Principal Financial Group® Announces Full Year and Fourth Quarter 2022 Results

Declares first quarter 2023 common stock dividend 

Company Highlights

• Full year 2022 net income attributable to PFG of $4.8 billion, or $18.85 per diluted share, includes $3.3 billion of income from exited business. Fourth quarter 2022 net loss attributable to Principal Financial Group^®, Inc. (PFG) of $10 million, or $0.04 per diluted share, includes $514 million of loss from exited business.
• Full year 2022 non-GAAP operating earnings of $1.7 billion, or $6.66 per diluted share. Fourth quarter 2022 non-GAAP operating earnings¹ of $422 million, or $1.70 per diluted share.
• Deployed $2.8 billion of capital for full year 2022, including $2.3 billion to shareholders. Deployed $0.6 billion of capital in the fourth quarter 2022, including $0.4 billion to shareholders.
• Assets under management (AUM) of $635 billion, which is included in assets under administration (AUA) of $1.5 trillion.
• Company declares first quarter 2023 common stock dividend of $0.64 per share.

Principal Financial Group^® (Nasdaq: PFG) announced results for full year and fourth quarter of 2022.

• Non-GAAP net income attributable to PFG excluding loss from exited business¹ for the 12 months ending Dec. 31, 2022 of $1,507.6 million, compared to $1,710.6 million for the 12 months ending Dec. 31, 2021. Non-GAAP net income excluding loss from exited business per diluted share of $5.90 for the 12 months ending Dec. 31, 2022 compared to net income per diluted share of $6.27, for the 12 months ending Dec. 31, 2021. Non-GAAP net income attributable to PFG excluding loss from exited business for fourth quarter 2022 of $504.4 million, or $2.03 per diluted share, compared to $471.8 million, or $1.76 per diluted share, in the prior year quarter.
• Non-GAAP operating earnings for the 12 months ending Dec. 31, 2022 of $1,700.9 million, compared to $1,847.6 million for the 12 months ending Dec. 31, 2021. Non-GAAP operating earnings per diluted share of $6.66 for the 12 months ending Dec. 31, 2022 compared to $6.77 for the 12 months ending Dec. 31, 2021. Non-GAAP operating earnings for fourth quarter 2022 of $422.3 million, or $1.70 per diluted share, compared to $498.4 million for fourth quarter 2021 or $1.85 per diluted share, in the prior year quarter
• Quarterly common stock dividend of $0.64 per share for first quarter 2023 was authorized by the company’s Board of Directors, bringing the trailing twelve-month dividend to $2.56 per share, a 2% increase compared to the prior year trailing twelve-month period. The dividend will be payable on Mar. 31, 2023, to shareholders of record as of Mar. 15, 2023.

“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

• RIS - Fee recurring deposits increased 26% over 2021
• RIS - Spread sales of $5.5 billion, including $1.9 billion of pension risk transfer sales
• Principal Global Investors (PGI) managed net cash flow of $4.4 billion driven by strong institutional flows. Pre-tax return on operating revenues less pass-through expenses² of 39%
• Principal International pre-tax return on combined net revenue (at PFG share)³ of 33%
• Specialty Benefits premium and fee growth of 11%, due to record full year sales, strong retention, and employment growth
• Individual Life business market sales increase 73% from 2021, including strong growth of company owned life insurance (COLI), used to fund non-qualified deferred compensation plans.
• Total company AUM of $635.3 billion, including AUM cash flow of $3.9 billion. Total company AUA including AUM was $1,455.8 billion.
  • Principal International reported total AUM of $156.5 billion; reported AUM does not include $181.2 billion of AUM in China
• Strong long-term investment performance⁴: 61% of Principal investment options above median on a three-year basis, 72% on a five-year basis, and 78% on a ten-year basis; additionally, 53% of fund-level AUM had a 4- or 5-star rating from Morningstar
• Deployed $2.8 billion of capital during 2022, including $2.3 billion of capital returned to shareholders:
  • $1.7 billion to repurchase 22.6 million shares of common stock; and
  • $0.6 billion of common stock dividends with $2.56 per share common dividend paid

Fourth Quarter

• RIS – Spread sales of $1.3 billion, including $0.8 billion of pension risk transfer sales
• Specialty Benefits premium and fees⁵ increased 11% from the fourth quarter of 2021, with more than half of the growth from net new business
• Deployed more than $600 million of capital during the fourth quarter, including more than $400 million of capital returned to shareholders:
  • $250.3 million to repurchase 2.9 million shares of common stock; and
  • $156.2 million of common stock dividends with the $0.64 per share common dividend paid in the fourth quarter

Strong financial position

• $1.5 billion of excess and available capital in our holding companies and other subsidiaries, which is available for corporate purposes
• Statutory risk-based capital (RBC) ratio for Principal Life Insurance Company of 406%

• Pre-tax operating earnings increased $2.8 million as a reduction in operating expenses offset revenue pressure.
• Net revenue decreased $51.4 million primarily due to impacts from unfavorable equity and fixed income markets.

• Pre-tax operating earnings decreased $94.6 million primarily due to lower net revenue.
• Net revenue decreased $106.6 million primarily due to impacts from the 2022 reinsurance transaction and lower net investment income.

   

• Pre-tax operating earnings decreased $54.2 million primarily due to lower operating revenues less pass-through expenses.
• Operating revenues less pass-through expenses decreased $73.9 million due to lower management fees from unfavorable equity and fixed income markets as well as lower performance fees.

• Pre-tax operating earnings decreased $13.5 million due to lower combined net revenue.
• Combined net revenue (at PFG share) decreased $39.8 million primarily due to unfavorable impacts from variable investment income, foreign currency translation and the impact of the regulatory fee reduction in Mexico.

• Pre-tax operating earnings increased $33.9 million due to growth in the business, disciplined expense management, and a decrease in the incurred loss ratio.
• Premium and fees increased $70.7 million driven by record full year sales, strong retention, and employment growth.
• Incurred loss ratio decreased primarily due to lower COVID claims.

• Pre-tax operating earnings decreased $2.8 million as lower net investment income was largely offset by improved claims experience.
• Premium and fees decreased $90.5 million due to impacts from the 2022 reinsurance transaction.

• Pre-tax operating losses decreased $7.7 million primarily due to higher than expected variable investment income.

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:

• Via live Internet webcast. Please go to investors.principal.com at least 10-15 minutes prior to the start of the call to register, and to download and install any necessary audio software.
• Via telephone by dialing 877-407-0832 (U.S. and Canadian callers) or 201-689-8433 (international callers) approximately 10 minutes prior to the start of the call.
• Replay of the earnings call via telephone is available by dialing 877-660-6853 (U.S. and Canadian callers) or 201-612-7415 (international callers). The access code is 13735216. This replay will be available approximately two hours after the completion of the live earnings call through the end of day Feb. 3, 2023.
• Replay of the earnings call via webcast as well as a transcript of the call will be available after the call at investors.principal.com.

The company’s financial supplement and slide presentation is currently available at investors.principal.com, and may be referred to during the call.

About Principal^®11

Principal Financial Group^® (Nasdaq: PFG) is a global financial company with approximately 19,000 employees¹² 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 customers¹² 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 Companies¹³, a member of the Bloomberg Gender Equality Index, and a “Best Places to Work in Money Management¹⁴.” Learn more about Principal and our commitment to sustainability, inclusion, and purpose at principal.com.

*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.

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