integration clear than done to ways. our a this IRT and after synergies maximize to These in full increase and attention emerging On more rate our end Custody happening. was

for in of confidence new us Principal realizing tremendous benefits, XXXX delivered we trends products execution by win made macro hiring customers growth also deal wage and was growth existing from and company, demand prepared automatic aided In strategic protection, our The with we the IRAs, revenues customers. market-leading favorable the and robust with We’re market. existing expanding customer, across rollovers a relationships customer benefits IRA great evolving us for XXXX Overall, US our increasing in an Higher over are target block X% market. X%. were premium and and environment excellent in with and increased for enterprise. and market Notably, sales increases retention Specialty fee benefits, Full rates. per both employees. and and momentum. the growth in compete labor sales seeing with Benefits to competitive In-Group in-Group over up strong a significant for a year better growth total and business a coupled XX%, of give year in record XXX review was continued under of enters for full has X% Group benefits number

was portfolio for our driving customers. results, both transformed already Our financially terrific and

the continue As sight we line customers, our right have we confidence our on and long-term and financial targets. right and competitive achieving this will leveraging of markets advantages. strategy, on we the look ahead, great focusing Executing

an it success. to whom have had Principal their I thank I dedication to to our the Their Before over is our core commitment Deanna, want without of year. mission and to exceptional would we our turn such at employees not

that for of to people ensure moment if years will Income also our Solutions, invest President Renee and a recently, growth XX with I as significant be of retirement and responsibilities, of leadership, I’d a We industry in our several announced transformation passion the week Schaaf, global recognize commitment led IRT Principal. held are period prepared the business. her to Thank the and evolves. after the across Renee Retirement Renee you, last and to take and most domestic with company with leadership continue Principal. Retirement your integration has and remiss didn’t business through we acquisition your your our and who positions

Vice Chris’s also Counsel, confidence the Counsel, significant and as I moves We C-suite, and Chris Deputy have Principal our role and CEO served previously and create will Deanna? business. announce and grow General assume Income Counsel General Littlefield, across experience our us into to since his business current Senior our into Secretary business, all Corporate at joined step XXXX, with ability Fidelity General will Chris will role. US transformation. lines Guaranty President Board. and Chris Mark and Life Aviva in as digital leadership Lagomarcino, Retirement also champion has with to having President as USA value the Holding. He been who Solutions’ the serve new operational as of leadership for the Insurance served and

Deanna Strable

of Principal fourth year a $XX as Dan. highlights capital morning, Full of net lower performance quarter. and than capital realized million morning I’ll Thanks, million quarter was the $XXX share full of income losses $XX to an the were update billion of our included This of for call. in current our to attributable net as position. losses Good well and on the everyone expected year, on the financial million, credit financial which $X.X

effective to million tax XXX for rate year. for was the earnings $X.XX quarter, [GALT] non-GAAP to XX% XX.X% our above operating primarily fourth [ph] XX% full per end the non-GAAP in respectively, XXXX, was due ROE to guided the primarily Since quarter guided year to above for The or the billion of earnings diluted full share growth. This compared of fourth and variances, basis $X.X XX% EPS diluted growth range and operating XX% earnings. points quarter XX% and through The increased share. to X% approximately $X.XX XX% we’ve range in or $XXX significant Excluding State included increased taxes. per XX% our XXXX,

operating Encaje that from variable and on impacted investment the had million cost. COVID-related investment were the several quarter. million we offset income in partially integration in and primarily IRT driven had Benefits expected reported income, variances pre-tax Brazil, Slide lower significant fourth to higher operating impact $XX share. per non-GAAP after-tax Variable and earnings inflation As These RIS-Fee during in $X.XX amortization by $XX a of was by higher prepayment $XX performance XX, non-GAAP million earnings quarter, net investment alternative pre-tax, shown diluted favorable expected than than returns DAC claims fees. and positive

Group was Delta quarter, the to Insurance impact Omicron variants expected. net our For investment higher a Outlook Solutions. greater the on than million variable COVID on be had Individual RIS-Spread Life claims and approximately provide as impacts rule age COVID-related an population. and COVID in thumb. million year, US the update COVID on $XX impact March results call. continue than continues With Xnd to Life for income have higher after-tax XXX,XXX the our of XXXX full $XXX expected US We’ll elevated working in our was the impact in deaths

adjust year, higher impacts positive from return earnings net planned benefited the for net contributed the positive capital variances free XXXX, capital our to flow the we capital throughout XXXX. significant in we as While experienced in as return well these and our

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

full year million as by on tailwind negative performance expense compared XX-month fees in the basis. from a operating third in $X trailing to favorable exceeding Foreign negative year. XXXX $XX full million $XX margin basis. record full headwind growth a million fourth exchange net fourth to million by XX-month on earnings benefited a rates revenue compared a $XX XXXX by a were strong fueled $X positive a pre-tax fees, and third included but a the from expectations Impacts a trailing pre-tax operating and the million reported quarter, was macro to XXXX, a environment to Overall, quarter quarter compared $XX year, earnings million operating fees and businesses. management performance the for quarter the approximately strong for $XX our and disciplined benefited management. and delivered PGI and Pre-tax margin to year, million earnings

full net expected the fees, XX% PGI’s than higher the performance Excluding margin was year. for

are in billion at and capital million XX company, months year on and XXX% our At $XXX in holding to our the our $XXX higher to a cover subsidiaries. $XX with of Turning to capital $X liquidity, and had than obligations. XXX% approximately end, of in targeted we strong risk-based million capital, which excess $X.X million financial ended of ratio, shareholders. available we in returning including excess position billion excess year capital the are focused

and leverage to million this to pay mature $XXX We is continue maintain XX% later XX% to to expect that debt ratio of a down long-term year. set will

quarter higher capital than deployed and ratio, As performance. to of billion Last million than our stock the the This is and shown the $X.XX of XX% dividend first our the of $X.X approximately a in in in approximately from strong $XXX million in increase million repurchases. repurchases line guided includes common in $XXX dividend announced is of with range $XXX approximately on paid XX% targeted Slide XXXX. stock million in payout reflective dividends, in total quarter, through business quarter, is million including $XXX the XXXX. XXXX, for we This payable night, share fourth the dividend and common we repurchases X, $XXX of more first

capital $X.X week, XXXX, to and payout billion XX% and As ratio, announced in our repurchases. to between of targeted stock to of we plan through now last $X.X XXXX $X $X to to share This up dividend repurchases billion $X.X share shareholders to and billion to return XXXX billion dividends. billion common shareholders reflecting includes

address Annuity for question US blocks. of came a and for US $X the on of of $XX Annuities On Investor of Fixed ULSG $XX for the of billion Annuities of of billion a total end Day, At billion GAAP of and reinsurance wanted I Before Fixed turning as $XX billion Retail our statutory week, a the that Q&A, March Call our of call US as we reserves of billion. provided XXXX. last ULSG XXst $X of referenced for up billion, total we reserves week, and our Transaction ULSG to entire announced where year we $XX Fixed last to Retail Retail

For had the block reserves. GAAP statutory, are reserves Retail some which we same expected Annuities, as Fixed the but relatively in reduced runoff the

there statutory approximately the the difference the transaction, to between and relevant ULSG, For statutory billion a is $X GAAP reserves. more Due reserves metric. specifics is of

As move deployment our with and concludes invest Global in US in Benefits prepared questions. Management shareholder and Markets, continue strategy, Operator, drivers open all we an forward Emerging to please the value. and of long-term aim our drive call capital the for a to growth US Select strengthened will Protection, focus refined we This Asset remarks. Retirement with and

Operator

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

Ryan Krueger

margins That driven comment was you by range. was it experienced general think morning. say of good normalized in business? maybe trends mortality I above XX% was just Thanks, had you guess the favorable a the Hi. I question year if if during Can year guided a your on for better on RIS-Spread on the that or basis.

Dan Houston

this – one? you strong full Yeah. Renee, the specifics this Thanks, do question, Ryan. And have Really no that question. quarter appreciate year. was on spread and the

Renee Schaaf

the we’re spread that net Ryan, you strengthened results, throughout question. And for investment very at of pleased positive with course very earnings were very look operating absolutely. XXXX, and they thank the When by – Yeah, we income.

non-COVID also year. out slightly experience the through We better play saw

in you thing that, what give guidance of in how we to I remain in the more this terms of upcoming remind would like block manage business. XXXX the will disciplined is We that one to of Outlook Call. expect But and we you very

We’re to kinds pricing long-term. that creates that that discipline returns take of would expect we make we the sure very on the which about careful risks our

for So, thank question. that you

Ryan Krueger

the of then, And updated how to Thanks. the you sensitivity about forward? on do any on have business thoughts rates going short-term think IRT

Dan Houston

please. Renee,

Renee Schaaf

Yeah. you’re there. asking suite the you’re what about? to deposits Is suspect – referring that the I

Ryan Krueger

that’s right. Yes,

Renee Schaaf

explain Yeah, with suite deposits. okay. Yes, so let me done we’ve what the

recall, of convert deposits of XXXX, that program suite In As impact million of accounts of purposefully you’ll out very reached the of IOER Trust block of the last business, closely The deposits million the to to blocks $XX those and & rates. half which were had move deposit $XX this to acquisition essentially IOER – onto we sheet. Principal rates balance an a to when we the on announced And, of our course, business transaction began went deposits zero, tied revenue. to Custody quickly to about the IRT suite those

additional significantly we now rate we on so run in of are our financials about this of the through – impact margin. $XX And up million those shore net block basis revenue, for generate which The is IRT the helps revenue to interest business. on deposits annual

billion the deposits to far in come point, had again of for – onto about balance suite So, But in we you XXXX. Call this our on sheet. Outlook this give the so guidance $X will we’ve

Dan Houston

example of and and add questions. Ryan, on Renee the deposits Bank the That’s IRT appreciate some to those in challenges ways the this to leverage team of and looking Principal more value shareholders. capabilities to current Principal, at block, receive of a case, her good

the good and feel to really you. of healthier team to we us a get the creativity about the spot. Thank So, innovation

Ryan Krueger

Thank you.

Operator

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

John Barnidge

that very to really talk focus Can much. level is All bigger long you. And opportunity be were you for the maybe that that? time. in inflows very grow Thank the you? Thank you a – going to about at highest a

Dan Houston

interest to Pat? Pat real we’re adding estate value you it’s very it And all Yeah. of morning. too I’ll that. good with asset have class and John But Thanks, time familiar and take a low is to again, of hear rates. this lot an at – a

Pat Halter

capital in our really of question, a one powder their AUM, And as Yeah, deposits, capabilities the strong managers, presence. and deploy thanks. the real in for ability terms the we top real size and some globally very, mentioned, clients’ relationship very the estate a estate of of commitments of see that strong management strong to growth is with. have managers the that some estate real and that marketplace real or we you serve that new alternative size as big part outs like to assets take estate other generating John under clients dry investment to And footprint we’re into estate see the have. some of new Thanks real their commitments the we new today and continues seen, probably from either we’re very continue grow very of clients and Dan of the our very, we’ve know, a lot of

and going as probably forward, real estate continue equity, to of story our around real of John. estate you’ll real hear part private – a growth engine more assets debt private and assets growth the assets So, see

Dan Houston

a John, follow-up? have do you

John Barnidge

I the of opportunity maybe and wage about for talk could, benefits in If in you. you Can please. thank the Yes, you the much. inflation Thank talent? very fight backdrop COLI

Dan Houston

Yeah.

the retail please. as and portion of the more details, life life fits You real our know growth down insurance Amy, doubling we strategy that it’s with because a exiting of and exciting opportunity. on certainly that business see

Amy Friedrich

Yeah.

market-leading huge We the thanks in terms question, in the know, experts a John. for of built you as see And being up marketplace. non-qualified do we’ve in COLI position – great So as a opportunity.

our and going our suite, part be as as our well So to non-qualified to Retirement funding, whether business going TRS help business. it’s that of USIS again, and that’s

those help knowing and what giving alternatives plants, mutual them in products, And so other other for COLI that only business to not of pieces put fund funds – knowledge but Insurance on business. place we built can is also or

COLI we that in tend to the that we where at look we products as well the tend consultants when opportunity, in we marketplace, industry. we’ve really insurance distinguished ourselves the placement best, know are that marketplace So, is, also to best know

with from terms focus to hear market COLI expect business in narrowed more for So new us the and again, of employer insurance, our production. on opportunities life

Dan Houston

John. Thanks,

John Barnidge

Thank you –

Operator

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

Alex Scott

Hi.

question is on I First had PGI.

that’s know of earnings little on – we inflation a know maybe coming as has margins no you of and sustainability that where know, and so that to those potentially of strong there. can Any back as disciplined And wage produced – a You through T&E out place you impacts about you wanted margins. understand provide very into there’s the you’re how think some forth doubt expenses are and thinking so as color I just the bit. well business you’re there,

Dan Houston

appreciate that question, – Yeah, that Alex.

doing great You you of we business, about lot capabilities. is know, one cost of it’s add aligning thing business, I to lot the frankly a the a scalable, capacity and of record but a revenues. there assets PGI their expenses has And with as higher ability out track have will say got point existing incredibly management of and to asset

thoughts? And that, with additional so Pat

Pat Halter

Yeah.

appreciate So, question. the Alex,

let side. the First start just with me on revenue

I a specialist broad investment think We have, of capabilities. depth

retirement institutional. or streams diversification solutions the our to the and it’s very good about retail, of revenue diversification offer we world, So the can the I clients whether of feel throughout

the good to our as margins Relative in we I about as sort of of the north strong very sort heard you revenue to the – feel XX%. continue margins, equation. some of So, see of side discussions,

continue forward continue the we margins, Call at discuss XXXX I year probably will continue to But see. terms we’re strong a – manage maintain be what our to of think going you try depth absolutely we in very know Outlook Alex, to to of generating invest where but said, going also we’ll margins being That marketplace, terms going to very specialist of to to capabilities we’re in we to discipline. continue offer that depth business to very with have growth. both investment expense the to management will strong and broad for growth, aggressively,

will platform, terms platform very excited marketplace. terms future, in investing growth of that credit and revenue in highlighted continue we in that private But new keen talent we’re to be about a the that. to the invest mean and to wage you continue we organization. to the And – a focus We’re developing strong believe credit immune alternative wage talent, we’re us. within for increases may very of need not very are we to what nurture in And

If you best in actually for December, noted year straight may work in again were we money to recall the management. places as XXth

of have that for straight one the globe achieved asset recognition in five only XXth managers We’re that years.

We’ll very we’re So to proud future. be to experience going in and to invest continue our we’re that very fact new continue talent. strong. to client to retain for attract And of the that the that can – in we to continues aspire technology make sure

for to very forward. and important for continue retention be client the experience of investing will growth we going So a

good of about Alex, the you for our I organization. story in about those reasons, and – think sustainability the So, hopefully terms has feel ahead. helped we And year as profitability

Alex Scott

international. That a on question And very Thank you. helpful. I follow-up had was

of has pension that beginning goes effect impact on that Mexico that some think – that has into at commission the the an year I reform – rates. the

long-term. to think puts over that and And takes, AUM for the you the business? – bottom I terms if some what time I commission know, And probably that quarter-over-quarter, for so assume it could I may take there’s to think do just what mean know wanted us in for And you’ll line you will and that expenses. what like through the can rate And – benefit know you sounds to revenue? decline offset see it – of you help like flows,

two immediate that revenue I the So can hands we wanted in of comment I I make you should – aspects around of know sure sort maybe you decline on. the had appreciate you it to know expect. my But there’s just that

Dan Houston

could hi Really codified a sort frankly, question. because fee they rules adjusted a on had apple, appreciate the the set will, what the of stroke then change Alex. and structures new been Yeah, further what of downward. of even the be look, Mexico, you if on And in pen, they bites there’s of two the

well we’re expenses revenues, sort you so expenses that to the aligning points. we the now at again, projected ensure new of basis table at And had with terms align can under charted as And those in revenues. with was of, a that path lower expenses way future to at we’re growing back our out, looking we our AUMs pointed

annuity week that worth the matters, business that participate that of some All call PI and [ph] when we Outlook to March the on some of those with be you our a provide our as say, call. more part one little [ORA] get we’ve differentiated operations you the the of to and Xnd, it’s that XXXX – on believe we’ll Mexican challenging know, in. capabilities And still mentioned with we feel scale is a there is matter, investing have we spots. a again, can But question. color bit continue Appreciate to we last on business divestiture we streamlined we we do the of business in of down And that continuing life to capability. and

Alex Scott

Thanks.

Operator

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

Tracy Benguigui

take Fitch, you morning. upsized I’m you And see Good that structured S&P, Principal because the more not was holds rated potential of their I up – did you’re curious S&P it looks treatment last asset target. I’m those And or of model? with especially just quite return to Moody’s assets, specifically account proposed and your speaking that that, It when coming capital nice week class. of hold capital onerous guess about what into by implication is

Dan Houston

Deanna. That’s right down question. great Yeah, for wheelhouse the

Deanna Strable

week there. last contemplate really how and couple understand a model would speculate to that out that. any would would through say still not we changes working I’d of on the we’re impact say to came things with us. impacts Yeah, early on too I it’s What that

go amount will we As do our have a early capital rating formula RBC still aware, forward. we ourselves the I’d as certain well there’s too think and at us we look well. it’s targeted our on about say how as you’re capital speculate impact at But grounded on But we that Holdco. to agencies as as as

Tracy Benguigui

Okay.

instead big to CMBS, Kroll assets not likes maybe that are be it three just proportion or RMBs will rated Morningstar? rating So those of by the understand the of helpful your by agencies

Deanna Strable

I great with the after that. call that’s we’ll question. think follow-up Tracy, And a you Yeah, on

Tracy Benguigui

Okay –

Dan Houston

question, Did a follow-up you have Tracy?

Tracy Benguigui

question, Chile really my discussion, no are In how contributions? I do be have on any there any you charged yeah Yeah we’re follow-up longer reform mentioned update are – – there know could your mandatory if you early. AFPs

Dan Houston

Yeah.

and helpful. statistics and pension XX% done Chileans we in viability. about in work there very AFPs income. they of did hardship, I making leads – know on And a there’s bit know, were Roberto there’s provider. we seems guaranteed support of – $XX which recent the reform help have distributions discussion is Walker, lot of pillar out survey think is, Santiago, sort part there’s was that right been pension, a that have that universal lower hands billion really There’s pension we that’s and of located that their Chileans be individual zero the may pension certainty a And Chileans operations as also our some in going that to well who want account. that of took to a million back American model. right that been You favor We’ve been Chile. retirement about There you as XX pass heavily, XX% know of keeping as participating their place choose as into the know to sure more that income AFP went lot right Latin found for of and – already There been Chileans, But noticed, own savings now, you their around their reality an Chile. of

Principal its and we ongoing so and private and So the It the – those the needs the that available to to dialogue continue sector people how government around, do is coexist regulators of without again, the AFP ensuring of that but peacefully model are there refine the the ongoing. if feel conversations in work. as continues of we’ll are to Chile be with challenges, isn’t options and the supporting we

work a – has our what We on most is customers our the recognizing forward it that’s have shareholders. going the on is to Hopefully path lot our of on impact also helpful. at for successful look

Tracy Benguigui

you. Thank

Operator

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

Tom Gallager

morning. Good

to do low on as – still I’m business your rate broadly. just we’re PGI, today. a real you mistaken, shift And in curious done you’re I don’t true in rising – – know estate good also visibility more commercial income, is, Just my and not that a a if well and a seeing view you you business is from if – fixed balanced, I if standpoint. even being that always side, you’re model equities look I of business don’t has do real broad headwind growth from standpoint? positioned from for question equity that’s I’ve value of over do a the growth – – your the still entirely flow well I’ve value you – But we’re that environment on a always that because rate estate the still or believe you’ll thought of flows strength environment

Dan Houston

I intentionally that think, the we’re of Tom But think to on there’s the have And it’s cognitive of fill been assets the an versus observation growth broad a manager asset solutions and all gaps. I I think marketplace the been think a range don’t even tendency all of bit across be value, of season that balanced. I classes.

a I that so – as don’t thing. see And rates interest with rising, bad I necessarily

think it the provide can he me can additional Pat? here. future win helpful. I let where – it in quite matter to where As I fact, of on think we can turn Pat would a be we But where see some thoughts

Pat Halter

– to – to my growth our diversified are discussion know really sort that a all intense served our I we general, within intentionally make of operate can boutique bit, marketplace, sure diversified We we because platforms. capabilities. broaden capabilities still interest as I are – terms us terms in high different and I’d very philosophy markets. of I seasons. Dan be we investment the little are Dan’s very also and create a think of But do do – approach from investment of a that have, to you a the the in have a you to mentioned, marketplace nimble different perspective, like model want original volumes suggest intention still would philosophy, quite that organization, Tom. a in terms equity still point, And we unique different fixed we though, in Yeah, in of in quality suite approach capabilities to capabilities in of of nimble in – offer to very the the well in in that terms terms offer that and viable. strong is to teams I has process think investment to there a income sort of

for one emerging One quarter, additional high again of our institutional in largest the So fourth was yield. instance flows large market in debt. institutional fourth side sort the of quarter in flow was very

forward, And offer as we mentioned we build our significant some in to there very private then strong going capabilities earlier, are to strong, sort some space. on more pivoting the broader in see investment to analytics of very fixed positioning absolute So continue higher in returning capabilities unique And growth solutions is more in deep that I private and credit more interests of income. going the ourselves upon markets.

both side alternative the think side, Tom. in we’re the on equity a I good So, on the in and place, side, income fixed

Dan Houston

help? that did Tom,

Tom Gallager

if at my kind of you’ve your That you’re underlying – below at it follow-up look Benefits, had unique think strip good does. and the – out Thanks, Specialty I industry, is, this I in – the performance actually, COVID somewhat you’re below any guys. reason this – guide this I My why favorable I PFG have impact, when your adverse of you sort guesses sustainable? XX And is of excluding that be when at point may seeing ratio benefit to a lot COVID, to are that quarter, any trends? XX as guide. think experience, Any competitors seeing to why – look

Dan Houston

small maybe say As small you advantage know, I and you a to less market back customers, into I of plant in sort of of frankly, have to go that think there you very respond. good position and space, care all they might work, expect, would where go they flexibility large is really they’re having But the those look Amy? Tom, favorable results. underwriting, – the taking employers mix SMB Amy at to and good – and is this, the of an but

Amy Friedrich

what built – and factors. sometimes a of one positive to Benefits And question. agree. isn’t really Principal’s across the Specialty for the I this back know, is go And we’ve I you thanks industry, but that would in When factor, Yeah, collection look you is, block outlier. a

I an one always get a another you can you these first is, think can the products you for that these broker you competing benefit actually doing first that them get means for focus. But market against we’re company Dan’s What a of small some which about already takeover. establishing help the you’re hit time. business can help educated. on educated often or position of are time, owner consult, not and benefits we’re advisor, sometimes the is in help for When establishing that

when of we’re penetrating terms a in on education cases pay tends and when to also how look terms as consulting practice products in products, you new side of of of number XXXX, We much that XXXX, you existing at case, X.XX mentioned, number X.XX. the that at get the look per unique off. had that to established, we you that’s building relationship is with up existing of So and in our well. That with cases, average market, in relationship industry gone

of you medium grow, concentration often has really pricing have strong underwriting, the multiple stable results. small that that disciplined limited so when to that so, have we claims and ability products a have we risks, to size but our way to ability focus, And and to because management in touch, look to at then do

collection is, those a So that else. make when of I industry probably things look than it us at everybody the different bit

Dan Houston

Tom. Hope, helped, had it

Tom Gallager

thank you. does, That

Operator

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

Jimmy Bhullar

good Hey, morning.

what is that, have But flows. a what and you’re deferral And comment drove your on So realized negative had they that and in on of first were just through question quarter for matching seeing up what’s up. the going rates, with and RIS-Fee ticked if and could you outlook I business? withdrawals terms just stuff market this the contributions might

Dan Houston

Jimmy. the for question, thanks Yeah,

are underlying – You how specifically of just Hello? this out remiss know, it’s business, strong didn’t be I’d whether – if call I fundamentals the Okay

Jimmy Bhullar

Not line. my

Dan Houston

Jimmy.

Jimmy, Okay, hear you still me? can

Jimmy Bhullar

my wasn’t someone’s hear know. that can that – I room don’t in mine, But you and unless I

Dan Houston

right. Okay. okay. It’s okay. All It’s

and Renee as these you of little the whether how look this sort business – lost appearance – I that fundamentals So year But time through the net flow the they’re of cash net markets $XX inflated fundamentals. and in why math worth doubling good. the from flow walk of sales my the strong it’s reoccurring billion train can that strong. is ago total thought Underlying understand incredibly on there strong, of Renee? of And spite that a a okay. cash for to spending incredibly bit just us reality fundamentals have in deposits, the equity are looks the this underlying know second, not the morning is, And remain soft a business of number sales. plus

Renee Schaaf

it’s seasonally quarter, course, already helpful you as And cash quarter net of the flows, think trailing to absolutely. higher I to eliminate fourth withdrawals. a seasonality. of basis to the – on XX-month to tend impact When about net Dan. fourth impacted equity an strong because When some contract impacts of look markets impact on withdrawals. was flow, have think mentioned, Thank adverse at specifically we by at look of you, Yeah, cash

so point, when at to over period, so transfer XXXX. XX-month were up And XX% – the they look Dan’s trailing you for deposits

strong results. and reflects value marketplace. to large the very that across continues proposition in resonate that mid goes So a it small, And plants. our And

of When a you peel deposits – Principal back strong factors From it’s primary footprint there down legacy And those recurring are is are you result. established positive XX% XX-month recurring really and the generating creating off further, basis, two even year-over-year. that you a drill you the and XX%. trailing you seeing that very transfer this see increase and recurring deposits had an deposit deposits. business take perspective our paying our that deposit and in we’re isolate on onion, up important XX% So about recurring if

of deferrals rest in increase about it a participants of That’s the that the of The in the block. is XX% increase an third that in of the our and first – number is simply themselves.

then look have net and take a a markets cash course, the flows. tend withdrawals, negative a at of this where – on you really is equity to strong So impact

That a retention. – And of what values. the contract favorably look average Dan values. into saw a to were start, compares When to account to at as percent put we that XXXX, we withdrawal that rate. that way XX% to to the XX% in see comments it account help and as was then you which withdrawals past So, in terms of in record do mentioned context withdrawals average express your in is years his XXXX, of that take see best you XX the for

with strong think underlying the results, this – pleased very of very we’re remain under business So we – fundamentals

Dan Houston

follow-up? Jimmy, do a have you

Jimmy Bhullar

Yeah.

of could Just election, Presidential on of impact do changes have better would the idea on potentially some they proposals with what the could what business? be business how the a Chilean some the your be? And or you

Dan Houston

Yeah.

those all you suggested system. – could AFP constraints, are that private one government it have the every lot constraints a proposals. more And a the where are if it of dissecting remains competing charges today, the the might to that the is, system, of in reality way if on So a where could the we’re there of have range would There’s you actual one make. more put ideas market, floated

find probably way stays a of the where everyone? and provide as industry complete is, go from was job half government a no ideas and I said, a needs the to the between. I Hopefully And in of said question the we at there dozen the And sensible regulators enacted, AFP that lower of The officials universal choices helping the pension, modify that I has in Jimmy. Principal the the to it elected individuals, income is with meet it work job of it helps, to way ranging long some a all of is different as think them pension the and do solution So already to change, are guaranteed solution. run AFP, now how with does – earlier, AFP for base. has helped a the been the concern a

Jimmy Bhullar

you. Thank does. That

Dan Houston

Thanks.

Operator

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

Erik Bass

Hi, I answer sure thank Ryan’s you. suite just the on to correctly. follow-up to make I the and had deposits following a want was question

change is revenue. said you you about $XX to So that that the I adding think made million

have the revenue rate. up? sort I’m about if benefit locked interest you half is lower sensitivity decline offsetting they where IOER But of Or go short-term from at this of point? in you still that rates stream wondering, do a to the So

Dan Houston

please. Renee,

Renee Schaaf

Yeah.

the of – we deposits that the the earnings function capture So margins. net these on interest are will a

And sensitive so IOER interest gives But less it we attached us, – simply to stream to going revenue rates overall. be short-term importantly, rates. more it – it’s it revenue had restores it a was to when that lost

Erik Bass

And it. Got through coming start higher level with immediately XXXX? in – that should then of that kind

Renee Schaaf

upcoming we’ll billion, That a bit XXXX. billion because That’ll in a like provide over sheet There’s what on right bit more have little increase $X little the come to guidance correct, that’s we But $X on – of look over. XXXX a – now. those little Outlook our will in Call. deposits, balance

Erik Bass

up as just or show in to all of that getting Bank? RIS-Fee any clarify, revenue of that’s in then And Perfect. booked the does

Renee Schaaf

RIS-Fee. in reported being all is That

Erik Bass

Great, thank you.

Dan Houston

Thanks, Erik.

Operator

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

Josh Shanker

Yeah.

segment, about pre-pandemic relative if successful grow more, any expect our compare down and As vision’s good I what’s or in pipeline you the not life pre-pandemic years. – sold over the I’m benefits to disability years, ‘XX? Group and to in Can whether the to have selling? been dental is in we product benefits looking the talk various What

Dan Houston

XXXX course, you Call. – about of will, want in talk get But to Amy? will your pipeline that Outlook your opportunities, current to of added Some your

Amy Friedrich

do Sure, Josh. to that. happy Thanks,

you meeting this kind some at Dan think baseline, you of of we’ll things Call. around the look pipeline it. said the employer-customer Outlook consider of of way get life think and and sort – some I here’s in vision I and had know dental life I and worksite as sort our when products, Dental a So, and would the look I and in characterized about and reestablishing would disability And in pre-pandemic role play I needs. after as again, I – would But at what supplemental Vision the all disability. well our,

look coverage because they’re has of they we’ve we doing benefit they’re kind and sometimes disability. something post-pandemic to different the forefront. in is, some awareness most of terms first, of of things Sometimes are life at So, the vision to the and that they’re brought utilized and What after dental needing trying those the fill? heightened what life design looking seen is disability benefits,

pure to, voluntary-based. portfolio small The seeing some things – we of those start attention conversation then other the there would employers some we’re continue our I and to that see fill pull going So the up almost in benefits. or in to piece more with is, of worksite build are are

pieces they those make as disability today. our through critical in that and reported good accident we’re illness, So going to see progress them get line position portfolio. continue And to

portfolio, a customer And capabilities. high other that we’ve as one slowly of worksite is well as expansion things building sort So opportunity, see as get interest up base. voluntary attention been quietly that those and probably or those much we future as potential doesn’t our to of margin

Josh Shanker

a for thorough much very you answer. thank Okay,

Dan Houston

Josh. Thanks,

talent out with up. have insurance continue are retain sure thing benefits You value the for disability built that life the know, inflation. happening be up, trying There’s to of a And attract there and in that’s wage employers right benefit one the way out goes now also goes there. differentiate is and to is, to historically

please. question, Next

Operator

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

Andrew Kligerman

a of efficiency insurance understand was a Thank the was transaction in I And on Monday, last think you. there block $XXX life closed up, looked their question it announced business. million. I A we reserved as there

– is released? what free the what you So been part And freed have on $XXX the $XXX closed not, million if of up? $XXX might my – up million block? million of is capital Did that question

Dan Houston

Deanna?

Deanna Strable

things Yeah, couple a on of there.

all $XXX of we as talked call, things we aren’t go going million the the you proceeds. to about know, itemize know, to that up the on You of

our release, well net We have one-time of kind loss commission up had a reserves, we capital we negative ceding negative, as economic we true impacts insurance that covariance of then to on not And had was regarding fees. had capital block, of to we did optimization but remaining part was do financing closed it. as is, all life you’re business, of which our break referring what some the benefits,

million those all so, to deployable that to – at and time transaction all better of the – back pieces was – have line proceeds, contemplated net know, you And $XXX time slightly – of did proceeds that financing together every what the than the that at which get in Day. came a to those we was would Investor the But the of Investor contemplated Day. of we

proceeds line in to or better what all got so were lot we moving and proceeds. the pieces that with – at $XXX there So Net anticipated. a million of had of were

Dan Houston

Andrew, follow-up? a you have

Andrew Kligerman

bit you’re I to I more or little then of earnings a that Would Dan, curious to roughly kind attributable correct about optimistic is a It scenario, And thinking like capital case was much allocated please. Chile. I operating it. maybe sounds, And size to Yes, you’re Chile? business? of worst maybe just I is and how that somewhat and – X% – – like be in I was

Dan Houston

Yeah.

Cuprum, is specifically of that capital we’re think let’s a sort doomsday as lot on around it’s – a long to I back again, allocation. We our – of Chile, from X% Cuprum of earnings the to talk there about in it actually So way road approach. relates to we’ll just it’s But – on and a in get travel. think from

effectively, universal I guaranteed helpful as all we’re officials we’re again, pension clear, having had things update and the and we Again, as the outcomes. government to Andrew, to dialogue there we’ll sure very more possible not continue And Appreciate investors. and of think change earlier, have, viable manage we’ll looking pollyannish is said product, some legislators. And with said question. in we the a passage We path. with be that, that at become

Andrew Kligerman

you. Thank

Operator

session, We the Q&A have our reached Mr. end Houston. of

Your closing comments, please.

Dan Houston

everyone again, appreciate morning. this Yeah, And in thank tuning you.

risk very seen I it in benefited dividend the to capital comments, strategic in and we, the again, think from the strong And review to know, on I acquisitions, was year results. the areas. from very the see fee, the across on of and helpful businesses the and said in in recent the attention most opportunities deployment, with IRT. focusing the each we we’re was the markets. and think is earlier markets pleased my those buyback what you’ve high share growth prepared value And business Again, focused as our being that as spread quarter of you the

a with and – your look we we’ll Xnd, March of appreciate input all insights. our the Outlook and So, your Call your great day. forward you, you when have visiting we’ll have on to Thank

Operator

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

You disconnect. may all

Principal Financial (PFG) 8 Feb 222021 Q4 Earnings call transcript