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DES MOINES, Iowa--(BUSINESS WIRE)--Jan 30, 2023--
Principal Financial Group ® (Nasdaq: PFG) announced results for full year and fourth quarter of 2022.
“2022 was a transformative year for Principal ®. Guided by a clear strategy, we made meaningful progress towards our goals,” said Dan Houston, chairman, president, and CEO of Principal. “With continued focus on higher growth markets and improved capital efficiency, we generated over $1.7 billion of non-GAAP operating earnings for the full year 2022, including $422 million in the fourth quarter, driving strong total shareholder return. We returned approximately $2.3 billion to shareholders in 2022, delivering on our commitment to return our excess capital. We remain in a strong financial position with the financial flexibility, discipline, and experience to manage through continued macroeconomic uncertainty.”
“We continue to transform our company to deliver even greater value to our customers and shareholders. We have de-risked our portfolio, reduced our balance sheet risk, and our business is less capital intensive. With a sharpened focus on higher growth markets and segments, we’re investing in our businesses that leverage our competitive advantages, while returning more capital to our shareholders.”
Other highlights
Full Year 2022
Fourth Quarter
Strong financial position
Segment Results Retirement and Income Solutions - Fee | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings 6 | $128.7 | $125.9 | 2% | $469.4 | $399.3 | 18% |
Net revenue 7 | $499.7 | $551.1 | (9)% | $2,023.2 | $2,037.9 | (1)% |
Pre-tax return on net revenue 8 | 25.8% | 22.8% |
| 23.2% | 19.6% |
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Retirement and Income Solutions - Spread | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings | $109.3 | $203.9 | (46)% | $621.0 | $741.9 | (16)% |
Net revenue | $143.0 | $249.6 | (43)% | $748.2 | $928.1 | (19)% |
Pre-tax return on net revenue | 76.4% | 81.7% |
| 83.0% | 79.9% |
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Principal Global Investors | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings | $138.6 | $192.8 | (28)% | $604.0 | $708.4 | (15)% |
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Operating revenues less pass-through expenses 9 | $379.5 | $453.4 | (16)% | $1,578.0 | $1,667.9 | (5)% |
Pre-tax return on operating revenues less pass-through expenses | 36.8% | 42.8% |
| 38.6% | 42.8% |
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Total PGI assets under management (billions)
| $464.7 | $546.5 | (15)% |
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PGI sourced assets under management (billions) | $241.6 | $275.9 | (12)% |
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Principal International | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings | $91.7 | $105.2 | (13)% | $308.6 | $309.0 | 0% |
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Combined net revenue (at PFG share) | $243.1 | $282.9 | (14)% | $925.1 | $971.7 | (5)% |
Pre-tax return on combined net revenue (at PFG share) | 37.7% | 37.2% |
| 33.4% | 31.8% |
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Assets under management (billions) | $156.5 | $152.1 | 3% |
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Specialty Benefits Insurance | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings | $99.4 | $65.5 | 52% | $361.0 | $256.3 | 41% |
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Premium and fees | $723.0 | $652.3 | 11% | $2,804.8 | $2,530.3 | 11% |
Pre-tax return on premium and fees 10 | 13.7% | 10.0% |
| 12.9% | 10.1% |
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Incurred loss ratio | 60.7% | 64.2% |
| 62.5% | 65.0% |
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Individual Life Insurance | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating earnings (losses) | $29.1 | $31.9 | (9)% | $170.7 | $214.5 | (20)% |
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Premium and fees | $217.6 | $308.1 | (29)% | $934.6 | $1,253.8 | (25)% |
Pre-tax return on premium and fees | 13.4% | 10.4% |
| 18.3% | 17.1% |
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Corporate | ||||||
(in millions except percentages or otherwise noted) | Quarter | Trailing Twelve Months | ||||
4Q22 | 4Q21 | % Change | 4Q22 | 4Q21 | % Change | |
Pre-tax operating losses | $(86.7) | $(94.4) | 8% | $(469.4) | $(368.0) | (28)% |
Forward looking and cautionary 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 and losses, capital and liquidity positions, sales and earnings trends, and management’s beliefs, expectations, goals and opinions. The company does not undertake to update these statements, which are based on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Future events and their effects on the company may not be those anticipated, and actual results may differ materially from the results anticipated in these forward-looking statements. The risks, uncertainties and factors that could cause or contribute to such material differences are discussed in the company’s annual report on Form 10-K for the year ended Dec. 31, 2021, and in the company’s quarterly report on Form 10-Q for the quarter ended Sep. 30, 2022, filed by the company with the U.S. Securities and Exchange Commission, as updated or supplemented from time to time in subsequent filings. These risks and uncertainties include, without limitation: adverse capital and credit market conditions may significantly affect the company’s ability to meet liquidity needs, access to capital and cost of capital; conditions in the global capital markets and the economy generally; volatility or declines in the equity, bond or real estate markets; changes in interest rates or credit spreads or a sustained low interest rate environment; the elimination of the London Inter-Bank Offered Rate (“LIBOR”); the company’s investment portfolio is subject to several risks that may diminish the value of its invested assets and the investment returns credited to customers; the company’s valuation of investments and the determination of the amount of allowances and impairments taken on such investments may include methodologies, estimations and assumptions that are subject to differing interpretations; any impairments of or valuation allowances against the company’s deferred tax assets; the company’s actual experience for insurance and annuity products could differ significantly from its pricing and reserving assumptions; the pattern of amortizing the company’s DAC asset and other actuarial balances on its universal life-type insurance contracts, participating life insurance policies and certain investment contracts may change; changes in laws, regulations or accounting standards; the company may not be able to protect its intellectual property and may be subject to infringement claims; the company’s ability to pay stockholder dividends, make share repurchases and meet its obligations may be constrained by the limitations on dividends or other distributions Iowa insurance laws impose on Principal Life; litigation and regulatory investigations; from time to time the company may become subject to tax audits, tax litigation or similar proceedings, and as a result it may owe additional taxes, interest and penalties in amounts that may be material; applicable laws and the company’s certificate of incorporation and by-laws may discourage takeovers and business combinations that some stockholders might consider in their best interests; competition, including from companies that may have greater financial resources, broader arrays of products, higher ratings and stronger financial performance; technological and societal changes may disrupt the company’s business model and impair its ability to retain existing customers, attract new customers and maintain its profitability; damage to the company’s reputation; a downgrade in the company’s financial strength or credit ratings; client terminations, withdrawals or changes in investor preferences; the company’s hedging or risk management strategies prove ineffective or insufficient; inability to attract, develop and retain qualified employees and sales representatives and develop new distribution sources; an interruption in information technology, infrastructure or other internal or external systems used for business operations, or a failure to maintain the confidentiality, integrity or availability of data residing on such systems; international business risks including changes to mandatory pension schemes; risks arising from participation in joint ventures; the company may need to fund deficiencies in its “Closed Block” assets; a pandemic, terrorist attack, military action or other catastrophic event; the ongoing COVID-19 pandemic and the resulting financial market impacts; the company’s reinsurers could default on their obligations or increase their rates; risks arising from acquisitions of businesses; risks related to the company’s acquisition of Wells Fargo Bank, N.A.’s IRT business; risks related to existing reinsurance arrangements, including counterparty risk, yearly renewable term mortality reinsurance rate increases, and recapture risk; loss of key vendor relationships or failure of a vendor to protect information of our customers or employees; the company’s enterprise risk management framework may not be fully effective in identifying or mitigating all of the risks to which the company is exposed; and global climate change.
Use of Non-GAAP financial measures
The company uses a number of non-GAAP financial measures that management believes are useful to investors because they illustrate the performance of normal, ongoing operations, which is important in understanding and evaluating the company’s financial condition and results of operations. They are not, however, a substitute for U.S. GAAP financial measures. Therefore, the company has provided reconciliations of the non-GAAP measures to the most directly comparable U.S. GAAP measure at the end of the release. The company adjusts U.S. GAAP measures for items not directly related to ongoing operations. However, it is possible these adjusting items have occurred in the past and could recur in future reporting periods. Management also uses non-GAAP measures for goal setting, as a basis for determining employee and senior management awards and compensation and evaluating performance on a basis comparable to that used by investors and securities analysts.
Earnings conference call
On Tuesday, Jan. 31, 2023, at 10:00 a.m. (ET), Chairman, President and Chief Executive Officer Dan Houston and Executive Vice President and Chief Financial Officer Deanna Strable will lead a discussion of results and the impacts on future prospects, asset quality and capital adequacy during a live conference call, which can be accessed as follows:
The company’s financial supplement and slide presentation is currently available at investors.principal.com, and may be referred to during the call.
Principal Financial Group ® (Nasdaq: PFG) is a global financial company with approximately 19,000 employees 12 passionate about improving the wealth and well-being of people and businesses. In business for more than 140 years, we’re helping approximately 62 million customers 12 plan, insure, invest, and retire, while working to improve our planet, support the communities where we do business, and build a diverse, inclusive workforce. Principal ® is proud to be recognized as one of America’s 100 Most Sustainable Companies 13, a member of the Bloomberg Gender Equality Index, and a “Best Places to Work in Money Management 14.” Learn more about Principal and our commitment to sustainability, inclusion, and purpose at principal.com.
Summary of Principal Financial Group, Inc. and Segment Results | ||||||||
Principal Financial Group, Inc. Results: | (in millions) | |||||||
Three Months Ended, | Trailing Twelve Months, | |||||||
12/31/22 | 12/31/21 | 12/31/22 | 12/31/21 | |||||
Net income (loss) attributable to PFG | $ | (9.5) | $ | 471.8 | $ | 4,811.6 | $ | 1,710.6 |
(Income) loss from exited business |
| 513.9 |
| - |
| (3,304.0) |
| - |
Net income (loss) attributable to PFG excluding exited business | $ | 504.4 | $ | 471.8 | $ | 1,507.6 | $ | 1,710.6 |
Net realized capital (gains) losses, as adjusted |
| (82.1) |
| 26.6 |
| 193.3 |
| 137.0 |
Non-GAAP Operating Earnings* | $ | 422.3 | $ | 498.4 | $ | 1,700.9 | $ | 1,847.6 |
Income taxes |
| 87.8 |
| 132.4 |
| 364.4 |
| 413.8 |
Non-GAAP Pre-Tax Operating Earnings | $ | 510.1 | $ | 630.8 | $ | 2,065.3 | $ | 2,261.4 |
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Segment Pre-Tax Operating Earnings (Losses): |
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Retirement and Income Solutions | $ | 238.0 | $ | 329.8 | $ | 1,090.4 | $ | 1,141.2 |
Principal Global Investors |
| 138.6 |
| 192.8 |
| 604.0 |
| 708.4 |
Principal International |
| 91.7 |
| 105.2 |
| 308.6 |
| 309.0 |
U.S. Insurance Solutions |
| 128.5 |
| 97.4 |
| 531.7 |
| 470.8 |
Corporate |
| (86.7) |
| (94.4) |
| (469.4) |
| (368.0) |
Total Segment Pre-Tax Operating Earnings | $ | 510.1 | $ | 630.8 | $ | 2,065.3 | $ | 2,261.4 |
| Per Diluted Share | |||||||
Three Months Ended, | Twelve Months Ended, | |||||||
12/31/22 | 12/31/21 | 12/31/22 | 12/31/21 | |||||
Net income (loss) | $ | (0.04) | $ | 1.76 | $ | 18.85 | $ | 6.27 |
(Income) loss from exited business |
| 2.07 |
| 0.00 |
| (12.95) |
| 0.00 |
Net income (loss) excluding exited business | $ | 2.03 | $ | 1.76 | $ | 5.90 | $ | 6.27 |
Net realized capital (gains) losses, as adjusted |
| (0.33) |
| 0.09 |
| 0.76 |
| 0.50 |
Non-GAAP Operating Earnings | $ | 1.70 | $ | 1.85 | $ | 6.66 | $ | 6.77 |
Weighted-average diluted common shares outstanding(in millions) |
| 249.2 |
| 268.7 |
| 255.3 |
| 272.9 |
*U.S. GAAP (GAAP) net income attributable to PFG versus non-GAAP operating earnings
Management uses non-GAAP operating earnings, which is a financial measure that excludes the effect of net realized capital gains and losses, as adjusted, income (loss) from exited business and other after-tax adjustments the company believes are not indicative of overall operating trends, for goal setting, as a basis for determining employee and senior management awards and compensation and evaluating performance on a basis comparable to that used by investors and securities analysts. Note: it is possible these adjusting items have occurred in the past and could recur in future reporting periods. While these items may be significant components in understanding and assessing our consolidated financial performance, management believes the presentation of non-GAAP operating earnings enhances the understanding of results of operations by highlighting earnings attributable to the normal, ongoing operations of the company’s businesses.
Selected Balance Sheet Statistics | ||||
| Period Ended, | |||
12/31/22 | 12/31/21 | |||
Total assets (in billions) | $ | 292.7 | $ | 304.7 |
Stockholders’ equity (in millions) | $ | 10,042.8 | $ | 16,125.8 |
Total common equity (in millions) | $ | 10,001.7 | $ | 16,069.4 |
Total common equity excluding cumulative change in fair value of funds withheld embedded derivative and accumulated other comprehensive income (AOCI) other than foreign currency translation adjustment (in millions) | $ | 12,727.7 | $ | 12,894.9 |
End of period common shares outstanding (in millions) |
| 243.5 |
| 261.7 |
Book value per common share | $ | 41.07 | $ | 61.40 |
Book value per common share excluding cumulative change in fair value of funds withheld embedded derivative and AOCI other than foreign currency translation adjustment | $ | 52.27 | $ | 49.27 |
Principal Financial Group, Inc. Reconciliation of U.S. GAAP to Non-GAAP Financial Measures (in millions, except as indicated) | ||||
| Period Ended, | |||
| 12/31/22 | 12/31/21 | ||
Stockholders’ Equity, Excluding AOCI Other Than Foreign Currency Translation Adjustment, Available to Common Stockholders: |
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Stockholders’ equity | $ | 10,042.8 | $ | 16,125.8 |
Noncontrolling interest |
| (41.1) |
| (56.4) |
Stockholders’ equity available to common stockholders |
| 10,001.7 |
| 16,069.4 |
Cumulative change in fair value of funds withheld embedded derivative |
| (2,885.7) |
| - |
Net unrealized capital (gains) losses |
| 5,357.6 |
| (3,519.2) |
Net unrecognized postretirement benefit obligation |
| 254.1 |
| 344.7 |
Stockholders’ equity, excluding AOCI other than cumulative change in fair value of funds withheld embedded derivative and foreign currency translation adjustment, available to common stockholders | $ | 12,727.7 | $ | 12,894.9 |
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Book Value Per Common Share, Excluding AOCI Other Than Foreign Currency Translation Adjustment: |
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Book value per common share | $ | 41.07 | $ | 61.40 |
Cumulative change in fair value of funds withheld embedded derivative and AOCI, other than foreign currency translation adjustment |
| 11.20 |
| (12.13) |
Book value per common share, excluding AOCI other than foreign currency translation adjustment | $ | 52.27 | $ | 49.27 |
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Principal Financial Group, Inc. Reconciliation of U.S. GAAP to Non-GAAP Financial Measures (in millions)
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| Three Months Ended, | Trailing Twelve Months, | ||||||
| 12/31/22 | 12/31/21 | 12/31/22 | 12/31/21 | ||||
Income Taxes: |
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Total GAAP income taxes (benefit) | $ | (10.6) | $ | 103.8 | $ | 1,207.9 | $ | 326.2 |
Net realized capital gains (losses) tax adjustments |
| (25.0) |
| 17.9 |
| 64.2 |
| 56.2 |
Exited business tax adjustments |
| 112.7 |
| - |
| (956.5) |
| - |
Income taxes related to equity method investments and noncontrolling interest |
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10.7 |
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10.7 |
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48.8 |
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31.4 |
Income taxes | $ | 87.8 | $ | 132.4 | $ | 364.4 | $ | 413.8 |
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Net Realized Capital Gains (Losses): |
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GAAP net realized capital gains (losses) | $ | 135.7 | $ | 44.2 | $ | (258.4) | $ | 2.5 |
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Recognition of front-end fee revenues |
| (1.5) |
| 1.0 |
| (4.7) |
| (2.9) |
Market value adjustments to fee revenues |
| 0.6 |
| - |
| 0.7 |
| (0.6) |
Net realized capital gains (losses) related to equity method investments |
| (9.0) |
| (5.7) |
| (15.0) |
| (24.0) |
Derivative and hedging-related revenue adjustments |
| (19.6) |
| (51.9) |
| (126.3) |
| (160.3) |
Sponsored investment fund adjustments |
| 5.3 |
| 5.4 |
| 22.2 |
| 21.3 |
Amortization of deferred acquisition costs |
| 15.0 |
| (8.7) |
| 6.5 |
| (0.2) |
Capital gains distributed – operating expenses |
| (10.9) |
| (4.2) |
| 102.9 |
| (69.4) |
Amortization of other actuarial balances |
| 0.5 |
| (3.0) |
| (4.0) |
| 11.3 |
Market value adjustments of embedded derivatives |
| 1.2 |
| 1.0 |
| (44.1) |
| 79.8 |
Capital gains distributed – cost of interest credited |
| 1.2 |
| (16.2) |
| 33.5 |
| (37.3) |
Net realized capital gains (losses) tax adjustments |
| (25.0) |
| 17.9 |
| 64.2 |
| 56.2 |
Net realized capital gains (losses) attributable to noncontrolling interest, after-tax |
| (11.4) |
| (6.4) |
| 29.2 |
| (13.4) |
Total net realized capital gains (losses) after-tax adjustments |
| (53.6) |
| (70.8) |
| 65.1 |
| (139.5) |
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Net realized capital gains (losses), as adjusted | $ | 82.1 | $ | (26.6) | $ | (193.3) | $ | (137.0) |
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(Income) Loss from Exited Business: |
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Strategic review costs and impacts | $ | (4.0) | $ | - | $ | 91.0 | $ | - |
Amortization of reinsurance losses |
| 22.3 |
| - |
| 82.5 |
| - |
Impacts to actuarial balances of reinsured business |
| 8.0 |
| - |
| (31.8) |
| - |
Net realized capital (gains) losses on funds withheld assets |
| (51.9) |
| - |
| (749.4) |
| - |
Change in fair value of funds withheld embedded derivative |
| 652.2 |
| - |
| (3,652.8) |
| - |
Tax impacts of exited business |
| (112.7) |
| - |
| 956.5 |
| - |
Total (income) loss from exited business | $ | 513.9 | $ | - | $ | (3,304.0) | $ | - |
Principal Financial Group, Inc. Reconciliation of U.S. GAAP to Non-GAAP Financial Measures (in millions) | ||||||||
| Three Months Ended, | Trailing Twelve Months, | ||||||
| 12/31/22 | 12/31/21 | 12/31/22 | 12/31/21 | ||||
Principal Global Investors Operating Revenues Less Pass-Through Expenses: |
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Operating revenues | $ | 410.6 | $ | 493.9 | $ | 1,715.5 | $ | 1,828.0 |
Commissions and other expenses |
| (31.1) |
| (40.5) |
| (137.5) |
| (160.1) |
Operating revenues less pass-through expenses | $ | 379.5 | $ | 453.4 | $ | 1,578.0 | $ | 1,667.9 |
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Principal International Combined Net Revenue (at PFG Share) |
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Pre-tax operating earnings | $ | 91.7 | $ | 105.2 | $ | 308.6 | $ | 309.0 |
Combined operating expenses other than pass-through commissions (at PFG share) |
|
151.4 |
|
177.7 |
|
616.5 |
|
662.7 |
Combined net revenue (at PFG share) | $ | 243.1 | $ | 282.9 | $ | 925.1 | $ | 971.7 |
1 Use of non-GAAP financial measures is discussed in this release after segment results. Non-GAAP operating earnings for total company is after tax. |
2 Pre-tax return on operating revenues less pass-through expenses = pre-tax operating earnings, adjusted for noncontrolling interest divided by operating revenues less pass-through expenses. |
3 Combined net revenue (a non-GAAP financial measure): net revenue for all PI companies at 100% less pass-through commissions. The company has determined combined net revenue (at PFG share) is more representative of underlying net revenue growth for PI as it reflects our proportionate share of consolidated and equity method subsidiaries. In addition, using this net revenue metric provides a more meaningful representation of our profit margins. |
4 Includes only funds with ratings assigned by Morningstar; non-rated funds excluded (89 total, 82 are ranked). |
5 Premiums and fees = premiums and other considerations plus fees and other revenues. |
6 Pre-tax operating earnings = operating earnings before income taxes and after noncontrolling interest. |
7 Net revenue = operating revenues less benefits, claims and settlement expenses less dividends to policyholders. |
8 Pre-tax return on net revenue = pre-tax operating earnings divided by net revenue. |
9 The company has provided reconciliations of the non-GAAP measures to the most directly comparable U.S. GAAP measures at the end of the release. The company has determined this measure is more representative of underlying operating revenues growth for PGI as it removes commissions and other expenses that are collected through fee revenue and passed through expenses with no impact to pre-tax operating earnings. |
10 Pre-tax return on premium and fees = pre-tax operating earnings divided by premium and fees. |
11 Principal, Principal and symbol design and Principal Financial Group are trademarks and service marks of Principal Financial Services, Inc., a member of the Principal Financial Group. |
12 As of December 31, 2022 |
13 Barron’s, 2022 |
14 Pensions & Investments, 2022 |
View source version on businesswire.com:https://www.businesswire.com/news/home/20230130005622/en/
CONTACT: Media Contact: Jane Slusark, 515-362-0482,slusark.jane@principal.com
Investor Contact: Humphrey Lee, 515-235-9500,lee.humphrey@principal.com
KEYWORD: IOWA UNITED STATES NORTH AMERICA
INDUSTRY KEYWORD: BANKING PROFESSIONAL SERVICES INSURANCE FINANCE
SOURCE: Principal Financial Group
Copyright Business Wire 2023.
PUB: 01/30/2023 04:15 PM/DISC: 01/30/2023 04:17 PM
http://www.businesswire.com/news/home/20230130005622/en