PFG - Earnings call transcript Q2 2024 | Principal Financial Group, Inc.

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Operator

Good morning, and welcome to the Principal Financial Group Second Quarter 2024 Financial Results Conference Call. [Operator Instructions] I would now like to turn the conference call over to Humphrey Lee, Vice President of Investor Relations.

Humphrey Lee

Thank you, and good morning. Welcome to Principal Financial Group's Second Quarter 2024 Earnings Conference Call.

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

of harbor prepared the Houston; reading a Following safe Deanna will and provision, Strable, deliver some remarks. CFO, Dan CEO,

up the will management available We will be then call questions. of also Other Q&A. for for senior members open

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

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

are Dan? we reminder, seeing York. of Day to XXXX this look our XX in a As New on Monday, We at you many forward Investor event. November hosting

Daniel Houston

discipline and shareholders. Thanks, customers on details our focus I the our milestones with follow call. and executing to results welcome second continue for everyone highlights deliver will results and quarter This Humphrey, and capital and will with on strategy our the our from to strong morning, discuss key Deanna as position. additional we

bifurcated in over year-over-year or operating XXXX. of a $XXX for the million Starting share second we non-GAAP EPS quarter, quarter increase diluted per results reported with the X% $X.XX earnings the compared second The of driven in very a net X% are to environment. and by year markets favorable revenue due growth in in said a ago. Having to market we business growth this, was increase earnings a

have million managed concentrated heavily mostly full the this cap very the the X% the performance mid-cap, second shareholders like X.X% repurchases. been performance in with second asset total was large a impacted first in This our including market technology we stocks. S&P our Despite and lagged to quarter the have active XX-month in of $XXX has of market XXX Meanwhile, were year diversified Principal, year, has confidence returned and this be XXX to AUM XXXX, basis. has half capital in on weighted million of S&P international year, results aligned a second expect XXXX of and negative of been the performance performance, second small equities strong managers our the of quarter, we handful market in the While trailing quarter. share half and mixed for outlook. We throughout $XXX

quarter, our dividend ended raised with also We managed We consecutive fifth for total with common the quarter the our dividend aligning AUM targeted XX% stock $XXX billion. ratio. of company payout

last billion AUM. currency in quarter headwinds $XX the months $X of over billion impacted Foreign translation and XX the

increased deposits average Retirement, entire businesses midsized turning the small to This to well year quarter. employer experience for X% block. a Now strong recurring as XX% we in by growth as ago businesses. deferrals across and Recurring driven fundamentals. more by the continue In growth to than matches and in deposits positive compared was participant

the growth generate in fewer driven sales XX% up in plans large deposits, by continue which While motion, growth year-over-year quarter. This market. plan by in strong to in transfer have the we was been SMB impacted the again were

in billion quarter, risk pension We increase strong withdrawal nearly with were impact billion has quarter transfer returns. in second generated another values retention improved on along of $X have primarily helping to the quarter markets is significantly surpassed Withdrawals year-to-date to favorable second the higher slight due withdrawals offset sales the Contract attractive and at account sales participant $X.X rates. in of a elevated in quarter. with

our nearly existing benefits benefit Importantly, continues of defined of contracts source with XX% business business from defined coming year-to-date customer our relationships. to valuable PRT new be a

third an premium industry in remain and report. first to We leader LIMRA's PRT, according in ranking both quarter contracts

This our a share. ESOP strengthened #X customers X and second added also on employee over leadership as XXX in critical provides XXX,XXX new We greater the workplace expands to customers. also ESOP with our U.S. of more ownership products medium-sized We our quarter, the offerings. plan July ESOP our Ascensus' in position stock value a current the services retirement This full acquisition solidifying participants. acquisition businesses offering, XX% in announcing to and small- the of enhanced market It our our and adds position of for is with piece and closed employer business. our and workforce on provider acquisition ESOP talent focus aligned suite

from momentum Principal quarter. Management. to continues Turning build the on to Asset the first sales PGI

suite demand continued mutual offerings. our are of ETF strong for and seeing We retail funds

driven the of flow cash $XXX capabilities level cash institutional had of flow consistent over is into real with specialty the income million net demand. approximately private real On private estate and We net past of in was side, corporate over from the net fixed This average fixed fee remain estate. X The second a momentum, quarters. Despite as negative outflows products a stable lower quarter flow well $X net we reported as the by large value redemption outflows. just client income cash billion.

cash looking year move improve assets risk-based investors We markets. to public are of private the and both to expect across second out as the of money half and into increasingly

optimistic about momentum. clients We continue growing to look invest our for opportunities this remain to for and

During to and Fund, yield retail to exposure middle-market Principal return the offering Credit investors. enhanced launched with Private quarter, loans the we

institutional million in seeing of team, in sales the the increased $XXX We in quarter. are interest resulting also

of add this launch expertise also capability industry actions infrastructure, infrastructure debt of These the veteran estate to and alternative credit. public hiring listed our We private lead an announced our debt and venture. to the in new real

performance benchmarks. our composite and peer include and the investment enhanced have disclosure weighted Morningstar performance equal we group both against to Finally, asset-weighted

be total market Favorable performance to currency strong Brazil. providing long-term performance the than primarily $XXX lineup. was investment focused more Principal AUM. foreign continue ended on International reported headwinds, across our offset billion in by quarter with We of

cash in Latin Southeast with in Net second was offsetting Kong, America. from the small contributions and outflows quarter Asia flow slightly positive Hong

are flows the strongest reminder, for and seasonality a first of Brazil. in quarter due As the in primarily to third International, quarter sales Principal

growth. above-market sales strong the have retention in fee And half to in is expect year. Specialty and along we We year-to-date by growth wage Benefits. with employment premium second being flow This a and net and the strong cash benefits generated record protection, growth of driven and

than growth came net underserved and small midsized advantage our of position our from our demonstrating new to leadership business, more Once half again, competitive the in market.

relationships to the with now distribution We X than remain highlight continue coverage our customer increase partners customer excited this, industry exceeds first opportunities per by time. the grow in-force across for customers. confident. with to average Principal number the and group the and per key benefits To continues deepening and of about faster coverages I'm

focus higher distribution partnerships combined our integrated portfolio growth. markets, value Our to growth with will create product on drive continue and and important

continue security the around like focused for to communities way of We XX,XXX and meet over this month. of celebrated to on providing it people, earlier XXXth our Before incredibly the Deanna, Principal changing employees turning I'm XX remain proud needs financial approximately more to highlight anniversary access globe. that the and million to businesses I'd company its Deanna? our customers.

Deanna Strable

Dan. position. Good well morning, contributors of share key capital our morning details our for everyone the I'll the as to This financial Thanks, on as the call. performance to quarter

reported quarter income net Second million. was $XXX

Non-GAAP Excluding ROE exited with by operating net million. minimal XX of million $XX year XX.X% improved business, basis compared was the points ago losses period. income of to $XXX credit

target. trend to continue XX% to We toward our XX%

improved or per compared earnings diluted to of share. foreign effective quarter significant currency translation $XXX driven markets, partially by impacts second a offset by XXXX, were top non-GAAP tax this Excluding the rate. EPS X% $X.XX variances, growth and million line was higher quarter second operating increased and

our corporate share. we segment. severance costs, items impacted $X.XX quarter, by state expenses both onetime tax PGI approximately and the During expenses, onetime results the and had impacting including The per

considering XXXX not for expenses. earnings share to significant we compared While second as our would growth variances, over adjusting are X% the these these of quarter have been per quarter second

guidance track This of earnings second strengthened deliver headwind rates quarter the the American X% to our remain adjusted exchange XXXX XX%. half of first as to XXXX Latin dollar full year, the aligned businesses to year. a forecast a earnings and Foreign and both against reported year-ago year the basis the both to growth sequential we of our our in U.S. with and compared half the to for be currencies. Based the of across on strong for continue on implies our remainder on growth EPS

quarter $XX $XX investment share. in on adjustment Protection, the Slide detailed a the Turning Significant non-GAAP include million block variable to and significant earnings negative and Life a RIS and $X.XX These regulatory dividend unfavorable variances Insurance. performance approximately in small the pretax, operating after net diluted and Principal in per variances GAAP-only by quarter International encaje Benefits income as tax for XX. lower impacted closed in million

we Variable investment prepayment the income improved fees Real had estate quarter. alternative in were muted, no transactions returns. sequentially and on stronger

tax noncash higher our the in The rate, primarily tax was non-GAAP assets. guided Iowa to in operating tax second than quarter corporate a a rate our was decrease earnings This of effective due range. deferred resulting remeasurement

is it net our While benefit. rate a the quarter, long-term current this tax impacted in

the be For range. full we expect to guided within the XX% to still year, XX%

RIS drive the the income business and by by the net guided invest second we and increased market exclude remained higher and growth. high following at our XX% XXXX, range, units. favorable quarter to future variances. in comments pretax grew of The end margins performance. to significant the the driven over business Turning continue revenue while investment growth business, Net X% in earnings to strong nearly of operating

immaterial lower the the an margins earnings $X relative quarter offset earnings of management XXXX. On operating in Higher In basis, increased flat expenses. first quarter severance earnings second the as redemptions impacted approximately as partially quarter, of by offset year over quarter, operating International, X% by low of margin from compared to was Asia. ago Strong the onetime PGI's second XXXX. from constant pretax Latin operating increase from currency were XX% of were by earnings AUM pretax of performance quarter. impact and recent Principal fees. Adjusted in a million decreased to flat. approximately a earnings and is growth other the In the well increasing X% fees America seasonal were by

see combined points operating basis second continued compared earnings and quarter America, was Benefits feel good driven a by higher Disability increased the Group underwriting of seasonality. of starting Latin favorable very Asia, improvements Specialty lines. and the pretax about continued year. half are in results in product year to XXXX, more macro second growth the strong We than in this Underwriting ago to from across a strong performance we business climate in XX% XX with diversification offset Improved more Group improved the the the results and experience. highlights in dental the Life by

We to second half expect seasonality the moderate year. of the the in

reinsurance our our in overall YRT X the as negotiated in guaranteed we our on ULSG rates locked as actions impact Insurance, business quarter Life risk, risk-reducing These resulting In immaterial well existing YRT contracts block. reduced an for earnings. in transacted and

for was the revenue Excluding continued grew the our X% where growth range. remain our in financial XX% strength full the quarter quarter. Across market business we the of year, the This businesses, guidance premium the at anchored guidance by fees to of activities, YRT targets. long-term on year fees our top in these compared confident premium related impact ago and margin to grew driven delivering

capital we After to profile, our capital of and to Turning based RBC capital and a at have levels evaluation our target of liquidity. XXX% mix to risk business revised on range our XXX%. thoughtful

additional this for our on more new our manage conditions external us profile and target liability believe and business new opportunities. capital is based We to gives suitable flexibility

operate We have and no within RBC prudently our immediate lower this to level plan will range.

at the this million approximately Based million of capital, Our $X.X including $XXX and estimate $XXX have RBC on was in XXX%. holding target, and our billion RBC company, ratio excess we $XXX new quarter above XXX% million excess approximately second subsidiaries. of available

of shown nearly return returned stock we million. As $XXX $XXX million million our of in to repurchases common the year-to-date share $XXX on This and X, brings to million dividends. shareholders $XXX second Slide capital including quarter,

free We the expect year. XX% full XX% capital to deliver targeted flow to our for on

flow capital discussed throughout of previous As due tends free calls, timing on generation, to the increase to capital year.

$X.X impact immaterial the excess a to second growth payable an increase in $X.X $X.XX capital We ESOP the in XX% continue align stock continued capital second our billion are at including continue capital night, our acquisition mentioned our approach capital This and committed dividend. our common and confidence a to quarter for an the share targeted deployment. of dividend a to third focused billion with quarter, payout million the previously shareholders paid to to and repurchases. The dividend overall announced expect continues Last to we billion and returning XX% disciplined capital demonstrates will in $XXX had quarter performance. We to over liquidity the maintaining full ratio XXXX of year, the increase to life remain company both deployments from deployment dividend plans. on the and $X.X holding and company and balanced targets and $X.XX

off have million continue with year, The commercial the maturities. strong, or mortgage we liability we positioned Our remain on to $XXX profile and All portfolio remaining. and maturities a work to $XXX have maturities resolved, with million in of underlying well borrowers healthy. Coming office The paid economic of had these remains variety investment XXXX. portfolio to the aligned and into remaining conditions. loan date pay metrics loan or off remains for refinance loans our high been our we quality

confident In in include our equity to growth capital flow share, XX% closing, of ability our X% XX% These and enterprise to on conversion. free per targets. return deliver increasing on are we XX% to earnings XXXX a

the year. and to our in are We growth expect the underlying by encouraged of fundamentals half businesses of second the accelerate

executing growth benefits on protection the strategy remarks. long-term for drivers prepared management shareholder value. This continuing and retirement, and We asset on focused and Operator, call are drive grounded a concludes our to please our in open questions. of

Operator

first of Instructions] [Operator question Hurwitz Joel The comes from & Dowling Partners.

Joel Hurwitz

decline. in, a even little it some discussed of was the non-asset-based revenue of thinking In dynamics further acceleration be of we compression. quarter, But know the having it quarter? to should I rate be business in on fees. rate expecting factoring of levels? light and retirement like fee I impact an Retirement, of other there with looked was fee what Any fee the fee the last I looks that a some bit unusual Anything about that looks

Daniel Houston

Joe. question. you. I'll just into Chris. have for that go the Chris Appreciate

Christopher Littlefield

than think, is Thanks about again, for net with question, the Joel. bps fee I period in when on we our X%, when But year. the for really good rate, at growth sequentially basis during where bps we I and look XX-month I'd revenue net feel start a at look X down less mean, of of revenue were trailing about down X outperformance. coming a we -- significant we market

with quarters, think And that's timing things things, or occur fluctuations other fee were highlight we revenue between to revenue X the the billable But respect view to way services. the is highlight view given the I that consulting rate trailing rate. the fee whether performance of in X best of if and market sort XX-month to I'd

it's when assets, than so quarters. average all over -- is of all numerator you we've significant faster you like not tied not outperformance noted, denominator market which the is that the seen AV, last revenue increases the couple particularly fee-based First, as have that to

of Second, decline performance market in difference monthly the matters average April that AV. notable in and pattern resulted in a market

So that's highlight. another factor I'd

equity our point-to-point investor out performance, look while it's XXX. to for pointed looking correlation diversified, and in our a conventional less more S&P we exposure slides, the XXX, market saw Third, as we S&P at gauge the at is

cap, cap were And presentation fee-based during to income the presentations. while outlined second real excuse the the all negative. performed quarter, -- and well those flat And estate international specific fixed so we in in small mid-cap, me, exposures investor large investor

anything notable. see So we didn't

of outperformance fluctuate bps a margin top our to in going sort to to confident reiterate net guidance a over markets respect normal at X the at again year above and full our with at of the believe we're or can continue the our X guidance to full year our we We bit. And in that that revenue guidance, for be guidance. and in markets I'd be

performance. we feel Joel? Does about So good really our help, that

Joel Hurwitz

stick of with And How that guess, helpful. spread-based retirement. in Yes, just is defined has now or that business much in I I'll products? in grown you Chris, -- I recent years? guaranteed was contribution your guess how

Daniel Houston

Yes.

I about should I the another factor can think respect actually rate, actually fee point you to that's -- Joel. with revenue

better for We focused the a in to get thank there. on been prompt been account WSRS. penetration you So that And an of. are definitely we've guaranteed increase seeing use really of trying product the in that's something

out they're in and So seeing some economics what coming you're up that is the is showing of coming, fee spread. of are

our definitely growing. and seeing our of in good WSRS to in ability is it seeing We're products success placements increase there. an guaranteed So earn

Operator

is next Ryan from coming KBW. The question Krueger of

Ryan Krueger

you key -- what second hoping was to guidance of seems EPS a some to EPS causing Your the year up? what you of half I know pretty good but half imply first take the other and year. are step-up seasonality, factors in that. that year driving full -- in factors the dental touch I the there's for that's the could of the on step in

Daniel Houston

Yes.

we're Before -- Deanna time that, the ability that a to our I'll confident mature growth how the have of to historical lot precedents these Ryan, my is, answer specifically. today, and understand relative of where With and get businesses that Deanna that feel at spent let tend themselves to hit looking on quite I earlier and comments, I in to as lot answer we we to question, what that. a said the got know we've at underlying to just

Deanna Strable

Yes. the question. Ryan, for Thanks,

drivers to full and year referred confident me that bit make then that sizing talk of little a performance. time spend of our still the about us you that step-up Let in kind

to second our mentioned, we if understand our in outlook for But guidance. reconfirming to business be acknowledge that you didn't it. a need would increase to that not us there, meaningful half and also meet financial I First, the to like the do results support for appears fundamentals want I you be we have

the Second, all way. make thinking I of we're just sure the in right want to numbers

to X% $XXX EPS XXXX. our adjusted to XX% EPS So of growth adjusted the refers million in our off growth

year an if in slightly us on per range X And over to next math the factor don't the to to we that you per half get quarters the actual average imply in that if taxes within that the $X.XX, quarter second compared that, expect so average quarter in and onetime $X.XX the $X would do quarter of first the or recur. you the expenses of out

year. There factors are The but of to mentioned first cause performance X most did be of -- but meaningful not that PGI naturally a EPS in the is is impacts our in seasonality, in of of the second number just X any you these that those those their also that higher half. half the in SBD just segments

of I second reduced In further growth the as helpful averaged to you my then the the the addition, a back EPS the year progresses. add be and and I pattern also as in half. that point will we $X.XX point, second support higher -- in And last in year, share natural contribute first could our as our half of EPS this as to think of count which a all In XXXX. well businesses the $X.XX to

a So $X.XX. delta of that's

continuation additional add share pattern last our $X.XX adjust you an we've as this year, would that $X.XX as of amount, activity, for a buyback that if year. a experienced a that recently increase making to And

to line, that, year to And provides a I of macro long path as bottom cooperate, see X% our continues clear So that XX%. as confidence. our to detail to additional guidance further support full hopeful

Operator

Carmichael of The coming Research. Autonomous is next question Wesley from

Wesley Carmichael

some expenses as costs, know On PGI were were much there mentioned like quite quarter. seems down expenses, severance I didn't last but come as you expecting and it you

year. have we that So any about rest you what -- higher just on drove expenses of quarter think wondering and for how if the color the this should

Daniel Houston

the to expect, investments have in question. about how also think part private. continue Wes, the public to make we business pivot have to you as And appreciate from you that might we in the we as the

add with additional some So have that, to color. I'll Kamal

Kamal Bhatia

you, Thank Thank you, Dan. Wes.

think in But we business, $X of reminding mentioned, business you did you and quarter, roughly So million this as I was are competitive to investment as that there, asset have, staff our we is some I have before severance related. we worth the costs management think I notes a did constantly that go model. that it's adapting highly mentioned the we

and talent So one the to adjust do is will continue things look appropriate and of capabilities we'll at it. our

the particular, to around your to question, we back business. you the also infrastructure making Dan's to I'll comments respect are point So in with the elevated were In expenses debt. reinvestments

as We sure are making we for particularly the capabilities focused the our mix. business adjust have on future we

adjustments that, to remain I see some there on OE the capability remain In our gave we addition nature confident we in we outlook AUM, management but in of you you to think perspective, confident due to an our expense margin. from and the will market were also guidance

Daniel Houston

a you have follow-up, Wes? Do

Wesley Carmichael

quarter, transfer, in mostly pension to, In risk in quarter. Yes. and the making But competitors some lawsuits against in chilling of guys guess, billion around volumes equity-related think, I private sponsors Last that related market. comments $X kind companies. I plan some you had were sales

what robust. wondering still in that just pipeline the looks you're seeing pretty if So

Daniel Houston

on you that? some color Chris, to want provide do

Christopher Littlefield

pretty Yes. Wes. as market see Thanks, still the No, Yes. robust. we

second think billion to to year, And targeted for nice we and getting put we slowing exceeding in quarter returns business. are $XX certainly, don't additional $XX really I PRT. to on down. the and -- is market on expectations in that PRT billion We're an the overall nice some the see opportunity industry PRT opportunities took our

macro And from seeing down. anything that a slowing so is market that basis would the not suggest PRT

Operator

JPMorgan. of is Jimmy The from next question coming Bhullar

Jamminder Bhullar

on flows. a PGI just first, question So net

to such on. such might this fee when over it of blocks become is lost, just than came the wondering have a your past business that was think your low business you did each pressuring mandates of different quarters, time? sort on? I'm you've outlined Or mandate fee you've that of put if few it low approach when And the I business flows. how

Daniel Houston

That's question, a great Jimmy.

the and all have generations of to detail different unique Kamal recent investments, on these a story, certainly a have little bit of most I'll additional quarter. some You have but they provide

Kamal Bhatia

Jimmy, Absolutely. a great that's question.

So like, me net cash net on but low-fee what the question flows this and the your with flows. start quarter, cash nature let these just think was I both look of

we in had low time almost were $XXX highlighted, of a So long-duration million a single and these a outflow we low-fee mandate. To us question, They for fixed become fee. were a as they did always income with mandate, over period your not a while.

In addition, I sources that very you particular, mentioned think strong, at which net Dan flow, revenue as I highlighting our margin and real quite cash are it of is $XXX look estate million and for high remained this, high flows worth think cash of if in net us. almost our durable flow

also we mix in of obviously as to both flows expand private continue high $XXX our that which And well. credit, business as and highlighted are high we million revenue margin

in to the answers bringing feel With durable respect revenue do business. question. that and of the we about high mandates, trend a in were that Hopefully, asset assets mix have are the mandates. unfortunately, the we -- we our So lose lower did are have in and revenue good classes

Jamminder Bhullar

years. just X-year, than Is most recent your inflows? records to performance, generate or as great XX-year ability good the still better had as on it's I And at not been impact that new your having if Sure. look any the it relatedly, in but track look retain

Daniel Houston

And that question. of gets great a attention. a obviously, Yes. lot That's

and are perspective. with interrogate together As and had underperformance a different the Deanna and to asset-weighted leaders a and and frequently why conversation couple I sources the Kamal to slide deck weighted get fact, the on of his robust very equal where weeks. perspective a in you last provide matter they It's of we've enhanced of

think in I of of truly underperformance good you good his again, some really strategies. frankly, Kamal, job how insights? done to a where our are do many provide and Kamal additional these sources want team performances But and have of understanding

Kamal Bhatia

Absolutely.

first, Jimmy, important us. me performance is acknowledge So to investment very let

do performance provided will think, to question, But particularly we really points on to managers, acknowledge I I point your top-tier you correlation data as this I direct go comments. I'll business our think so I flows, a quarter. seen further, your a you we mix. across investment short-term X to haven't

One, data, this And you clients better have which you to to that our invested they basis and picture we basis, reflect are on are if provide for because where added both our a complete quite quarter are you providing to you peer we look business. asset-weighted values strong. the of relative updates to at alpha our numbers

You could highlight in quartile strategies, top I particular, a us, is would which long-term performance. mid-cap and for X short- strategy, see, strategy large has you for

area which is for addition, In hybrid performance. target dates, very an of strength us, has long-term strong

our The I their institutional the which this key see decision other and beating our period, in of clients. you'll almost XXX is would are to you, thing XX% for basis benchmark, point recent alpha almost strategies charts most your points of through is the

me that would keep are results the So that producing that there. we comfort we gives investment

has lastly, since XQ positive first private return know, to our as continue market our estate then that marquee equity position real we you And benchmark its and net beaten on in peer-based had real focused absolute their estate 'XX. be strategy

data me I we give performance, focused that this stage. doesn't the on feel at are do but So concern

Operator

from coming John Barnidge of Sandler. is question Piper next The

John Barnidge

Given the in [ the flows flows. for you're business the exceeding and RIS on you look remainder some to targeted volume returns the focus going ] headwinds Is bigger year? fee growth business be a this of PRT as maybe and to

Daniel Houston

attractive risk disciplined I overall for in about Yes, approach between of And the very really that, think the additional liability the add business very very and say the enterprise a is and year set said just as outlook management. Having the we're area But we that, it's for spread thing half first with fees, on intentionally on now, of portfolio some the his I'll right the like opportunity PRT and our John, we like return we have Chris we that we PRT. take risk. of seeing. the would perspective do second that profiles

Christopher Littlefield

our of in range the the billion upper I $X to previously thank business full to the of half. in billion as long Dan. $X for the year. And We believe half question. as of be that PRT we're sort first continue $X.X John, again, our we that billion sales can the that at billion much would for midpoint. you, we of Yes. Thanks, the $X.X end targeted be to range the in at returns. momentum first nice be PRT we'll mean, through of 'XX Yes. through 'XX, close seeing We than pretty achieve now We'll that guided

half opportunities us. with second investment. in to return and we do always with do we balance sure And as the on an some really this so But investing that the get that capital appropriate we for return growth make on we we're see focus do business,

as I provider in as out industry. the PRT pointed #X we're in well, Dan think the

a actuarial to So it's coming solutions have pension really whether us plans, we of way a a differentiator and and defined defined consulting, are opportunities that for management. benefit benefit existing provide lot record-keeping custody, see complete because for able and our we set OCI customers our our of capabilities are asset our solutions full

that plans, PRT. in when to And that and really they to us allows bear their all take of that derisk bring want to able capabilities advantage we're of and to those capture

$X feel about the billion again, expect PRT to be closer we really full the So good to for and year.

John Barnidge

My follow-up question.

you the getting opportunity size that those provide is with Given of your solutions. at average Are you products, look to larger? -- full pipeline, transaction as suite

Daniel Houston

specifically? side PRT the On

John Barnidge

Yes.

Christopher Littlefield

the the if is -- we that amount us at you the lead you entered -- as do John, our as we into when things number premium. differentiates -- again, both of X Honestly, contracts well of PRT in of look

opportunities Dan as benefit source of so We out, pension is defined customers. pointed about and us. a nice benefit for got existing of existing solutions from defined XX% opportunities complete And the

to at really And a is market, lot where up that of of in area we the we competitive the plans our better more than market go the rates, opportunities, to focused of we attractive we but many of allows in and really the find require actually our on of different small other the a more better we bid focus. where retiring many have onboarding And better there, us still that onboarding, differentiation us in only look close large, point focus so returns we are that of will capabilities get areas midsize competitors, returns economics. if competitors highly really robust don't for

Daniel Houston

part Also this on TRS that. of suite. is just remember to Dan, just that our And pile

lot clients, a they defined know benefit They compensation a those a being ESOP. So even client nonqualified from us deferred from being for deferred know of client. income, a XXX(k) us

of there relationship we're these customers. is platform, PRT benefit So across the an existing defined obvious symbiotic a and really provider on this

Operator

from The is of Elyse next question Greenspan Wells Fargo. coming

Elyse Greenspan

of use your on just is question Bermuda. first My

can for transfer incremental update use provide If that yet? be just any entity forward risk have capital capital you any And and an just relief, there thinking pension going relief and expectations you guys should we about? deals

Daniel Houston

Yes.

on update to the I us give position some got And there good and to life use in ERT -- in our an a this. to that think annuity is remember, as future. we've and some a she we're respond it can Deanna result business some how term going transactions, was business of

Deanna Strable

Yes. for that Thanks, question. Elyse,

we've the Bermuda term PRT, lines previously created our new well. of with As as we and those but both see entity, business business, product was some to entity discussed seeded both for in-force that it of

business new naturally. Term to Life just to of continued year That reinsured kind Our Bermuda. all be has happens

specifics expect a sales to first business we a year. second is determine on For None if to of as really position PRT in efficiency utilized matter half of Bermuda, capital PRT, sales Bermuda half of a for perspective. the have leverage Bermuda that but basis be new operational the in our optimal case evaluated and is to from case-by-case some our

Elyse Greenspan

half And back just the for then on expectations the Do of guys you year? VII. maybe have

Deanna Strable

that would a as on of in we the look improvement that. current investment are in performed in the actual quarter have what income. think metric, drivers we improvement are really some returned the of our -- overall Just driven quarters have we volume what but I as do comments at prior an seeing variable look portfolio couple VII has we expected quarter, you level or and identified it return than expected. if was ] that the by seeing lower at improvement still TTM a actually pressure at to even in pressured on [ alts the we a relative If whereas previous basis, quarters in the of

really given is we've well X yet interest as or is interest transactions. year relative rates areas. we're One continuing to to place, is we're start actually as other our are pressure real in a to impact had on prepays. peers and uncertainty rate prepays bit sizable no And Obviously, BII real a see prepays current is increase to But the little when but of of and estate it actually in place this virtually than that environment different the that. fees kind going had we where not then particular, estate a more prepays from

the that in of be into real we potential levels income interest do year. a first step we the we at variable and component more environment the the of pretty in half minimal where will rate quarters look probably will volatile. in beginning second been change transactions likely substantial see X I look improvement XXXX. in I investment we Obviously, But performance were think decrease occur the of has can necessitate as at think improvement year. And the a increase the constructive real as estate our

Operator

The Jefferies. next question coming from of Kamath is Suneet

Suneet Kamath

Dan, to XXX(k). about in talk I withdrawals wanted participant

elevated in that prepared mentioned You at remarks being your an level.

One of having impact on your rollover. advisers alluded the peers are recently to

terms withdrawals? of just maybe participant in seeing So you're what -- you unpack can

Daniel Houston

at of good But Yes, look market I'll is, it take part way withdrawals and I that so in these large several over the Chris. years. been has part over it elevated number the you've throw performance because the one, would to then got last that

opportunistic much point it the to Secondly, and as are being changers you retirees very as job advisers retirees. so relates it benefited out,

generally with they that large outside plan. seek an retirement have account qualified outside average balances will relationship for Oftentimes, the it's Those insights. really professional advice existing their

of at served good So advice capabilities to frosting off But way I'll it of balances, cupcake, our if our and the lower Principal Connection within dollars. of guidance that which skewed individuals account I those that balances, before And ability average towards only are have much the it's lot of think a us I see any surprised with the account for pass take Chris, higher us I didn't to natural. really average is provide don't many to for and be a too to retain you.

Christopher Littlefield

either add Yes. of thing No, an no, IRA -- I in think IRA in more or -- quarters. terms that's to and pretty keeping where over improvements in those I'd of and much to thanks -- get plan driving is that continue area better we Principal, with and the that's continue earning couple invest rollovers assets IRA success an in seen our the we've yes, on last

seeing uptick I'm with very though, to rate. I only slight want a though. withdraws Specifically clear, sure make just We're in

it's much withdrawals. in on what impact participant on more we're is about rate So of than seeing market withdrawals it

And are so being also when people that inflating anecdotal, with taken. it's while to markets. market just up and account larger withdrawals it's amounts retire days And it's taken, tend in

taking values much more in and so opportunity. of market would call maybe in sort XX% then account this on it, the bit rates. slight a see taking But little the to is high time of that more, and increase more to people point expect is of at I'd again, than attribution you And advantage

Daniel Houston

additional a to advisers, then with gathering benefit we IRAs know investment directly these on quick lot X their roll distribution within gather Remember, that ability over that PGI, I platforms are products from Network, we our of Just sitting other PFN comments. equally. sorts our have partners' really Financial these And of Principal assets.

participating is different Principal of a on levels. variety So

record-keeping comments Our focused primarily to of gate. out helps. our coming that Hopefully, the We're platform.

Suneet Kamath

I some that things guys others there are And you does. It that have maybe think don't.

us target, PRT think that revenue the it's to helpful. obviously, we John growth about is business. the if combines question, My as So but as that's follow-up well net Barnidge's related fee and RIS, you give

we sense at were defined a to industry? it like us the growth maybe how look if business at So contribution looks you revenue Principal, there to what compares the give can just of and

Daniel Houston

a Chris. that handy, follow-up That may be got unless you've

Christopher Littlefield

growing we're But fee Well, to yes, we're the that manage good average we're I in about where at at. believe we've revenue all reporting What I the we don't we've and lead together that of down sort at our the is or revenue business how because that's of gone think above feel and specifically rate. say spread operate the we segment as what break retirement we business. looking and We would done is industry of terms components.

in recurring open up. our more profile revenue the arch bit bit respect in of to our pointed dynamics, on to revenue of at Principal continues. the in revenue if different. deposits I business overall mid, sales So to sort is strength is net core and a plan be versus on small markets, ahead that think new to to think mid about a little we've up business little again, We're and sort rates about out mid if so tends But We small core with mid to market XX% were we of of to small think small about X%. large

is pipeline Our up.

So we actually feel business. our overall really fee good the performance of about

Daniel Houston

last we this across the enterprise within months, talking strategy. really Principal think the has, to organization. In as out retirement entire we've heard an you've been XX doing that, Suneet, investors. adopted about

the SMB about organization. think also across We

for make capture revenues sure to less in we we want we is which them profits bucket those again, capture actually where in important. enterprise So the

So hopefully, that helps.

Operator

Gallagher The Evercore next Tom of ISI. question is coming from

Thomas Gallagher

to had of a this bit where I related Can line about weaker. quarters know RIS some few fee talk retention flows plan-level I questioning. prior in a questions quarter? were Suneet's you

You had losing about some talked large cases.

overall any large quarter talk this planned you those of can about losses? you case had So just whether retention level and

Daniel Houston

recent the excited they've his significant small, acquisition side. Chris about both and had And the medium with acquisition retention very we're improvement ESOP integration our on team and most because of the Brag the full large. and on

Christopher Littlefield

at Again, all-time contract positive Thanks Yes. seen question, for probably favorable retention we've very the for Principal. levels Tom.

very strong this losses across all retention and contract large no So segments significant year.

So really good.

In a scores in trending positive all are addition, satisfaction, adviser good customer direction. NPS

about really I we perspective. So contract good from feel retention a sit where

Thomas Gallagher

through the you through Wells like whole feel the gotten pig python So you've transaction. the from

You a of going forward. those risk don't to that see lot Is fair?

Christopher Littlefield

overall really a from terms that integration, fair. retention. like I are that to couple in volatility broad-based that think working that's I I do we're of feel so of lot you're good a through comment, on. always But I about have you think -- Tom. a going But mean

Thomas Gallagher

to my your so And and is, comments participant and granted, that just Great. about you retention I your would listening When are and the in think comments results level -- of totally follow-up part say fair, -- then levels. like this the the on a larger just considering account asset just value redemption. -- same a based goes lot, participant level up your it's of market outflows

that. get totally I So

that from those this sort rate that, having But that is about when said I of plan for path So like very aside good stronger there's glide is considering $X.X a we the here quarter, about forward obviously, the that outflows dynamics? to think QX, given billion reasonable retention, quarterly while? look just a at all level be a seasonally should going decent run thinking of

Christopher Littlefield

Yes.

as sales participant market, strong to think we and second volatility transfer If elevated a as quarter, strong that's at trends deposits, fair that impacted out, by, well as equity contract I withdrawals the it's kind both retention. question. as of offset recurring of look point slightly the again, strong large the whether plan want I well

continue, run expect cash trends to those flow in the net year. think and of that see through some the will rate, pressure balance We we

Operator

The next coming question Wilma Raymond is from James. Burdis of

Wilma Jackson Burdis

at these at how take that? point, lower felt all you -- start you do are by do of think million target to -- $XXX comfortable you change? the term? you that the operating questions of And comfortable at And Could Was a the speedup why about little to all evaluate lot this think would near bit you RBC excess full in I the talk a it a long time? but could one, some capital lowering RBC know feel

Daniel Houston

appreciate I'll really respond. the to Deanna question. I Well, Yes. have

Deanna Strable

quite was There components few that. different Wilma. Thanks, Yes. a of

on of touch to it. try I'll all So

about change. and years few a liability Obviously, prepared and ] So our for if [ our reason you back the profile. just we the talked It changed to decision the retail changed we risk that strategic I made exit go reinsure ago, our annuities to USG think profile. fixed remarks,

level be. as have to so our follow-up, a we RBC that, what target been up should And evaluating

We considered business risk We at profile. analysis. capital extensive considered mix, our we considered risk

had also agencies with also competitors rating at We well. and of our regulators looked lot conversations target our a as what and

of you lowered range And that XXX%. previous target so to XXX% the we is our to level XXX% RBC what a the is saw outcome from

that quantification the mentioned of You difference.

were a It is that between You high. difference the really was $XXX the million little XXX% and XXX%. about

to We be expect in level, to we're volatile have no plans to prudent immediately lower continue and current and the to remain environment, uncertain. that going going RBC to which we is

operate us opportunities. the the attractive foreseeable of in see So primarily organic of some volatility you will quarter-to-quarter, likely see by driven you'll targeted growth upper But portion that just for future. range that volume

very able to feel really overall our our and capital shareholders. But good again, to back feel return about continue also with being capital levels significant good of to a amount

Wilma Jackson Burdis

potential or help the but us years little how you Bermuda so. us using And capital XX about think quantify know about earlier that, about thinking I mentioned a PRT. bit you it the for you or over months maybe could or benefit from using help would think entity X the how next size And you're

Deanna Strable

as think more probably slightly after giving higher I for about as about Well, capital. to Yes. similar of think it the ability would a I of us freeing volume a amounts cases up capital. of lot it wouldn't PRT go

idea color, of volume an up a how that's the give to little you had million and and relative the million of bit gives it bit $XX would that it capital PRT $XX I maybe term of that. so to of size current you kind a And usage elevated to the maybe quarter in little outsized

to wouldn't expect opportunities take advantage the us the free of it markets company, grow to be ability of again, that attractive of with amounts to retiring SMB. up, our massive I allow business, return but align target our But grow

Operator

of Bank coming Josh America. The is from next question Shanker of

Joshua Shanker

recur experiencing is in would in of much growth. trend. track you I X% that did factor to have 'XX think your much doubt not how And XXXX, repeat? confidence that no XX% seasonality you in I surprise how the you're go the to for EPS back to expect going to answered I to mostly 'XX when want out to on that look in Ryan's about you sufficiently. question But the you're the I seasonality 'XX?

Deanna Strable

more that at Josh, we our will that on we're you year, expected. half I say a little pretty to about of of what outlook. the fact be is that thinking operating one bit But time exactly performance we spend for would have Yes, would the something first top look if prior much

are is into that see kind we of early I that we 'XX, and pattern that we also expect one but a want in anything few we seasonality commitments PGI make of of of businesses that we more so And for earnings. outlook change SBD. in that to go of have from transparent on But the sure don't perspective, level would total, key the as like

know I that pattern the than to that, of we we different about to card continue what is is seasonality talk to continuing wild one a Obviously, be experienced pre-COVID. dental

year into I'd one be to the a wild bit of I to in Life We little trends fortunate offset you was relative think card in seasonality we positive our to underwriting that, different. thought that's Disability. we it elevated the might transparent probably little materialize a come say of both that XXXX. were quarter more But the by as current but is and commitment any that

Daniel Houston

and trends when business think Investor November perspective XXXX. additional into I provide we'll thoughts also on get be we our to XX Day, to those able

Joshua Shanker

are you'd dental things well the the but be to item. clear, outlook, with enough just the seasonality in exclusion how of wasn't So patterning earnings actually that expect during vocalized of with the line

Deanna Strable

Yes.

would total, So unexpected. say I in it was what not

I up we that's it EPS bubble seasonality PGI, but XXXX that move refine what into clear from didn't seasonality, how to we'll impacted overall as were again, think to talk a outlook. pretty we SBD and we about about And look quantification.

Operator

is question coming Citi. next The Mike Ward of from

Michael Ward

detail if was far? office so you of could discuss -- some around maturities the wondering in resolutions any I

Daniel Houston

we that. it? actually do to take Yes, Deanna, do can want you

Deanna Strable

the paid We year. maturities. into came year to color We the We far with off thus did or about Yes. come $XXX prepared has some of that resolved bear remarks. on million this everything

those to a remain $XXX strong, remaining We those bring underlying to have outcome. continue work metrics million and positive to we about of

impact. that did about million the CML $XX noticed second have losses may have of our You in quarter

increase out our point entirely I to increase do is reserves in that want $XX loan which reserve, due to and specific our million X about across increasing $XX with reserve. general a almost in that, properties was about a million

a basis, high on we quality our good portfolio So mortgage in GAAP particular. commercial CML loan portfolio feel million our overall and to of really the have reserves about $XXX again, of relative portfolio still about office the and

Daniel Houston

Mike? helps, that Hopefully,

Michael Ward

Yes. No, that does.

recently. maybe It curious put then seems work driving of at that And least if seeing for Okay. Fed just there's questions clients is flows. gotten this. like wanting couple Kamal, I on cut uptick likely a what today. on an horizon. more But sort PGI know money you've a you're of on in to to the Wondering just more

Kamal Bhatia

Yes, Mike, that's great question. a

our impacts of view with of terms to I is outlook. But we clients would answer in you book having income point conversation terms it to but of that the economists, like economic think many also cutting is that in anticipation other we sanguine fixed it are see I'll question, a own on are start rate on in see What So view current increasing hearing fairly clients to I from are There X engagement. going think our out we there how are is cycle business, here. maybe how now what perspectives: we the from helping your or we is do side. I that

look which And that's is we begin, excellent of strategy. of interest. longer high-yield clients has to interest more to cut in lot we the a rate but franchise, cycles historically, as areas area see an duration obviously one see high-quality, And our continue performance,

our in And a starting. our than business real benefit the equities which cycle REIT move cuts clearly, traditionally, respect from that big equity With equity to of side, would faster private anticipation portion of franchise, is rate estate.

time. are CMBS SASB different it wouldn't coming this you do macro the both capital at to you I increase issuance, the in you you expect And look refinancing. deals So real in emerging conduit at do improving. is and see sources new entrants trends look in there any When new marketplace, do of when see to estate, new be refinance

rate is anticipation do of So more I generally but in more the also the cuts engagement. creating the volume think marketplace,

Daniel Houston

you, Hopefully, that helps Mike?

Michael Ward

does. It

Operator

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

Daniel Houston

globe. Thanks, Dana. with leverage portfolio to our our continue the product distribution We'll integrated partners around

high-growth our Additionally, discussed our very judiciously today. as market we'll capital and on deploy focus we've

certainly of with road importance as the know hope Day in top is Thanks our your at Thank would expenses we the you next expect. on of you. months I for time us, That November XX. revenues aligning and to the for Lastly, our investing on and mind the Investor future. see today. few for you

Operator

you. conference Thank call. This concludes today's

your disconnect participation. may and You at lines this you we for your thank time,

Principal Financial (PFG) 26 Jul 242024 Q2 Earnings call transcript