Principal Financial(US:PFG)2021-04-28 19:21Financial Data and Key Metrics Changes - The company reported non-GAAP operating earnings of $424 million for Q1 2021, an 18% increase compared to Q1 2020, driven by solid execution and improved macroeconomic conditions [10][33] - Net income attributable to Principal was $517 million, including $94 million of net realized capital gains with minimal credit losses [32] - The company closed Q1 with record total assets under management (AUM) of $820 billion, a 30% increase from the pressured first quarter of 2020 [13] Business Line Data and Key Metrics Changes - The Retirement business achieved record sales with $8 billion in sales growth, contributing to a 10% increase in recurring deposits compared to Q1 2020 [17][37] - Individual life sales rebounded with a 30% increase over the prior-year quarter, driven by nonqualified deferred compensation [26] - Principal International reported $161 billion of AUM, a 15% increase on a constant currency basis compared to a year ago [16] Market Data and Key Metrics Changes - The S&P 500 Index increased by 6% in Q1 2021, benefiting revenue, AUM, and account value growth in various segments [38] - In Brazil, industry-wide net deposits were down 19% from a year ago, but the company continues to lead in pension deposits with a first-quarter net cash flow of $100 million [21][90] - China AUM increased to $155 billion in Q1 2021, with $34 billion of net cash flow, despite not being included in reported AUM [16][20] Company Strategy and Development Direction - The company is focused on enhancing shareholder value and strengthening its position as an industry leader through a strategic review of its business mix and capital management, in collaboration with Elliott Management [28][29] - The integration of the Institutional Retirement and Trust business is on track, with expense synergies expected to emerge in the second half of the year [22][24] - The company is committed to its ESG strategy, pledging enhanced support for women and minority-owned businesses and targeting net-zero carbon emissions by 2050 [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the opportunities ahead, citing strong momentum across diversified businesses and resiliency in small to medium-sized businesses [11][44] - The macroeconomic outlook has improved, which is expected to fuel continued growth across the company's businesses [44] - Management noted that participant withdrawals returned to pre-pandemic levels, which is anticipated to persist throughout the year [17] Other Important Information - The company announced a $0.61 common stock dividend payable in Q2 2021, a $0.05 increase over the previous quarter [12][43] - The company has $2.8 billion of excess and available capital, significantly above its target [41] - The company is exploring solutions to mitigate the impacts of low IOER rates on its trust and custody business [99] Q&A Session Summary Question: Strong flows in Retirement and Asset Management business - Management acknowledged strong sales across all plan sizes, particularly in the large plan market, and noted the importance of proprietary asset management capabilities [48][49] Question: Revenue synergies from IRT integration - Management indicated that revenue synergies from the IRT block exceeded expectations, with successful transitions of three out of five blocks of business [59][60] Question: International organic growth drivers - Management highlighted strong net cash flows in Southeast Asia and ongoing challenges in Latin America due to pension reforms and COVID impacts [88][90][96] Question: Mortality trends beyond COVID - Management reported no significant changes in mortality trends beyond normal volatility, indicating stable claims patterns [110][111] Question: Acquired AUA drop - Management explained that the drop in AUA was due to market depreciation and normal shock lapses, particularly in the trust and custody segment [114][115]