Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — Investor Day (November 2015)
47 slides from Principal Financial's investor day presentation, Nov 6, 2015
Slide 1: Investor Workshop
INVESTOR WORKSHOP The Principal Financial Group ® November 6, 2015
Slide 2: Welcome
INVESTOR WORKSHOP John Egan - Vice President, Investor Relations Welcome
Slide 3: 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 earings, net income available to common stockholders, net cash flows, realized and unrealized gains
Slide 4: Agenda
PRINCIPAL FINANCIAL GROUP Agenda 12:00 pm Welcome John Egan 12:05 pm Company Strategy Dan Houston Integration of Retail and Institutional Jim McCaughan 12:20 pm Investment Platforms Mike Beer OER with ities Barb McKenzie 1:30 pm Break 1:40 pm Financial Supplement Enhancements Terry Lillis 2:10 pm Q&
Slide 5: Company Strategy
INVESTOR WORKSHOP Dan Houston - President and Chief Executive Officer Company Strategy re. Group
Slide 6: Where we compete, how we win
SN OW WE COMPETE WIN
Slide 7: Where We Compete
WHERE WE COMPETE Morethan 75 countries around the world EB Asset management, retirement/long term savings, risk protection [By Asset management, retirement/long term savings [Bl Assetmanagement
Slide 8: Where We Compete: High growth, high potential markets
WHERE WE COMPETE High growth, high potential markets GLOBAL ASSET MANAGEMENT INDUSTRY PAG IEEE Country 2014 rank | 2019E rank | 2024€ ran IN TRILLIONS Indonesia #16 #15 #15 #12 TOTAL GDP FOR SIX LISTED COUNTRIES [ee $34 Trillions $100Trillions re. ‘See APPENDIK or sources. Group
Slide 9: The top retirement market in the world
WHERE WE COMPETE The TOP retirement marketin the world 25 RETIREMENT MARKET OPPORTUNITIES 20 » RETIREMENT READINESS: - Newplan formation - Non-participants 45 - Under-saved g + INCOME SOLUTIONS: e = Yield/Income 10 - Outcomes: © Longevity o. Marketvolatility 5 Inflation C) UNITED STATES 2nd THROUGH
Slide 10: From positions of leadership
10 WHERE WE COMPETE From positions of leadership Best Place to Workin Money Mgmt* #1 APV - Chile Funds? #6 manager of Target Date Funds* Top 10 manager Real Estate* 13t* largest manager High Yield® #3 Greenest CRE Company® #3 provider of DC plans” #1 Non-qualified deferred #2 Pension provider in Lat
Slide 11: How We Win: Through top-tier investment performance
44 HOW WEWIN Through top-tier investment performance MORNINGSTAR RANKINGS Percentage of funds in the top two quartiles 0 36% 91% 91% 33 % 78% 78' 0 72%, 72' 66%) 60% OF RATED FUNDS HAVE 4 OR5STARRATING 3 STARS 10 FUNDS 2 STARS 2 FUNDS 1-YEAR 3-YEAR 5-YEAR 4 STAR 1 FUND 12/31/11 w 12/31/13 9/30/15 “a
Slide 12: The right active strategies
HOW WE WIN The right active strategies ALTERNATIVES Estimated share of cumulative global net cash flows HEDGE FUNDS, PRIVATE EQUITY, REAL (2015-20186) ESTATE, INFRASTRUCTURE AND COMMODITY FUNDS* | SPI EQUITY SPECIALTIES - FOREIGN, GLOBAL, EMERGING MARKET, SMALL AND MID CAP, sector** FIXED INCOME SPE
Slide 13: The right active strategies drive strong flows and AUM growth
HOW WE WIN The right active strategies drive strong flows and AUM growth Total CompanyNet Cash Flow PFGAUM growth ($ in Billions) ($ in Billions) 2005 2010 9/30/15 re. Group 13
Slide 14: Multi-channel, multiproduct distribution
14 HOW WE WIN Multi-channel, multiproduct distribution Number of firms with: $1+ Billion in sales fl $500-$599 Million in sales Il $250-s499 Million in sales fi $100-$249 Million in sales 2005 xs UBS ater Financia Ee Bankof America Merrill Lynch 2007 2009 = 2011 wamonvaanes @)NFP| 2013 Mier tragaren
Slide 15: This is how we win
THIS IS HOW WE WIN - Investment excellence ~ Exceptional service ~ Multi-channel distribution ~ Collaborative culture
Slide 16: Integration of Retail and Institutional Investment Platforms
INVESTOR WORKSHOP Jim McCaughan - CEO, Principal Global Investors Mike Beer - President and CEO, Principal Funds Barb McKenzie - SeniorExecutive Director, COO & Boutique Operations Integration of Retail and Institutional Investment Platforms re. Group
Slide 17: Diversified global asset management organization
47 PRINCIPAL GLOBALINVESTORS Diversified global asset managementorganization Includes Principal Funds $354 Billion of AUM Managed by Principal Global Investors Broad range of investors; over 75 countries * Offices in major money centers worldwide « Long commitment to corporate stewardship; signatory
Slide 18: Global reach
PRINCIPAL GLOBAL INVESTORS Global reach
Slide 19: Specialized investment boutiques
PRINCIPAL GLOBAL INVESTORS Specialized investmentboutiques Unique hybrid boutique approach Post Advisory Group » Distinct investment MACRO CURRENCY GROUP processes re ‘Strategies + Leverage distribution; global institutional et and funds pa + Integrated business MORLEY FINANCIAL Investors ‘SERVICES,
Slide 20: Our growth drivers
20 PRINCIPAL GLOBAL INVESTORS Our growth drivers * Long-term strategies - institutional, retirement, high net worth, and retail clients * Global leader in funds * Global distribution - institutional and funds * Range of capabilities - innovative products and solutions * Multi-boutique approach Drivi
Slide 21: How we will win: Global leader in funds
21 PRINCIPAL GLOBALINVESTORS Howwe willwin Global leaderin funds ~ We are now a GLOBAL DESTINATION FOR FUNDS ~ $162BinAUMacrossU.S. and Intemational platforms, as well as various private funds* _ Strong performance across boutiques and strategies ~ Global alignment of funds governance, operations an
Slide 22: Industry leading performance
22 PRINCIPAL GLOBALINVESTORS Industry leading performance Percentage of funds in the top two quartiles, 3Q 2015 Principal* (Momingstar) T Rowe (Lipper) 71% 78% 77% Invesco (Lipper) 53% 73% 83% Janus (Morningstar) 70% 79% 63% Franklin (Lipper) 24% 55% 57% Waddell (Lipper) 48% 64% 52% 78% of Morningst
Slide 23: Important recognitions
23 PRINCIPAL GLOBAL INVESTORS Importantrecognitions Principal Funds #5 in Barron’s Best Mutual Fund Families - 2014 THOMSON REUTERS / LIPPER FUND AWARDS 2015 s Z UNITED STATES Best Global Real Estate Fund Over the 5-Year Period 16™ LARGEST ADVISOR-SOLD FUND FAMILY" Principal Global Investors Dublin
Slide 24: Opportunity set for global funds
Opportunity set for global funds Translating our multi-asset, multi-manager success to offshore fund markets Translating success of other products/solutions Leveraging stronger relationships and increased power with big global distributors Driving efficiencies and sharing best practices across our p
Slide 25: Global distribution - funds
25 * AUM figuesincude both Retal and Retirement AUM and remove double counting fo fnd-of fund assets PRINCIPAL GLOBAL INVESTORS Global distribution - funds Top 5 Distributors Top 5 U.S. Strategies Wels Fargo Merrill Lynch Target Date $25.38 9.3% Morgan Stanley Dynamic Outcome Strategies $13.8B 61.7%
Slide 26: Global distribution - institutional
PRINCIPAL GLOBAL INVESTORS Global distribution - institutional Top 10 clients based on mandates won & funded in 2015, through 9/30/15 Funded Amount Strategies ( Millions) Japanese Financial Institution 5,172 Investment Grade Corporate, High Yield, Post intermediate Term HY and Limited Term High Yiel
Slide 27: How we will win: Innovative products & solutions
27 PRINCIPAL GLOBALINVESTORS Howwe willwin Innovative products & solutions ~ Product Development already a core strength ~ With alignment, industry leading multi-asset , multi-manager capabilities _ Principal Portfolio Strategies — Edge Asset Management ~ Combined “center of excellence” for product
Slide 28: Proven multi-asset, multi-manager expertise
28 PRINCIPAL GLOBALINVESTORS Proven multi-asset, multi-manager expertise Principal Portfolio Strategies Investment Process # Strategies AUM 9/30/15 Strategic Asset Allocation* 7 $68.6B Dynamic Asset Allocation 5 $3.5B Dynamic Outcome 4 $14.4B Edge Asset Management Strategic Asset Management** 5 $15.
Slide 29: Well positioned for industry trends
29 PRINCIPAL GLOBAL INVESTORS Well positioned for industry trends » Industry leader in delivering solutions, including Multi-Asset solutions ° Strong and growing suite of Alternatives ¢ Early entrant in the Active ETF space Hybrid, Passive and Indexed offerings on retirement platform of the Principa
Slide 30: The power of alignment
30 PRINCIPAL GLOBAL INVESTORS The powerof alignment Principal Global Investors Financial Results 1™ ¢ ns) 2012 | 2013 | 2014 | Bae Adjusted Revenues* $828 $1,028 $1,084 $1,162 Operating Expenses~ $611 $722 $722 $771 Pre-tax Operating Earnings $207 $290 $350 $387 Pre-tax Operating Earnings, Adjastad
Slide 31: Key takeaways
Key takeaways Principal Global Investors is well positioned to take advantage of industry evolution and investor trends Continued collaboration with Principal International to leverage investment capabilities of the Principal Financial Group Keeping strong momentum while we pursue growth opportuniti
Slide 32: Q&A Panel
INVESTOR WORKSHOP Q&A Panel
Slide 33: Break
INVESTOR WORKSHOP Break
Slide 34: Financial Supplement Enhancements
INVESTOR WORKSHOP Terry Lillis - Executive Vice President & Chief Financial Officer Financial Supplement Enhancements re. Group
Slide 35: Evolution of the Principal Financial Group
35 Evolution of the Principal Financial Group 53% 47% $98 Billion AUM* 2001 U.S. General Account I Other + Adustedto reflect the dispostion of discontinued operations $516 Billion AUM 3Q 2015
Slide 36: Proven results: Many growth engines
36 Proven results: Many growth engines ASSETS UNDER MANAGEMENT [Principal Intemational [BB] Principal Global investors 13% CAGR si71 ral ~ Institutional [By Principat Global investors ~ Mutual Funds $120 $119 [Bh Retirement & Income Solutions, USIS, & Corporate $106 [Bh Outlook for Principal Financi
Slide 37: Outcomes
3 OUTCOMES Simplify disclosures Increase transparency Align business reporting
Slide 38: Simplify disclosures
THE PRINCIPAL FINANCIAL GROUP Simplify disclosures 3Q 2015 Pre-taxTTM operating earnings OLD Full Senvice Accumulation m Individual Annuities investment Only Full Senice Payout m Bank and TrustSewvices Principal Funds = Principal Intemational = Principal Global Investors = Individual Life Specialty
Slide 39: Simplify disclosures
THE PRINCIPAL FINANCIAL GROUP Simplify disclosures 3Q 2015 Pre-taxTTM operating earnings OLD Full Senvice Accumulation m Individual Annuities investment Only Full Senice Payout m Bank and TrustSewvices Principal Funds = Principal Intemational = Principal Global Investors = Individual Life Specialty
Slide 40: More concise and pertinent disclosures
40 THE PRINCIPAL FINANCIAL GROUP Simplify disclosures MORECONCISEAND PERTINENT DISCLOSURES * More focus on trailing twelve months — Pre-tax operating earnings for business segments — Equity method accounting clarification — After-tax operating earnings for total company and fee, spread, risk * Total
Slide 41: Retirement & Income Solutions - Fee and Spread
RETIREMENT & INCOME SOLUTIONS - FEE AND SPREAD Simplify disclosures 3Q 2015 Pre-taxTTM operating earnings $970 Million Principal Funds To Principal Global Investors $780 Million Full Service Accumulation RIS Accumulation Individual Annuit Bank & RIS Guarantee ment Only RIS-Spread Service Payout OLD
Slide 42: Retirement & Income Solutions - Fee and Spread
42 RETIREMENT & INCOME SOLUTIONS - FEE AND SPREAD Simplify disclosures Pre-taxTTM operating earnings, excluding Principal Funds (Sin Mitions) $844 $780 $722 14% CAGR -12% CAGR 9/30/13 9/30/14 9/30/15 * @ Ris-Fee I Ris-Spread + Results adjusted for 3015 acuatal assumption review, ITEMS MODIFIED: « Na
Slide 43: Principal Global Investors: Increase transparency
PRINCIPAL GLOBALINVESTORS Increase transparency Pre-taxTTM operating earnings (Sin Milions) 20% CAGR $387 $332 $269 9/30/13 9/30/14 9/30/15 ITEMS MODIFIED: * Includes Principal Funds * AUMrollforward detail Boutique reporting + Additional revenue detail * Margin reporting consistency er. Group
Slide 44: Principal International: Increase transparency
PRINCIPAL INTERNATIONAL Increase transparency Pre-taxTTM operating earnings {Sin Millions) 14% CAGR* $397 $370 $303 $260 $282 9/30/13 9/30/14 9/30/15 I Reported Basis A Adjusted Basis* “BM pevods adjusted fr foreign exchangeand encje 9/30/15 also adjusted for intangible assetimpaiment ITEMS MODIFIED
Slide 45: Alignment of Disclosures
Alignment of Disclosures ALIGNMENT GOING FORWARD --3Q 2015 supplement new format available online . 4Q 2015 only presented in new format 2016 OUTLOOK CALLIN NEW FORMAT - December 3, 2015 REPORTING ~ Fee, Spread, and Risk
Slide 46: Q&A Panel
INVESTOR WORKSHOP Q&A Panel
Slide 47: Appendix - sources
az Appendix - sources Slide 8 - Sources for left side chart: Asset Management 2020: A Brave New World, PwC, 2014; The age of asset management? Speech by Andrew G Haldane, Executive Director, Financial Stability, Bank of England, atthe London Business School, London, 4 April 2014.) Sources for right
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