Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — Investor Day (November 2018)
71 slides from Principal Financial's investor day presentation, Nov 15, 2018
Slide 1: Principal
© Principal’
Slide 2: 2018 Investor Day, November 15, 2018
2018 Investor Day November 15, 2018
Slide 3: Welcome
Welcome John Egan Vice President - Investor Relations
Slide 4: 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 non-GAAP operating earnings, net income attributable to PFG, net cash flows, realized and unrealized gains an
Slide 5: GAAP metrics
GAAP metrics Principal Financial Group, Inc. U.S. GAAP Financial Measures (in millions, except as indicated) Trailing 12 months 9/30/2013 9/30/2014 9/30/2015 9/30/2016 9/30/2017 9/30/2018 PFG Net income available to common stockholders 1 $861.2 $1,074.1 $1,226.1 $1,252.1 $1,786.6 $2,151.8 Net income
Slide 6: GAAP metrics
GAAP metrics Principal Financial Group, Inc. U.S. GAAP Financial Measures (in millions, except as indicated) Trailing 12 months PFG 09/30/2018 Income (loss) before income taxes $1,856.3 Net realized capital (gains) losses 3.1 Net realized capital (gains) losses pre-tax adjustments 50.1 Pre-tax opera
Slide 7: GAAP metrics
GAAP metrics Principal Financial Group, Inc. U.S. GAAP Financial Measures Trailing 12 months 9/30/2018 (in millions, except as indicated) Impact of 3Q18 actuarial Excluding 3Q18 actuarial As reported assumption review assumption review 1 Segment pre-tax operating earnings (losses) RIS-Fee $549.0 $7.
Slide 8: Use of non-GAAP financial measures
Use of non-GAAP financial measures A non-GAAP financial measure is a numerical measure of performance, financial position, or cash flows that includes adjustments from a comparable financial measure presented in accordance with U.S. GAAP. The company uses a number of non-GAAP financial measures mana
Slide 9: Agenda
Agenda Time Topic Presenter(s) 1:00 pm Welcome John Egan 1:05 pm CEO perspective Dan Houston Gary Scholten, Kara Hoogensen, Jerry Patterson, 1:35 pm Panel discussion: Digital and technology Renee Schaaf, Ellen Shumway 2:40 pm Break John Egan, Nora Everett, Amy Friedrich, 2:50 pm Panel discussion: Bu
Slide 10: CEO perspective
CEO perspective Dan Houston Chairman, President & Chief Executive Officer
Slide 11: Principal remains well-positioned
Principal remains well-positioned to: Capitalize on key Continue to deliver Address key macroeconomic trends above market growth challenges • Era of personal • Retirement and • Fee pressures responsibility long-term savings • Demand for low • Aging populations in the U.S., Latin cost investments and
Slide 12: Strategic and integrated business mix
Strategic and integrated business mix RIS - Fee RIS - Spread 24% 15% • We’re in the right $2.3B businesses Pre-tax • We’re in the right Principal operating U.S. markets 15% 20% Insurance International earnings • Integrated business Solutions model enhances results 26% Principal Global Investors 12 T
Slide 13: The customer remains at the center of our strategy
The customer remains at the center of our strategy Our customers Small to Medium Sized Individuals Institutions Businesses (SMBs) Customer We help people We help businesses We tailor investment Individuals save and invest; address risks and solutions to client Institutions and protect against compet
Slide 14: Leading market positions
Leading market positions • Top 40 global asset manager • Top 5 retirement & group benefits/leading SMB franchise (U.S.) Strong • #1 pension (Latin America); #4 retail mutual funds (China) competitive • Top 20 Advisor sold fund family (U.S.) Strong investment performance positioning ‒ • 89% of funds
Slide 15: Continue to execute
Enhancing our solution set • 100+ new funds launched in 2017 and 2018 • ETF franchise now in top 25 • Internos acquisition Expanding our distribution network Continue to • More than 160 third party platform placements in 2017 and 2018 execute • Alibaba/Ant Financial, Tencent, Paytm Using technology
Slide 16: Continue to achieve above industry growth in AUM
Continue to achieve above industry growth in AUM 5 Year AUM CAGRs (2012-2017)1 11.0% Among top 50: • 15th fastest 8.3% 8.4% growing firm • 11th largest ranking increase (up 5 spots in 5 years) Principal Top 20 global Top 500 global asset managers asset managers 1 Calculated based on local currency 1
Slide 17: Continue to prioritize revenue growth
Continue to prioritize revenue growth Alternatives, active specialties and solutions continue to be key drivers Industry AUM and revenue growth (2017-2022E) Passive 120 90% 86% Active core 80% 100 Alternatives, 70% active specialties 59% 80 60% & solutions 50% 60 40% 33% 40 30% 20% 20 11% 10%
Slide 18: Capitalizing on key trends
Capitalizing on key trends
Slide 19: Revisiting and capitalizing on key trends
Revisiting and capitalizing on key trends 1 2 3 4 5 Era of personal Aging Emerging market Informal Innovation and responsibility populations, middle class employment digitization Responsibility longer life population Prevalence of Changes to how people for financial expectancies growth informal acqu
Slide 20: Era of personal responsibility
1 Era of personal responsibility Insufficient income replacement spotlights need for long-term savings vehicles Mexico 29% Hong Kong 33% Malaysia 34% Target is Chile 39% 70+% of Thailand 47% income U.S. 49% China 54% Brazil 56% 0% 10% 20% 30% 40% 50% 60% 70% Sources: For Brazil, Chile, and Mexico, P
Slide 21: Aging populations, longer life expectancies
2 Aging populations, longer life expectancies Further intensifies need for retirement savings and income solutions Dependency ratio 2015 (Age 65+ as % of working age population) 2030 Implications: 2050 • Need for additional 2X to 3X 60% voluntary solutions • Need for greater focus 50% on holis
Slide 22: Growth of emerging market middle class
3 Growth of emerging market middle class Asia-Pacific dominates expansion Regional contribution to next middle class billion 2015-2022E (Population in billions) Implications: 1.1 • Resource allocation – 1.0 Asia Pacific represents nearly 90% of 0.9 Rest 0.8 of Asia expansion 0.7 • Need for solutions
Slide 23: Informal employment and gig economy
4 Informal employment and gig economy Presents massive digital sales and advice opportunity 2 billion people For hundreds of work informally “millions of workers, (>60% of world’s population) informality means a lack of access to are in emerging and finance 93% developing countries ” 23 Source: Info
Slide 24: Innovation and digitization
5 Innovation and digitization Create important levers for growth Benefits of AI, data analytics, digital experience technologies and cloud 20+ ecosystems: 71% 26% billion • Better customer insights • Predictive capabilities • Improved decision believe legacy of companies internet- making connected s
Slide 25: Narrowing the focus
Narrowing the focus
Slide 26: A global overview
A global overview Significant opportunity for asset management industry overall Global investable assets (in USD trillions) Investable assets Projections: $400 managed by asset • Total global $350 management industry investable assets up >$130 trillion $300 Investable assets not managed by asset
Slide 27: A regional overview
A regional overview Trend toward equities and fixed income enhances opportunity ($ in trillions) Total Equity Balanced Cash heavy wealth heavy Highlights: $167 $56 $41 $38 $15 $8 $5 $4 • More mature 11% 23% 37% 26% markets have 39% 39% 12% 37% 61% greater investment 70% 4% 4% in equities and fixed 1
Slide 28: Global Asset Management
Global Asset Management Principal Global Asset Management (GAM) Principal Principal Global Strategy, International General Global RobustWealth Marketing & (PI) investment Account Investors (PGI) operations* Product Institutional Retirement High Net Worth/ investors investors Retail investors 28 *As
Slide 29: Where we'll compete
Where we’ll compete #1 United • Total projected AUM growth dwarfs all other opportunities States • SMB market remains massive opportunity for retirement and group benefits • China to become 2nd largest investment management market by 2030 (Casey Quirk projection) #2 China and • Substantial upward tr
Slide 30: How we'll win
How we’ll win Take market Maximize Make the Talent/workforce Technology, data share existing block pie bigger of the future and innovation • Goal for all • Innovative • New plan • Workplace • Data analytics businesses enrollment formation flexibility; linking for underwriting, solutions diversity &
Slide 31: Q&A
Q&A
Slide 32: Digital and technology panel discussion
Digital and technology Panel discussion Gary Scholten Chief Information Officer & Chief Digital Officer
Slide 33: Principal digital strategies
Principal digital strategies Digital infrastructure Customer Direct Investment Business experience sales & advice process efficiency 33
Slide 34: On the panel
Kara Hoogensen Vice President Group Benefits Jerry Patterson Senior Vice President On the panel Retirement & Income Solutions Renee Schaaf Senior Vice President & Chief Operating Officer Principal International Ellen Shumway Senior Executive Director - Strategy & Investments Principal Global Investo
Slide 35: Principal
© Principal’
Slide 36: Summary thoughts
• Digital is business strategy driven • 20%+ IRRs; benefits will emerge two-thirds through revenue growth, one-third through expense efficiencies Summary • Revenue growth will emerge from: • New channels & new customer segments thoughts • Increased plan participation • Reduced lapses • Improved trad
Slide 37: Q&A
Kara Hoogensen Vice President Group Benefits Jerry Patterson Senior Vice President Q&A Retirement & Income Solutions Renee Schaaf Senior Vice President & Chief Operating Officer Principal International Ellen Shumway Senior Executive Director - Strategy & Investments Principal Global Investors 37
Slide 38: Break
Break
Slide 39: Business unit opportunities panel discussion
Business unit opportunities Panel discussion John Egan Vice President – Investor Relations
Slide 40: Principal's businesses
Principal’s businesses Retirement U.S. Principal Global Principal & Income Insurance Investors International Solutions Solutions Vision for our future… 40
Slide 41: On the panel
Nora Everett President Retirement & Income Solutions Pat Halter President On the panel Principal Global Investors Luis Valdés President Principal International Amy Friedrich President U.S. Insurance Solutions 41
Slide 42: Principal
© Principal’
Slide 43: Summary thoughts
Retirement & Income Solutions Principal International • Underserved target market – • Growing opportunity set – our half of all SMBs don’t currently current footprint covers half the have a retirement plan offering world’s population • Largest retirement market – • Favorable demographics - growing U
Slide 44: Q&A
Nora Everett President Retirement & Income Solutions Pat Halter President Q&A Principal Global Investors Luis Valdés President Principal International Amy Friedrich President U.S. Insurance Solutions 44
Slide 45: Financial update
Financial update Deanna Strable Chief Financial Officer
Slide 46: What differentiates Principal?
What differentiates Principal? Proven history of execution Long-term Investing Strong focused growth for the financial strategy future position 10%+ average growth Committed to investment At one of our strongest in non-GAAP operating for growth through: financial positions as a earnings and earnings
Slide 47: Coming from a position of strength
Coming from a position of strength Capital Leverage Profitability Over $2B 20% Excess and 14.5% Low debt-to- ROE1 available capital capital ratio • Includes capital at • No debt maturities • A proven, diversified Holdco, subsidiaries, until 2022 business model and excess above a • Flexibility exists
Slide 48: A diversified high quality portfolio
A diversified high quality portfolio Commercial Mortgages Fixed Maturities portfolio 17% CMBS 12/31/2008 9/30/2018 5% MBS NAIC 1 57% 68% 7% Corporate NAIC 2 38% 28% Private Bonds NAIC 3 – 6 5% 4% 17% ABS $79B 8% Total U.S. Commercial Mortgage quality invested 12/31/2008 9/30/2018 assets & cash Gover
Slide 49: Intentional diversification and limited exposure to higher risk products
Intentional diversification & limited exposure to products with higher risks RIS - Fee RIS - Spread • Defined contribution • Fixed annuities and defined benefit • Pension risk transfer Products we’ve limited or • Variable annuities • GICs and MTNs • Trust 24% 15% • Bank managed our exposure to: $2.3
Slide 50: Disciplined capital management drives long-term shareholder value
Disciplined capital management drives long-term shareholder value Targeted long-term capital deployment strategy Capital is prioritized: Capital deployed as a percent of net income • Grow the company organically and inorganically • Strong growth including PRT and Group Benefits • Recent strategic ac
Slide 51: External capital deployments
External capital deployments ($ in millions) 89% of Net Income 78% of Net Income Highlights: 69% 77% 1 65% of Net Income $130 • Over the past 5 years, of Net Income of Net Income $355 we’ve externally deployed $100 $94 $180 $40 nearly $5B of capital $180 $440 $193 • After prioritizing for $275 $257
Slide 52: Proven results
Proven results Proven above market long-term Experienced results Balanced and management disciplined team High quality approach asset to capital portfolio and deployment Strong conservative financial liability average growth in non-GAAP position profile operating earnings and earnings 10%+ per dilut
Slide 53: General Q&A
General Q&A
Slide 54: Q&A
Dan Houston Amy Friedrich Chairman, President & President Chief Executive Officer U.S. Insurance Solutions Q&A Deanna Strable Pat Halter Chief Financial Officer President Principal Global Investors Nora Everett Luis Valdés President President Retirement & Income Principal International Solutions 54
Slide 55: Thank you
Thank you ce) Principal’
Slide 56: Appendix
Appendix
Slide 57: Non-GAAP financial measure reconciliations
Non-GAAP financial measure reconciliations Principal Financial Group, Inc. (in millions, except as indicated) Trailing 12 months PFG 09/30/2013 09/30/2014 09/30/2015 09/30/2016 09/30/2017 09/30/2018 Non-GAAP operating earnings 1 $1,014.2 $1,279.9 $1,291.3 $1,262.3 $1,499.8 $1,632.2 Actuarial assumpt
Slide 58: Non-GAAP financial measure reconciliations
Non-GAAP financial measure reconciliations Principal Financial Group, Inc. (in millions, except as indicated) Trailing 12 months PFG 09/30/2013 09/30/2014 09/30/2015 09/30/2016 09/30/2017 09/30/2018 Net income ROE available to common stockholders (including AOCI) 9.6% 11.6% 12.6% 12.3% 15.7% 18.2% N
Slide 59: Daniel J. Houston
Daniel J. Houston Chairman, President & Chief Executive Officer Daniel J. Houston is Chairman, President and Chief Executive Officer of Principal Financial Group®. He is responsible for overall management of the company. Houston joined Principal® in 1984 in Dallas. He has held several management pos
Slide 60: Deanna D. Strable
Deanna D. Strable Executive Vice President & Chief Financial Officer Deanna Strable is Executive Vice President and Chief Financial Officer with Principal Financial Group®. She plays a central role in driving and managing long-term strategies for innovation-fueled company growth, including responsib
Slide 61: Gary P. Scholten
Gary P. Scholten Executive Vice President, Chief Information Officer & Chief Digital Officer Gary P. Scholten is the Executive Vice President, Chief Information Officer and Chief Digital Officer of Principal Financial Group®. He’s responsible for overseeing the company’s use of Information Technolog
Slide 62: Nora M. Everett
Nora M. Everett President, Retirement & Income Solutions Nora Everett is President of Retirement and Income Solutions (RIS) and chairman of Principal Funds at Principal Financial Group®. She is responsible for U.S. retirement, annuity, broker-dealer and banking businesses at Principal®. Everett join
Slide 63: Amy C. Friedrich
Amy C. Friedrich President, U.S. Insurance Solutions Amy C. Friedrich is president of U.S. Insurance Solutions with Principal Financial Group®. Friedrich joined Principal® in 2000 in a performance improvement role for Corporate Strategic Development. Later, as a Director in that division, she helped
Slide 64: Patrick G. Halter
Patrick G. Halter President & Chief Executive Officer, Principal Global Investors Patrick G. Halter is the President and Chief Executive Officer for Principal Global Investors, the multi-boutique investment management firm within Principal’s Global Asset Management business. Halter is responsible fo
Slide 65: Luis Valdés
Luis Valdés President & Chief Executive Officer, Principal International Luis Valdés is President and Chief Executive Officer, Principal International. Previously he was President, Principal Financial Group Latin America (2010 – March 2011), supervising operations in Brazil, Chile and Mexico. Valdés
Slide 66: Kara M. Kohler Hoogensen
Kara M. Kohler Hoogensen Vice President, Group Benefits Kara M. Kohler Hoogensen is a Vice President with Principal Financial Group®. She has responsibility for the Group Benefits business within U.S. Insurance Solutions (USIS). In addition, Kara leads a team of strategists supporting the USIS and R
Slide 67: Gerald (Jerry) Patterson
Gerald (Jerry) Patterson Senior Vice President, Retirement & Income Solutions Jerry Patterson has been a presence in the financial services industry for more than 25 years and has held diverse and senior roles at some of the nation’s largest financial institutions. Patterson currently serves as Seni
Slide 68: Renee Schaaf
Renee Schaaf Senior Vice President & Chief Operating Officer Renee Schaaf is Senior Vice President and Chief Operating Officer for Principal International. In that role, she is responsible for global business development, strategy and operations in key emerging markets in Latin America and Asia. Ren
Slide 69: Ellen Shumway
Ellen Shumway Senior Executive Director, Strategy & Investments Ellen Shumway is Senior Executive Director, Strategy and Investments for Principal Global Investors, the asset management arm of Principal Financial Group®. In this capacity, she oversees two of Principal Global Investor’s boutique asse
Slide 70: John Egan
John Egan Vice President, Investor Relations John Egan is Vice President, Investor Relations with the Principal Financial Group®. Egan joined Principal® in 2010. Prior to joining the company, he most recently served as Vice President, Investor Relations with Assurant Inc., and Vice President and Fin
Slide 71: Contact page
Contact page John Egan Vice President, Investor Relations 515-235-9500 Egan.John@principal.com Eddie Vonnahme This presentation is available on our website: Director, Investor Relations www.principal.com/investor. 515-362-2018 Vonnahme.Eddie@principal.com Mail 711 High Street Cindy Kreuder Des Moine
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