Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — Merger or Acquisition (October 2012)
28 slides from Principal Financial's merger presentation, Oct 9, 2012
Slide 1: Principal Financial Group Cuprum Acquisition Announcement
Principal Financial Group® Cuprum Acquisition Announcement October 8, 2012
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain statements made by the company which are not historical facts may be considered forward-looking statements, including, without limitation, statements as to operating earnings, net income available to common stockholders, net cash flows, realized and unrealized gain
Slide 3: Transaction Highlights
Transaction Highlights The Principal ® has signed a definitive agreement to acquire AFP Cuprum S.A.. The agreement requires Empresas Penta S.A. and Inversiones Banpenta Limitada (private Chilean holding company) to sell their 63% share ownership in Cuprum pursuant to a public tender offer, that will
Slide 4: Cuprum: A Compelling Transaction
Cuprum: A Compelling Transaction Accelerates execution of our stated strategy Acquisition of a marquee franchise in a high-growth market Solidifies our position as a leading pension and retirement services specialist in Latin America with a unique “Pensions Inc.” platform (from hire through retire)
Slide 5: Accelerating Our Strategy
Accelerating Our Strategy Opportunity Year Announced Achievement 2012(a) ü Complete offering in Chile with marquee pension and savings franchise Claritas 2012 ü Entry into Brazil mutual fund and asset management market Origin 2011 ü Enhance global equity investment capabilities Finisterre Capital 20
Slide 6: Established and Targeted Presence in Emerging Markets
Established and Targeted Presence in Emerging Markets Transaction is representative of our accelerated execution of focused expansion in defined contribution, retirement and related products in markets well known to The Principal Cuprum (2012) AUM of $32.1B Mandatory Pensions and Voluntary Pensions
Slide 7: Acquisition of Cuprum is in line with previously stated expansion strategy
Acquisition of Cuprum is in line with previously stated expansion strategy Pensions Mutual Funds Asset Mgmt Annuities Brazil Chile Mexico China Hong Kong India Malaysia/South East Asia = Where we have a product offering today = Targeted expansion Source: Data from Cerulli includes Brazil, Chile, Mex
Slide 8: Greater Diversification of Earnings and Positioning for Growth
Principal International increases to 23% of pro forma operating earnings Increases diversification of earnings across markets, geographies and currencies Greater Diversification of Earnings and Positioning for Growth Standalone – TTM 2Q 2012 Pro Forma – 2012 Operating Earnings by Business Segment No
Slide 9: Acquisition of a Marquee Franchise in a High-Growth Market
Acquisition of a Marquee Franchise in a High-Growth Market Posted on PFG website on 10/8/2012
Slide 10: Cuprum: The Marquee Pension Franchise in Chile
AUM per Contributor ($) Cuprum: The Marquee Pension Franchise in Chile... Source: Company information, Broker research, Superintendencia de Pensiones. Note: All figures as at Q2 2012. “Customer” refers to mandatory pension account holders (in Chile also referred to as “affiliates”). Top Mandatory Pe
Slide 11: With Leading Market Share Momentum
...With Leading Market Share Momentum Source: Company information, Broker research, Superintendencia de Pensiones. Note: All figures as at Q2 2012. (a) Basis points change in percentage market share, by total AUM and by total customers. Market Share Gains Since June 2010 (bps)(a) By AUM By Customers
Slide 12: Uniquely Positioned Across Latin America as the High-Income Platform
Uniquely Positioned Across Latin America as the High-Income Platform Source: Company information, Broker research, Superintendencia de Pensiones. AUM per Customer vs. AUM AUM per Customer (US$ in 000’s) AUM (US$bn) $52,000 of AUM per customer $72,000 of AUM per actively contributing customer 13 Post
Slide 13: Simple Fee-Based Model with Strong Margins and Cash Flow
6 Months Ended June 30, 2012 Standalone Summary Financials ($millions) Observations Strong cash flow, low capital requirements and high ROE business Fees primarily based on salary-based contributions/deposits, not AUM High margin business with scalable expense structure Limited regulatory capital re
Slide 14: Attractive Industry in an Attractive Country
Attractive Industry in an Attractive Country Chile has a proven mandatory DC pension system System in place since 1981 Employees required to contribute a fixed percentage of their monthly salary Mandatory pension providers charge fees as a percentage of salary levels (not AUM based) Double digit gro
Slide 15: The Chilean Pensions System Has Experienced Exceptional Historical Growth
The Chilean Pensions System Has Experienced Exceptional Historical Growth Source: Superintendencia de Pensiones (Chile), IMF World Economic Outlook. (a) Real GDP growth of 4.4% plus inflation of 3.3%. Chilean AFP System AUM 1981 - June 2012 CAGR: 43.3% in CLP 32.0% in US$ Annual Growth Over Last 10
Slide 16: Strong Market Growth Expected for Chile and Principal's Other Latin America Businesses
Business 2010-2015E Pension Accumulation Brazil(a) Chile (mandatory)(b) Chile (voluntary)(a) Mexico(a) 14% 12% 14% 16% Mutual Funds(a) Chile Mexico 20% 17% Business 2010-2012E(b) Institutional Asset Mgmt Chile 12% Payout Annuities Brazil Chile 14% 10% (a) Source: Cerulli Quantitative Update: Global
Slide 17: Transaction Creates Enhanced Product Offering in the Chilean Market
Entered Chile in 1995 Historically not a participant in mandatory pension market Leader in mutual fund, pension and savings products Leader in payout annuities Transaction Creates Enhanced Product Offering in the Chilean Market Combined Companies Are More Than Sum Of The Parts Leader in mandatory an
Slide 18: Comprehensive Retirement Platform
Comprehensive Retirement Platform Together Principal Financial Chile and Cuprum completes the full spectrum of products for a comprehensive “hire through retire” approach to the market TOGETHER PRODUCTS: Mandatory Pension Voluntary Pensions: AFP Fund Based Mutual Fund Based Mutual Funds Payout Produ
Slide 19: Principal in Latin America
CHILE MEXICO BRAZIL CORE PRODUCTS Mandatory pensions Voluntary, qualified individual retirement Voluntary, qualified group retirement Payout annuities Mutual funds Mandatory individual pre-retirement pension Retail mutual funds Defined Contribution accumulation products for individuals & employer gr
Slide 20: Business that Principal Knows How to Manage and Integrate
Business that Principal Knows How to Manage and Integrate Posted on PFG website on 10/8/2012
Slide 21: Low Execution Risk
Low Execution Risk Strength of Cuprum High quality franchise and management – not a turnaround story Stable underlying fee business with limited balance sheet exposure/requirements Majority of revenue base not directly tied to equity markets Principal’s Experience in Chile and Latin America Long-ten
Slide 22: Latin America Asset Management M&A
Latin America Asset Management M&A 1997 – BanRenta Compania de Seguros de Vida S.A. (Chile) 1998 – El Roble Cia (Chile, from Santander) 1999 – Andueza y Cia, Agentes de Mutuos Hipotecarios (Chile) 2002 – Zurich Afore S.A. de C.V. (Mexico) 2002 – Tanner Mutual Funds (Chile) 2003 – Genera Mutual Funds
Slide 23: Attractive Financial Returns
Attractive Financial Returns Posted on PFG website on 10/8/2012
Slide 24: Attractive Financial and Value Proposition
Attractive Financial and Value Proposition Transaction valuation of approximately 13x our estimated 2012 standalone net income(a) and approximately 12x our estimated 2013 standalone net income(a) Favorable valuation for a high growth business Attractive multiple relative to precedent transactions Tr
Slide 25: Financing Approach
Financing Approach Hedging strategy between signing and closing Expect to raise part of required financing in Chilean currency Expect to implement hedging for remainder of purchase price between signing and closing Financing Source Potential Amounts ($bn) Excess Capital $0.4 Cash Proceeds from Septe
Slide 26: Financial Impact
Financial Impact Source: Company information, Bloomberg (October 5, 2012). (a) Estimated useful life of 20 years with accelerated amortization. (b) Excludes one-time costs related to transaction expenses, retention and marketing (~$20mm after-tax). (c) Consensus EPS estimates for Principal are Bloom
Slide 27: Appendix
Appendix Posted on PFG website on 10/8/2012
Slide 28: Exchange Rate Assumptions
Exchange Rate Assumptions The exchange rates assumed herein are based on current spot rates as reported by the Central Bank of Chile at October 5th, 2012 USD/CLP rate of $1/CLP472.76 (Central Bank of Chile Dolar Observado) UF/CLP rate of UF1/CLP22,598.58 (Unidad de Fomento, an inflation-adjusted uni
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