DES MOINES, Iowa--(BUSINESS WIRE)--
Principal Financial Group, Inc. (Nasdaq: PFG) today announced certain
business unit outlook metrics and capital deployment plans for 2019 and
updated long-term guidance. These metrics provide greater clarity around
the key drivers of earnings growth for each of the business units.
Company senior leaders will provide additional detail on guidance,
discuss potential impacts from recent market volatility on fourth
quarter 2018 results, and answer questions during a 60-minute conference
call at 10:00 a.m. EST today, Dec. 3, 2018. Slides related to the 2019
outlook are available now at principal.com/investor.
Effective January 1, 2019, we will be making changes to the allocation
of certain compensation and other expenses and net investment income
among the business units. These allocation changes are being made as a
result of a global financial process improvement project, with no impact
to total company financial results.
Our 2019 and long-term guidance ranges reflect these allocation changes
and should be applied to recast 3Q 2018 trailing twelve month financial
metrics, which can found in the conference call slides available on principal.com/investor.
Below are the 2019 and long-term guidance ranges for each business,
reflecting the allocation changes, market performance through November
28, 2018, and updated expectations:
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2019
guidance
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Long-term
guidance
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Retirement & Income Solutions – Fee
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Net revenue1 growth
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(2)-2%
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1-5%
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Pre-tax return on net revenue2
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26-30%
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28-32%
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Retirement & Income Solutions – Spread
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Net revenue growth
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5-10%
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5-10%
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Pre-tax return on net revenue
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65-70%
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65-70%
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Principal Global Investors
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Operating revenues less pass-through commissions3 growth
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1-5%
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4-7%
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Pre-tax return on operating revenues less pass-through commissions4
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34-38%
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34-38%
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Principal International (in reported USD)
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Combined net revenue (at PFG share)5 growth
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5-9%
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11-14%
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Pre-tax return on combined net revenue (at PFG share)6
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35-39%
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38-43%
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Specialty Benefits
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Premium and fees7 growth
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7-9%
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7-9%
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Pre-tax return on premium and fees8
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12-14%
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11-14%
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Loss ratio
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60-66%
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60-66%
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Individual Life
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Premium and fees growth
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4-8%
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4-8%
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Pre-tax return on premium and fees
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16-20%
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17-21%
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Corporate
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Pre-tax operating losses
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$(300)M - $(320)M
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N/A
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The outlook for 2019 incorporates certain assumptions including:
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Average S&P 500 index in 2019 between 2,830 and 2,850, assuming a 2
percent quarterly total return on levels as of November 28, 2018;
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10-year treasury rate approximately 3.25-3.50 percent at year-end 2019;
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Future foreign exchange rates follow external9 consensus as
of November 2018;
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U.S. GAAP total company net income effective tax rate of 12-16
percent; total company non-GAAP operating earnings effective tax rate10
of 16-20 percent;
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$1.0 billion to $1.4 billion of total capital deployed for common
stock dividends, strategic acquisitions, share repurchases, and to
provide financial flexibility; and
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Weighted average diluted shares outstanding ranging from 280-282
million.
Conference call information
You can access the Monday, December 3 conference call several ways:
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Connect to principal.com/investor
to listen to a live Internet webcast.
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Please go to the website at least 10-15 minutes prior to the start
of the call to register, and to download/install any necessary
audio software.
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Via telephone by dialing in the following numbers approximately 10
minutes prior to the start of the call.
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866-427-0175 (U.S. and Canadian callers)
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706-643-7701 (International callers)
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Access code is 2198493
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An audio replay will be available approximately two hours after the
live earnings call via:
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Online at principal.com/investor
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Telephone:
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855-859-2056 (U.S. and Canadian callers)
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404-537-3406 (International callers)
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Access code: 2198493
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The replay will be available until December 10, 2018
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 flows, 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, 2017, and in the company’s
quarterly report on Form 10-Q for the quarter ended Sept. 30, 2018,
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 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 could
differ significantly from its pricing and reserving assumptions; the
pattern of amortizing the company’s DAC 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
and meet its obligations may be constrained by the limitations on
dividends 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; a downgrade in the company’s financial
strength or credit ratings; client terminations, withdrawals or changes
in investor preferences; inability to attract and retain qualified
employees and sales representatives and develop new distribution
sources; an interruption in telecommunications, information technology
or other systems, or a failure to maintain the confidentiality,
integrity or availability of data residing on such systems;
international business risks; fluctuations in foreign currency exchange
rates; the company may need to fund deficiencies in its “Closed Block”
assets; the company’s reinsurers could default on their obligations or
increase their rates; risks arising from acquisitions of businesses; and
loss of key vendor relationships or failure of a vendor to protect
information of our customers or employees.
Use of Non-GAAP Financial Measures
A non-GAAP financial measure is a numerical measure of performance,
financial position, or cash flows that includes adjustments from a
comparable financial measure presented in accordance with U.S. GAAP. In
this press release, the company provides outlook on certain metrics that
impact non-GAAP operating earnings (losses) and earnings growth.
Non-GAAP operating earnings is a non-GAAP financial measure that
management believes is useful to investors because it illustrates the
performance of normal, ongoing operations. Non-GAAP operating earnings
are determined by adjusting GAAP net income attributable to PFG for net
realized capital gains and losses, as adjusted, and other after-tax
adjustments the company believes are not indicative of overall operating
trends. However, it is possible these adjusting items have occurred in
the past and could recur in future reporting periods. Management uses
non-GAAP measures for goal setting, as a basis for determining employee
compensation, and evaluating performance on a basis comparable to that
used by investors and securities analysts.
About
Principal
®11
Principal helps people and companies around the world build, protect and
advance their financial well-being through retirement, insurance and
asset management solutions that fit their lives. Our employees are
passionate about helping clients of all income and portfolio sizes
achieve their goals – offering innovative ideas, investment expertise
and real-life solutions to make financial progress possible. To find out
more, visit us at principal.com.
1 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.
2 Pre-tax
return on net revenue = pre-tax operating earnings divided by net
revenue.
3 Operating revenues less pass-through
commissions is a non-GAAP financial measure. The company has determined
this measure is more representative of underlying operating revenues
growth for Principal Global Investors as it removes commissions that are
collected through fee revenue and passed through expenses with no impact
to pre-tax operating earnings. In addition, using this metric provides a
more meaningful representation of our profit margins.
4Pre-tax
return on operating revenues less pass-through commissions = pre-tax
operating earnings, adjusted for noncontrolling interest divided by
operating revenues less pass-through commissions.
5 PI
combined net revenue is a non-GAAP financial measure. It reflects net
revenue for all Principal International companies at 100 percent less
pass-through commissions. The company has determined combined net
revenue (at PFG share) is more representative of underlying net revenue
growth for Principal International 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. The difference between combined net revenue (at PFG
share) and pre-tax operating earnings is combined operating expenses
other than pass-through commissions (at PFG share).
6 Pre-tax
return on combined net revenue = pre-tax operating earnings divided by
combined net revenue (at PFG share).
7 Premium and fees
= premiums and other considerations plus fees and other revenues.
8
Pre-tax return on premium and fees = pre-tax operating earnings
divided by premium and fees.
9 Latin America utilizes
Central Bank estimates, while Asia uses Bloomberg.
10
The operating earnings effective tax rate is a non-GAAP financial
measure and differs from the U.S. GAAP net income effective tax rate
primarily due to net realized capital gains and losses (NRCG).
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.
View source version on businesswire.com:
https://www.businesswire.com/news/home/20181203005248/en/
Media Contact: Erica Jensen, 515-362-0049, jensen.erica@principal.com
Investor Contact: John Egan, 515-235-9500, egan.john@principal.com
Source: Principal Financial Group, Inc.