Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — Q4 2023 Earnings Presentation
32 slides from Principal Financial's earnings presentation, Feb 13, 2024
Slide 1: Fourth Quarter 2023 Earnings and 2024 Outlook Presentation
©) Principal’ Fourth Quarter 2023 Earnings and 2024 Outlook Presentation PRINCIPAL FINANCIAL GROUP February 12, 2024 RETIREMENT ASSET MANAGEMENT BENEFITS & PROTECTION
Slide 2: Key takeaways
Key takeaways FY 2023 non-GAAP EPS! excluding significant variances? of $6.92 increased 6%, at the top end of our 3-6% 2023 guidance 4Q23 non-GAAP EPS’ excluding significant variances? of $1.81 increased 11% from 4Q22; non-GAAP operating earnings’ excluding significant variances? increased 7% Delive
Slide 3: Full year 2023 financial highlights
Full year 2023 financial highlights FY 2023 OPERATING RESULTS Reported non-GAAP Impact of significant variances to Non-GAAP operating earnings, operating earnings! non-GAAP operating earnings? excluding significant variances (xSV) $1,603M $(89)M after-tax $1,692M AUM (-1% vs. FY 2022) ($(42)M pre-ta
Slide 4: 4Q 2023 financial highlights
4Q 2023 financial highlights 4Q 2023 OPERATING EARNINGS AND EPS Reported non-GAAP operating earnings! $441M (+12% vs. 4Q 2022) Reported non-GAAP operating earnings per diluted share’ (EPS) $1.83 (+16% vs. 4Q 2022) CAPITAL DEPLOYMENTS 4Q 2023 capital deployments $41 OM returned to shareholders: $251M
Slide 5: Consistently recognized for excellence in business and workplace practices
Consistently recognized for excellence in business and workplace practices Top Place to Work in Money Management, 12‘ Consecutive Year Pensions & Investments (December 2023) 2023 World’s Most Ethical Companies, 12* time Ethisphere (March 2023) Top Companies for Executive Women Seramount (September 2
Slide 6: Investment performance
Investment performance % of funds outperforming Morningstar median’? As of 12/31/2023 1-Year 3-Year 5-Year 10-Year Equity 53% 50% 74% 95% Fixed Income 63% 56% 73% 82% Asset Allocation 88% 67% 88% 76% Total 70% 58% 80% 83% % of composites outperforming benchmarks"? As of 12/31/2023 1-Year 3-Year 5-Ye
Slide 7: Retirement and Income Solutions
Retirement and Income Solutions HIGHLIGHTS * Pre-tax operating earnings excluding significant variances! increased primarily due to growth in the business and strong revenue retention, higher net investment income, as well as favorable markets * 4Q23 sales of $5.1B, includes $1.2B in PRT; full year
Slide 8: Principal Global Investors (PGI)
Principal Global Investors (PGI) HIGHLIGHTS * Pre-tax operating earnings decreased primarily due to lower performance fees * PGI Managed AUM of $500B increased 7% over 2022; mixed net cash flow with +$1.9B of real estate flows for the full year more than offset by investors increasing allocations to
Slide 9: Principal International
Principal International HIGHLIGHTS * Pre-tax operating earnings excluding significant variances! increased primarily due to higher combined net revenue on higher AUM * Record AUM of $180B, up 15% from 4Q22 * Net cash flow of +$0.6B in 4Q23 and +$2.1B for the full year, with positive flows in both As
Slide 10: Specialty Benefits
10 Specialty Benefits HIGHLIGHTS * Pre-tax operating earnings excluding significant variances’ increased as growth in the business and disciplined expense management were partially offset by less favorable underwriting experience * Premium and fees increased 9% vs. both 4Q22 and FY 2022 driven by re
Slide 11: Life Insurance
11 Life Insurance HIGHLIGHTS * Pre-tax operating earnings excluding significant variances! decreased primarily driven by one-time expenses * Premium and fees increased 5% from 4Q22 and 1% from FY 2022 as strong business market growth outpaced runoff of the legacy business * 4Q23 sales increased 42%
Slide 12: 2024 Outlook
2024 Outlook
Slide 13: 2024 Outlook
2024 Outlook Well-positioned to deliver on enterprise long-term guidance * 2024 outlook in line with long-term guidance as EPS' will benefit from growth in the business, macroeconomic tailwinds, and higher share repurchases; partially offset by continued pressure on real estate and Asia as well as a
Slide 14: 2024 Outlook
2024 Outlook Guidance ranges on an excluding significant variances basis 2024 and long 2023 EPS! term guidance Total Company EPS growth $6.92 9-12% Expect midpoint of 9-12% long-term range Effective tax rate 17-20% Increased from 16-19% in 2023 2024 modeling considerati Retirement and Income Solutio
Slide 15: U.S. investment portfolio details
U.S. investment portfolio details As of 12/31/2023, excluding funds withheld
Slide 16: High quality and diversified investment portfolio
High quality and diversified investment portfolio U.S. invested assets and cash; excluding funds withheld, as of 12/31/2023 Government Cash, 4.8% Agencies, State & Political, a) Other", 10.4% 8.9% Residential Loans, 4.3% Commerical Mortgage Loan . (ex-Office), U.S. invested assets &cash $ 7 6. 2 B C
Slide 17: High quality commercial mortgage loan portfolio
High quality commercial mo an portfolio U.S. invested assets excluding funds withheld, as of 12/31/2023 | Property type Commercial Mortgage Loan- Total @ 44% Apartments Debt service coverage Senne [= 32 | com ro | 1 @ 23% Industrial > <1.25x | <1.00x | Total 4.9% 0.8% * Commercial mortgage whole loa
Slide 18: CML - Office portfolio details
CML - Office portfolio details U.S. invested assets excluding funds withheld, as of 12/31/2023 Commercial Mortgage Loan - Office Debt service coverage offi ins high 2024 Maturities Fan era * 11 loan maturities, 1Q24 loan maturity paid off in <1.00x | Total Guelligpliigilysstseiiacm ws January; remai
Slide 19: Mortgage & asset-backed fixed maturity securities
Mortgage & asset-backed fixed maturity securities U.S. invested assets excluding funds withheld, as of 12/31/2023 ($ in millions) Reduced size of CMBS portfolio by over 20%! since 2008. Overall quality of the portfolio improved; 97% of CMBS portfolio rated NAIC 1, up from 87% in 2008. in NAIC design
Slide 20: Equity real estate
Equity real estate U.S. invested assets excluding funds withheld, as of 12/31/2023 * Substantial cushion between market Equity real estate exposure by property type and carry values; risk of balance sheet vs. NCREIF property index’ impairment unlikely 39.0% ° Well diversified portfolio across proper
Slide 21: Equity real estate and other alternatives
Equity real estate and other alternatives U.S. invested assets excluding funds withheld, as of 12/31/2023 Core real estate is largest share of alternative asset exposure (carried at amortized cost). Future opportunity to harvest capital gains. Diverse, manageable exposure to other alternatives. Alte
Slide 22: Appendix
Appendix
Slide 23: Full year 2023 significant variances
Full year 2023 significant variances Business unit impacts of significant variances (in millions) Actuarial Variable assump’ estment H Hi inflation review income Retirement and Income $53.4 $(71.0) - $11.0 $(6.6) Solutions Principat al - §(18.9) $13.5 $(2.0) $07.4) Specialty $16.2 §(12.5) - 5(7.2) $
Slide 24: Full year 2023 significant variances
Full year 2023 significant variances Revenue impacts of significant variances (in millions) 2023 revenue, Actuarial Variable Encaje and 2023 revenue, Business Unit Revenue metric , , . : ee asreported assumptionreview investmentincome _ inflation XSV Retirement and Income Solutions Net revenue $2,69
Slide 25: 4Q 2023 significant variances
4Q 2023 significant variances Business unit impacts of significant variances (in millions) Retirement and Income $(15.0) 7 $(15.0) Principal International $(4.7) $21.9 $17.2 Specialty Benefits $(2.0) - $(2.0) Life Insurance $(5.0) - $(5.0) Corporate $9.8 - $9.8 Total pre-tax impact $(16.9) $21.9 $5.
Slide 26: Disciplined capital management strategy
Disciplined capital management strategy With emphasis on actively returning excess capital to shareholders Targeted range as a percentage of net income’: Organic capital 15-25% deployment Capital efficient business mix Consistent dividend 7 . . . . 1 payout ratio 40% Growth of dividend will track gr
Slide 27: Non-GAAP operating earnings sensitivities
Non-GAAP operating earnings sensitivities Estimated impacts of changes in key macroeconomic conditions on annual non-GAAP pre-tax operating earnings relative to the next 12 months, prior to management expense actions Certain alternative Equity market investment If macroeconomics return? Interest rat
Slide 28: Non-GAAP financial measure reconciliations
28 Non-GAAP financial measure reconciliations Three months ended (in mil Principal Global Investors operating revenues less pass- through expenses 12/31/23 12/31/22 Principal Global Investors operating revenues $403.8 $410.6 Principal Global Investors commissions and other expenses (29.9) (31.1) Pri
Slide 29: Non-GAAP financial measure reconciliations
29 Non-GAAP financial measure reconciliations Twelve months ended (inn s) Non-GAAP operating earnings (Losses) 12/31/23 12/31/22 Net income attributable to PFG $623.2 $4,756.9 Net realized capital (gains) losses, as adjusted 87.9 165.6 (Income) loss from exited business 891.7 (3,303.7) $1,602.8 Non-
Slide 30: Non-GAAP financial measure reconciliations
30 Non-GAAP financial measure reconciliations Stockholders’ equity x- cumulative change in fair value of funds withheld embedded derivative and AOC! other than foreign currency translation adjustment, available to common stockholders Period ended (in millic 12/31/23 Non-GAAP operating earnings ROE (
Slide 31: 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 flow 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 manag
Slide 32: Forward looking statements
32 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 flow, realized and unrealized gains
Principal Financial Group — Q4 2023 Earnings Presentation on 6ix