Principal Financial(PFG) - 2024 Q1 - Quarterly Results

Executive Summary & Q1 2024 Highlights Overall Performance Overview The company reported strong Q1 2024 results with nearly $400 million in non-GAAP operating earnings, driven by strategic execution and favorable market conditions - CEO Dan Houston highlighted strong Q1 2024 results with nearly $400 million in non-GAAP operating earnings, driven by focused strategy execution, strong sales, and equity market tailwinds[2] - The company is committed to driving profitable growth, balancing investments in growth and innovation with expense management[2] - Principal returned over $360 million to shareholders in the quarter, including $200 million in share repurchases, demonstrating a strong financial position and commitment to capital return[3] Key Financial Metrics & Capital Allocation The company reported $533 million in net income, returned $362 million to shareholders, and grew Assets under Management to $709 billion in Q1 2024 Q1 2024 Key Financial Highlights | Metric | Value | | :--- | :--- | | Net income attributable to PFG | $533 million | | Diluted EPS (GAAP) | $2.22 | | Non-GAAP operating earnings | $394 million | | Non-GAAP operating EPS | $1.65 | | Capital returned to shareholders | $362 million | | Share repurchases | $200 million | | Common stock dividends | $162 million | | Q2 2024 common stock dividend (per share) | $0.71 (+$0.02 YoY) | | Assets under management (AUM) | $709 billion | | Assets under administration (AUA) | $1.6 trillion | | Excess and available capital | $1.4 billion | Enterprise Financial Results Consolidated Financial Performance The company reported a significant turnaround in net income to $532.5 million and strong growth in both non-GAAP earnings and assets under management Q1 2024 Enterprise Financial Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Net income (loss) attributable to PFG | $532.5 | $(140.1) | N/M | | Non-GAAP net income attributable to PFG, excluding exited business | $376.4 | $346.9 | 9% | | Non-GAAP operating earnings | $394.3 | $366.8 | 7% | | Diluted earnings per common share (GAAP) | $2.22 | $(0.58) | N/M | | Non-GAAP diluted EPS, excluding exited business | $1.58 | $1.39 | 14% | | Non-GAAP operating EPS | $1.65 | $1.48 | 11% | | Assets under administration (billions) | $1,624.3 | $1,503.4 | 8% | | Assets under management (billions) | $708.5 | $659.9 | 7% | Selected Balance Sheet Statistics As of Q1 2024, total assets increased slightly to $308.7 billion, while stockholders' equity grew to $11.2 billion and book value per share rose to $47.60 Selected Balance Sheet Statistics (QoQ Change) | Metric | 1Q24 ($M) | 4Q23 ($M) | | :--- | :--- | :--- | | Total assets (in billions) | $308.7 | $305.0 | | Stockholders' equity (in millions) | $11,230.4 | $10,961.7 | | Total common equity (in millions) | $11,185.5 | $10,916.0 | | Total common equity excluding cumulative change in fair value of funds withheld embedded derivative and AOCI other than foreign currency translation adjustment (in millions) | $12,640.9 | $12,735.4 | | End of period common shares outstanding (in millions) | 235.0 | 236.4 | | Book value per common share | $47.60 | $46.18 | | Book value per common share excluding cumulative change in fair value of funds withheld embedded derivative and AOCI other than foreign currency translation adjustment | $53.79 | $53.87 | Segment Performance Highlights Retirement and Income Solutions (RIS) The RIS segment achieved 6% growth in both sales and net revenue, leading to a 5% increase in pre-tax operating earnings to $262.2 million RIS Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Sales | $9,400 | | 6% | | Pre-tax operating earnings | $262.2 | $249.8 | 5% | | Net revenue | $691.4 | $650.1 | 6% | | Operating margin | 37.9% | 38.4% | | - The increase in pre-tax operating earnings was primarily due to higher net revenue, partially offset by higher operating expenses[10] - Net revenue growth was driven by business expansion, increased net investment income, and positive market performance[11] Principal Global Investors (PGI) PGI's managed AUM grew 7% to $514 billion, driving a 4% increase in pre-tax operating earnings to $113.9 million from higher management fees PGI Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Managed AUM (billions) | $513.5 | $478.7 | 7% | | Pre-tax operating earnings | $113.9 | $109.1 | 4% | | Operating revenues less pass-through expenses | $373.8 | $361.5 | 3% | | Operating margin | 30.7% | 30.5% | | - Pre-tax operating earnings increased due to higher operating revenues less pass-through expenses, partially offset by higher operating expenses[16] - Operating revenues less pass-through expenses increased primarily due to higher management fees on higher average AUM[16] Principal International (PI) PI's AUM grew 7% to $179 billion, but pre-tax operating earnings declined 7% to $73.2 million due to macroeconomic headwinds in Asia PI Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | AUM (billions) | $178.7 | $167.1 | 7% | | Pre-tax operating earnings | $73.2 | $78.7 | (7)% | | Combined net revenue (at PFG share) | $231.3 | $241.5 | (4)% | | Operating margin | 31.6% | 32.6% | | - Pre-tax operating earnings decreased primarily due to lower combined net revenue[21] - Combined net revenue (at PFG share) decreased due to macroeconomic headwinds in Asia and foreign currency translation[21] Specialty Benefits The Specialty Benefits segment delivered a 25% surge in pre-tax operating earnings to $102.0 million, driven by record sales and an improved loss ratio Specialty Benefits Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Premium and fees | $801.3 | $742.1 | 8% | | Pre-tax operating earnings | $102.0 | $81.8 | 25% | | Operating margin | 12.7% | 11.0% | | | Incurred loss ratio | 61.1% | 62.5% | | - Pre-tax operating earnings increased due to business growth and a lower incurred loss ratio[22] - Premium and fees increased, driven by record sales, employment, and wage growth[22] - The incurred loss ratio improved to 61% due to more favorable underwriting experience[22] Life Insurance The Life Insurance segment's premium and fees grew 4%, but pre-tax operating earnings fell 44% to $9.8 million due to a regulatory adjustment Life Insurance Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Market premium and fees | | | 23% | | Premium and fees | $234.0 | $224.8 | 4% | | Pre-tax operating earnings | $9.8 | $17.5 | (44)% | | Operating margin | 4.2% | 7.8% | | - Pre-tax operating earnings decreased primarily due to a GAAP-only regulatory closed block dividend adjustment[23] - Premium and fees increased as strong business market growth outpaced the runoff of the legacy business[23] Corporate The Corporate segment improved its pre-tax operating loss by 7% year-over-year, reporting a loss of $(88.9) million for the first quarter of 2024 Corporate Q1 2024 Performance (YoY Change) | Metric | 1Q24 ($M) | 1Q23 ($M) | % Change | | :--- | :--- | :--- | :--- | | Pre-tax operating losses | $(88.9) | $(96.1) | 7% | Non-GAAP Financial Measures & Reconciliations Explanation of Non-GAAP Measures The company uses non-GAAP measures like operating earnings to provide a clearer view of ongoing operations by excluding certain non-recurring items - Non-GAAP financial measures are used to illustrate the performance of normal, ongoing operations, aiding in understanding and evaluating the company's financial condition[28] - Management uses non-GAAP measures for goal setting, determining employee awards and compensation, and evaluating performance comparable to that used by investors and analysts[28][33] - Non-GAAP operating earnings exclude net realized capital gains and losses, income (loss) from exited business, and other after-tax adjustments deemed not indicative of overall operating trends[33] Detailed Reconciliations This section provides comprehensive reconciliations from U.S. GAAP to non-GAAP financial measures, detailing adjustments for key financial metrics Summary of PFG and Segment Results (GAAP to Non-GAAP Reconciliation) | Metric | 1Q24 ($M) | 1Q23 ($M) | | :--- | :--- | :--- | | Net income (loss) attributable to PFG | $532.5 | $(140.1) | | (Income) loss from exited business | $(156.1) | $487.0 | | Non-GAAP net income (loss) attributable to PFG excluding exited business | $376.4 | $346.9 | | Net realized capital (gains) losses, as adjusted | $17.9 | $19.9 | | Non-GAAP Operating Earnings | $394.3 | $366.8 | | Income taxes | $77.9 | $74.0 | | Non-GAAP Pre-Tax Operating Earnings | $472.2 | $440.8 | | | | | | Segment Pre-Tax Operating Earnings (Losses): | | | | Retirement and Income Solutions | $262.2 | $249.8 | | Principal Asset Management | $187.1 | $187.8 | | Benefits and Protection | $111.8 | $99.3 | | Corporate | $(88.9) | $(96.1) | | Total Segment Pre-Tax Operating Earnings | $472.2 | $440.8 | | | | | | Per Diluted Share: | | | | Net income (loss) | $2.22 | $(0.58) | | Non-GAAP net income (loss) excluding exited business | $1.58 | $1.39 | | Non-GAAP Operating Earnings | $1.65 | $1.48 | Reconciliation of Income Taxes (GAAP to Non-GAAP) | Metric | 1Q24 ($M) | 1Q23 ($M) | | :--- | :--- | :--- | | Total GAAP income taxes (benefit) | $95.1 | $(78.0) | | Net realized capital gains (losses) tax adjustments | $11.1 | $8.2 | | Exited business tax adjustments | $(41.5) | $121.3 | | Income taxes related to equity method investments and noncontrolling interest | $13.2 | $22.5 | | Income taxes (Non-GAAP) | $77.9 | $74.0 | Reconciliation of Principal Global Investors Operating Revenues Less Pass-Through Expenses | Metric | 1Q24 ($M) | 1Q23 ($M) | | :--- | :--- | :--- | | Operating revenues | $404.8 | $392.7 | | Commissions and other expenses | $(31.0) | $(31.2) | | Operating revenues less pass-through expenses (Non-GAAP) | $373.8 | $361.5 | Reconciliation of Principal International Combined Net Revenue (at PFG Share) | Metric | 1Q24 ($M) | 1Q23 ($M) | | :--- | :--- | :--- | | Pre-tax operating earnings | $73.2 | $78.7 | | Combined operating expenses other than pass-through commissions (at PFG share) | $158.1 | $162.8 | | Combined net revenue (at PFG share) (Non-GAAP) | $231.3 | $241.5 | Additional Information Earnings Conference Call An earnings conference call led by senior executives to discuss Q1 results and future prospects is scheduled for April 26, 2024, at 10:00 a.m. ET - An earnings conference call will be held on April 26, 2024, at 10:00 a.m. ET, featuring CEO Dan Houston and CFO Deanna Strable[25] - The call will discuss Q1 results, future prospects, asset quality, and capital adequacy[25] - Access to the live webcast and telephone dial-in details, along with replay and transcript availability, are provided on investors.principal.com[26] Forward-Looking Statements This release contains forward-looking statements based on current expectations, which are not guarantees of future performance and are subject to risks - The release includes forward-looking statements about share repurchases, planned dividends, growth strategies, and ongoing operations[27] - These statements are based on current expectations and beliefs and are not guarantees of future performance; actual results may differ materially[27] - Risks and uncertainties are described in SEC filings, including the annual report on Form 10-K. The company assumes no obligation to update forward-looking statements[27] About Principal Principal Financial Group is a global financial company with a long history of serving millions of customers in planning, insuring, investing, and retirement - Principal Financial Group is a global financial company with nearly 20,000 employees, serving approximately 62 million customers for over 140 years[29] - The company helps customers plan, insure, invest, and retire, while also focusing on improving the planet, supporting communities, and building a diverse and inclusive workforce[29] - Principal is recognized as one of the 2023 World's Most Ethical Companies, a member of the Bloomberg Gender Equality Index, and a "Best Places to Work in Money Management"[29]