Yahoo Finance Principal Financial Group Inc (PFG) (Q1 2024) Earnings Call Transcript Highlights: Strong ...
Non-GAAP Operating Earnings: $394 million
Earnings Per Share (EPS): $1.65 per diluted share, an 11% increase from Q1 2023
Capital Returned to Shareholders: Over $360 million, including $200 million in share repurchases
Dividend: Raised common stock dividend, aligned with 40% payout ratio
Total Company Managed AUM: $709 billion at quarter-end
Total Company AUM Net Cash Flow: Nearly $1.5 billion positive
Principal International Net Cash Flow: Positive $1 billion
U.S. Retirement Revenue and Earnings Growth: Strong, with stable high-end margins
Total Retirement Sales Growth: 6% increase over the previous year
Benefits and Protection Premium Net Fees: 8% increase from Q1 2023
Life Insurance Premium and Fees: Increased 4% from Q1 2023
Reported Net Income: $533 million
Net Income Excluding Exited Business: $376 million
Adjusted Non-GAAP Operating Earnings: $419 million or $1.75 per diluted share
Excess and Available Capital: Approximately $1.4 billion
Risk-Based Capital Ratio: Approximately 400%
Release Date: April 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you provide more color on the conversations you're having and the optimism for continued improvement in allocations to yield products going forward? A: (Kamal Bhatia - President & CEO of Principal Asset Management, Principal Life & Principal Funds) We're seeing encouraging signs, particularly in retail with a turnaround and increased interest from sophisticated gatekeepers in our higher revenue fundamental equity strategies. We also have about $6 billion of unfunded capital commitments in institutional real estate, expected to be called over the next 18-24 months, showing early signs of value. Additionally, our international business, especially in Latin America, is showing strong performance and we anticipate this positive momentum to continue.
Q: What are your expectations on the fee rate in PGI going forward? A: (Kamal Bhatia) We are managing to our 28 to 29 data points for fee rates. The strong institutional real estate flows and fixed income flows, especially in high-yield credit, are good for our management fee rate. We also expect improved retail flows, traditionally going to higher revenue and margin products like equity mutual funds. Our investment performance has been strong, particularly in multi-asset strategies, which should also support the fee rate.
Q: Is the high for longer rate environment impacting participant level withdrawals in RIS? A: (Christopher James Littlefield - President of Retirement & Income Solutions) We are seeing a slight uptick in participant retirement withdrawals, influenced by strong equity markets which increase account values. We are monitoring these elevated withdrawals and expect to see some benefits from higher interest rates as we capture participant accounts on rollover.
Q: Can you discuss the pipeline for PRT and your targets for sales or capital deployment there for the year? A: (Christopher James Littlefield) We had a strong start with PRT sales close to $800 million in Q1. The industry expects another strong year with total sales of about $30 billion to $40 billion. We are targeting $2.5 billion to $3 billion in PRT sales for the full year, expecting most of that in the later part of the year as companies close out their defined benefit pension liabilities.
Q: What are the expectations for variable investment income over the next few quarters? A: (Deanna Dawnette Strable-Soethout - Executive VP & CFO) We saw some pressure from lower real estate activity and private equity holdings in Q1. Going forward, we expect normalization in Principal International and continued pressure on prepays due to the interest rate environment. The alts portfolio may show more quarterly volatility, but we anticipate a return closer to our 8% to 9% target.
Q: With higher interest rates, is there any consideration of reentering the retail fixed annuity market? A: (Christopher James Littlefield) We continue to focus on variable annuities and have launched a registered index-linked annuity product. We are not looking to launch new retail fixed annuities but are focusing on growing our variable annuity and RILA offerings.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
