Q3 2024 Principal Financial Group Inc Earnings Call

October 25, 2024

Good morning, and welcome to the principal financial group third quarter 'twenty 'twenty four.

Results Conference call there will be a question and answer period. After the speakers have completed their prepared remarks to ask a question. During the session you will need to press star one on your telephone.

Your question. Please press star one again.

Speaker Change: We would ask that you'd be respectful of others and limit your questions to one and a follow up so we can get everyone in the queue I would now like to turn the conference call over to Humphrey Lee Vice President of Investor Relations.

Humphrey Lee: Thank you and good morning, welcome to principal financial group's third quarter 2020 earnings Conference call.

Humphrey Lee: As always materials related to today's call are available on our website at investors <unk> principal dot com.

Humphrey Lee: Following a reading of the safe Harbor provision.

Humphrey Lee: Dan Houston, and President and CFO, Deanna <unk> will deliver some prepared remarks.

Humphrey Lee: We will then open the call for questions.

Humphrey Lee: Other members of senior management will also be available for Q&A.

Humphrey Lee: Some of the comments made during this conference call may contain forward looking statements within the meaning of the private Securities Litigation Reform Act.

The company does not revise or update them to reflect new information subsequent events or changes in strategy.

Humphrey Lee: Risks and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's most recent annual report on Form 10-K filed by the company with the U S Securities and Exchange Commission.

Humphrey Lee: Additionally, some of the comments made during this conference call may refer to non-GAAP financial measures.

Humphrey Lee: Reconciliations of the non-GAAP financial measures to the most directly comparable U S. GAAP financial measures may be found in our earnings release financial supplement and slide presentation Dan.

Dan Houston: Thanks, Humphrey and welcome to everyone on the call.

Dan Houston: Morning, I will discuss key milestones and highlights from the third quarter as we execute our strategy with discipline and focus Deanna will follow with additional details on our results capital position and the outcome of our actuarial assumption review.

Dan Houston: It continues to be a strong year for principal as we delivered favorable results for our customers and shareholders consistent with the commitments outlined in our 2020 for outlook and reiterated last quarter.

Dan Houston: Starting with the third quarter, we reported $412 million of non-GAAP operating earnings are $1 76 per diluted share excluding significant variances in our actuarial assumption review, our EPS was $2 five at 12% increase in EPS over third quarter of 2023.

Dan Houston: The earnings growth on a year over year basis was fueled by a 5% increase in net revenue.

Dan Houston: This was primarily due to growth in the businesses and favorable market conditions compared to the previous year earnings also benefited from strong expense management, while reinvesting in our businesses.

Dan Houston: We returned $416 million of capital to shareholders in the third quarter, including $251 million of share repurchases. We raised our common stock dividend for the sixth consecutive quarter aligning with our targeted 40% dividend payout ratio.

Dan Houston: At the end of the quarter, our total company managed AUM reached $741 billion.

Dan Houston: Reflecting a 6% growth from the previous quarter. This increase was mainly driven by robust returns and positive market performance across equity fixed income and real estate lastly, our net cash flow for total company AUM showed improvement both sequentially and on a year over year basis now turning to our businesses.

Dan Houston: In retirement, we are generating revenue and earnings growth above the high end of our guidance. This momentum is driven by favorable market conditions, and the breadth and depth of our integrated suite of retirement solutions, which span recordkeeping asset management and retirement income.

Dan Houston: In addition, the underlying fundamentals across the retirement remained healthy reoccurring deposits increased by 10% year over year across all segments, a number of individuals' deferring and receiving employer matches as well as the dollar amount of those deferrals in matches continues to grow <unk>.

Dan Houston: Contract retention remained strong with lapse rates running lower than a year ago. We are on track to achieve our best full year retention rates over the past five years. We are also benefiting from market performance, which drove account value growth in the quarter, while rising markets are a benefit to our business financially the increased accounts.

Dan Houston: I use also result in a corresponding increase in the dollar amount of participant withdrawals.

Dan Houston: With respect to new retirement plan sales, we see a lot of momentum in our business with our pipeline up significantly across all segments positioning us well for continued growth in 2025.

Dan Houston: As further evidence of our momentum. We recently received the second most mentioned as a top record keeper from advisers in the 2020 for Napa Advisers Choice Awards. This.

Dan Houston: This is a testament to the high quality retirement services and solutions, we offer to the market.

Dan Houston: Pension risk transfer sales were nearly $500 million in the third quarter, bringing our year to date sales to $2 $2 billion at attractive returns.

Dan Houston: We remain on track to achieve our target of $3 billion in full year sales.

Turning to principal asset management strong net cash flows in principal international were offset by outflows in pgi. The outflows in Pgi were driven in part by lower fee and yield products as well as the rebalancing activities taken by institutional clients following strong appreciation.

Dan Houston: Our private real estate strategies generated approximately $400 million of positive net cash flow in the quarter. The 12th consecutive quarter of positive flows are unfunded commitments remained strong at approximately $5 billion as we continue to put money to work.

Dan Houston: We're also generating good underlying momentum with global retail and institutional investors given the strong ongoing demand for our product offering and specialty capabilities. We're seeing notable increases in institutional RFP activities across equity fixed income and private assets. The year to date volume has already exceeded full year volumes in 'twenty.

Dan Houston: 23 and 2022.

Dan Houston: This increased activity is driven by broad interest in equity and fixed income strategies and very strong interest and commitments for our real estate datacenter fund.

Dan Houston: Lower interest rates and improving liquidity are leading to more conversations meetings and searches for our broad range of public and private investment capabilities. These.

Dan Houston: These interactions are expected to drive continued business momentum over the next several quarters.

Dan Houston: Principal international ended the quarter with a record $185 billion of AUM up 8% from the second quarter. This was driven by robust net cash flows favorable market performance and FX tailwind.

Dan Houston: Positive net cash flows of $2 $3 billion were driven by $2 $1 billion of investment management flows. These were spurred by institutional mandate wins from new clients in Chile, Mexico and Southeast Asia.

Dan Houston: These flows in current quarter results highlight the success, we are having and going to market as a global asset manager across our integrated international franchise and the strong client interest in our local and global investment capabilities.

Dan Houston: While not included in reported AUM and net cash flow our combined AUM in China was 268 billion.

Dan Houston: Asset management inflows in the quarter exceeded $18 billion.

Dan Houston: Reflecting the recovering macro environment in the region.

Dan Houston: Turning now to benefits and protection, we continue to generate above market premium and fee growth of over 6% in specialty benefits more than half of our growth is driven by net new business highlighting our leadership position in the small to mid size market.

Our focus remains on high growth high persistency industries, and we continue to deepen our relationships with key distribution partners and customers.

Dan Houston: The average number of coverages per customer grew three 5% to over three coverages per customer on a trailing 12 month basis.

Dan Houston: I'm excited about the opportunities of cross principle, we remained well positioned to capitalize on the immense opportunities that exist in the markets in which we do business today, our diversified yet integrated portfolio allows us to manage through dynamic macro conditions, while evolving to meet changing customer demands.

We are locked in on driving growth, which will continue to come from aligning our businesses with the higher value creation opportunities and maximizing the intersection of our businesses.

Dan Houston: Our unwavering focus is on providing individuals businesses communities and markets with access to financial tools products and guidance.

Dan Houston: We regularly assess global customer trends and sentiment.

And we know the demand for our brand of financial security expertise and support is significant for example through our proprietary global financial inclusion index, we track the state of financial inclusion worldwide.

Dan Houston: Key finding from this year study is while financial inclusion has improved globally for the second consecutive year. The perception of feeling financially included has fallen among global consumers.

Dan Houston: As a financial services leader that tells US there is more work to be done while I am encouraged.

Dan Houston: <unk> by the increase in access to financial tools and solutions I can't help but see the opportunity and demand to do more to support advise and enable the individuals' appeal more secure and their financial decision, making before turning it over to Deanna I want to acknowledge her promotion in August to President and Chief operating officer.

Dan Houston: Anna has a remarkable leader with an impeccable track record for the past 35 years, both in our industry and a principal.

Dan Houston: She has worked internationally led our U S benefits unit directed our strategy function during pivotal moments in our company's history and most recently she has done an exemplary job as our chief financial Officer.

Dan Houston: Diana's diverse roles have given her deep insights and what makes principal successful and how we can continue to grow her passion and intense focus on the customer and creating shareholder value has been instrumental in strengthening our organization the board and I have complete confidence in her ability to drive the organization forward.

Dan Houston: Today, and well into the future Diana congratulations.

Diana: Thank you Dan for all of your support and those kind words and good morning to everyone on the call. It's truly an honor to step into this new role, reflecting on my 35 years at principal I've seen firsthand, how our ability to adapt and innovate has enabled us to consistently deliver value to our customers and shareholders.

Diana: I'm incredibly proud of this company the importance of our mission, our strong culture and core values and the way we do business.

Diana: Im more confident than ever in our ability to continue growing sustainably, especially as we navigate the evolving needs of the markets we serve.

The strength of our team our commitment to our purpose and the innovative solutions. We're building all give me great confidence in our future.

Diana: Before I turn to our results I would like to acknowledge tilted who has stepped in as interim chief financial officer. During this transition.

Diana: So al has been with principal for nearly three decades and he has extensive experience across our domestic international and corporate functions makes him well suited to step in as interim CFO.

Diana: Turning to our third quarter results I will share key contributors to our financial performance for the quarter, including impacts from the actuarial assumption review and an update on our current financial and capital position.

Diana: Third quarter reported net loss was $220 million driven by noneconomic impacts from exited businesses.

Diana: Excluding these impacts net income was $419 million.

Diana: non-GAAP operating ROE in the quarter was 12, 9% and 13, 5%, excluding actuarial assumption review impacts.

Diana: We are on track to meet our guidance of 14% to 16% in 2025.

Diana: Our significant variances for the quarter detailed on slide 12 include impacts from our actuarial assumption review.

Diana: These had a net negative impact on non-GAAP operating earnings, but an immaterial impact to free capital flow and run rate earnings.

Diana: This is the second time, we've conducted the review under <unk>, which expanded the actuarial balances subject to assessment.

Diana: It's important to note that these are primarily non economic impacts.

The primary drivers of the assumption review impact where model refinements in life and experience updates in RIS and benefits and protection largely related to lapse assumptions.

Diana: As mentioned the run rate impact on pre tax operating earnings is immaterial with modestly favorable results in RIS and principal international offsetting unfavorable results and benefits and protection.

Diana: The remaining significant variances largely offset.

Diana: We had favorable and kind of high performance and a benefit from reversing the closed block dividend accrual from the first half of the year.

Diana: These were offset by lower than expected variable investment income, primarily driven by negative private equity returns in the quarter.

Diana: Excluding significant variances third quarter non-GAAP operating earnings were $480 million or $2 <unk> per diluted share.

Diana: Adjusted EPS increased 12% compared to the third quarter of 2023.

Diana: This was driven by growth in the business and strong market performance, which was up over 5% in the third quarter and 16% for the trailing 12 months.

Diana: These were partially offset by foreign currency translation impacts and difficult year over year comparisons for pgi performance fees and specialty benefits loss ratio.

The effective tax rate in the quarter was at the lower end of our 17% to 20% guidance with year to date at the midpoint of our guidance range.

Diana: During the quarter, we had one time severance and integration costs impacting our results by approximately <unk> <unk> per share.

Diana: These one time expenses impacted both RIS and principal international.

Diana: Similar to previous quarters, we are not considering these as significant variances.

Diana: We are pleased with our results and remain on track to deliver full year EPS growth.

Diana: Lined with 2024 guidance of 9% to 12%.

Diana: Turning to the business units the following comments exclude significant variances.

Diana: RIS <unk> pre tax operating earnings increased 12% over the third quarter of 2023, driven by growth in the business favorable market performance.

Diana: And expense discipline, while investing in the business.

Diana: Compared to third quarter of 2023, net revenue increased by 9% and margin expanded by 120 basis points to 40%.

Diana: We remain confident we will be above the high end of our guided range for net revenue growth and at the high end for margin for the full year.

<unk> pre tax operating earnings decreased 2% over the third quarter of 2023, but increased nearly 17% sequentially.

Diana: The year ago quarter comparison is impacted by $16 million of higher performance fees in the third quarter of 2023.

Diana: Management fees increased 6% over the third quarter of 2023, driven by positive market performance, partially offset by lower performance fees and transaction and borrower fees in the current quarter.

Diana: T G I its margin of 38% in the quarter is at the high end of our range.

Diana: Principal international had a strong quarter pre tax operating earnings increased by 8% compared to the third quarter of 2023. This is driven by ongoing business growth in Latin America, and a continued recovery in Asia, despite currency headwinds of $7 million.

Diana: The underlying growth and disciplined expense management resulted in margin of nearly 34% an expansion of 230 basis points compared to the third quarter of 2023.

Diana: Specialty benefits pre tax operating earnings in the quarter reflected a more normal loss ratio relative to the year ago quarter.

Diana: The comparison is impacted by very favorable group disability underwriting results, which led to a loss ratio in the third quarter of 2023 below our guided range.

Diana: The loss ratio this quarter was 61, 5% below the midpoint of our guidance range of 60% to 65%.

Diana: In life improved mortality experience drove an increase in pre tax operating earnings of 11% and margin expansion of 135 basis points over the third quarter of 2023.

Diana: As we look to the fourth quarter, our enterprise compensation and other expenses are typically higher due to the seasonality of certain expenses.

Similar to the last few years, we expect the impact in the fourth quarter to be in the low single digit range relative to the average of the first three quarters.

Turning to capital and liquidity as a reminder, last quarter, we revised our RBC target to a range of 375% to 400%.

Diana: We are in a strong position with approximately $1 $6 billion of excess and available capital, including approximately $900 million at the holding company $400 million excess above, 375% RBC and $250 million in our subsidiaries.

Diana: As shown on slide three we returned $416 million to shareholders in the second quarter, including $251 million of share repurchases and $165 million of common stock dividends.

Diana: This brings our year to date capital returned to nearly $1 $2 billion we.

Diana: We expect to deliver on our targeted 75% to 85% free capital flow for the full year and are on track to return $1 five to $1 $8 billion of capital deployments for the full year, including 800 million to $1 $1 billion of share repurchases.

Diana: Last night, we announced a 73 common stock dividend payable in the fourth quarter. This.

Diana: This is a one cent increase from the dividend paid in the third quarter, a 9% increase over a year ago quarter, and a 10% increase for the full year.

Diana: We remain focused on maintaining our capital and liquidity targets at both the life company and the holding company and we will continue our balanced and disciplined approach to capital deployment.

Diana: Our investment portfolio remains high quality aligned with our liability profile and well positioned for different economic conditions.

Diana: The commercial mortgage loan portfolio remains healthy.

Diana: We had four office loans pay off in the quarter resolving all year to date office loans, we feel good about the remaining maturities through the end of the year.

In closing we are pleased with the results this quarter delivering on the growth objectives communicated in our 2020 for outlook and reiterated last quarter.

Diana: We remain confident in delivering on our financial metrics for the full year anchored to our long term financial targets.

Diana: Our strong and diversified portfolio of businesses is positioned across attractive growth markets and features competitive advantages, which give us confidence in our ability to sustainably deliver results for our customers shareholders and employees today and into the future.

Diana: This concludes our prepared remarks, operator, please open the call for questions.

Speaker Change: At this time I'd like to remind everyone that to ask a question press star one on your telephone we will pause for just a moment to compile the Q&A roster.

Speaker Change: Our first question comes from Joel harvests with Darling Partners. Your line is open.

Joel harvests: Hey, good morning, I wanted to start on specialty benefits in top line. So the 6% growth is solid but below the pace you've been running at in your long term target can you just talk about some of the drivers of the slowdown as our competition are blowing the small to medium size market or something else.

Speaker Change: Yes, good morning, Joel I appreciate the question I just just at the top here I would just mentioned this is an incredibly well run business. It's got a long history of disciplined underwriting and risk management early adopter of technology to become more efficient and focuses on the customer.

Dan Houston: Again couldnt be more pleased with Amy's leadership of this of this business and again, we feel very good about the current state of affairs, Amy Thanks, Dan and Joel for the question.

Amy Thanks: So I guess I'm going to start with on a year to date basis. Our growth is at 7.5% and we do expect that premium and fee growth to stay within those probably the bottom end of the range that we communicated in the quarter as you've noted that growth was $6, 2% above third quarter 'twenty three.

Amy Thanks: It really is due in large part to know new <unk> sales in the third quarter comparison last year, we had a bit of lumpy PFM metal sales they were nearly $20 million in the prior year sales quarter.

Amy Thanks: And I would note that there's no new openings state openings planned for 25, but there are several scheduled for 26. So when we think about this marketplace. It is going to be a little lumpy.

Amy Thanks: And when we think about the competitive environment, the comparisons quarter over quarter going to be a little bit uneven, we do see a pretty competitive environment.

Amy Thanks: Probably particularly notable for dental and we continue to make sure we're introducing pricing changes that align with the experience that we're seeing.

I think we're going to see some impact on growth for the remainder of 'twenty four I think one of the hallmarks of our group benefits business as Dan noted before is that for over a decade decade, we've had discipline and consistency that has yielded us above market growth and above market profit. So we know that discounting new business can and does have an impact on renewal.

Amy Thanks: Pricing it has an impact on our customers and one of the things we strive to do is make sure we serve that SMB market really well with consistent pricing consistent renewals. So that they can do things like manage cash flow, which is really important so our products capabilities and experiences I feel.

Amy Thanks: Really good on how we're positioned on growth.

Amy Thanks: Got it that makes sense.

Speaker Change: And then maybe just sticking on dental experience can you talk about what youre seeing there it looks like year to date.

Speaker Change: The loss ratio is elevated I think Q3 was a bit above what it normally runs just what are you seeing there and what are you expecting from a repricing standpoint.

Speaker Change: Yeah. So.

Speaker Change: I'd start with I'm really pleased that sequentially, our dental loss ratio was nearly 400 basis points better so I'd start with we.

Speaker Change: Communicated that that is going to go down and it did in fact go down it was slightly above what I would say our expectations were for this quarter. So it's clearly dental isn't inflationary product, we've been taking actually measured consistent actions to address our pricing being conscious of both new sales and renewal pricing in for <unk>.

Speaker Change: Patients over 90% of our dental block can be repriced annually. So this has been an effective tool for us but it is always a slightly lagging tool we have been using that tool, though over the course of the last 18 months to align our experience.

In the last 18 to 24 months I think it's worth noting we've also continued to invest in AI based dental claims technologies to assist our claims examiners and improve their claims payment accuracy. So as those begin to come online and they move from more prototypes to kind of online integration for us.

Speaker Change: I expect that to continue to help the results my expectation for fourth quarter is that dental loss ratios will continue to decline.

Got it thank you.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from Sydney to come out with Jefferies. Your line is open.

Speaker Change: Yeah. Thanks, Good morning, I wanted to start with RIS fee and the participant withdrawals I know we spent some time last quarter talking about the market impact.

Speaker Change: Need to revisit that but I guess the question is if we think about the participant withdrawals to say something like beginning of period assets and we track that over time, which we can't do externally, but what would that sort of look like is it inline with history or changing in one way or the other.

Speaker Change: Thanks for the question I'll have Chris take that one.

Sidney: Sidney Thanks for that yes.

Speaker Change: Yes, you noted the impact on market and certainly as those markets rise. The average <unk> is up fairly significantly if we were to just dial in specifically on participant withdrawals.

Speaker Change: We definitely see that average JV being up impacting and that that market impacts driving about 75% of the overall withdrawals and the other 25% is a slight uptick in rates. So we're seeing a slight uptick in the rate of withdrawals from older participants, but again thats, probably 25% of the impact the vast majority of the.

Speaker Change: <unk> is really coming from the very strong market performance.

Speaker Change: So when we look at the rest of the flows.

I think we feel really good about the other underlying fundamentals of the business.

Speaker Change: Transfer deposits as SMB were up 11%, we saw strong recurring deposit growth of 10% on a same plan. That's also up 10%. If you just look at the plans that were in both quarters.

Speaker Change: We see very high contract retention.

Speaker Change: In the business and again as we've said in prior quarters, we're prioritizing revenue and margin overflows and when we look at that our net revenue was up significantly over the guidance, we provided at 9% and our margin is above the top end in this quarter. So feel really good overall about the dynamics of our business.

Speaker Change: Got it that makes sense and then I guess the second follow up.

Speaker Change: Related is.

Speaker Change: So when a benefit event occurs in RIS fee, what percentage of the assets do you sort of retain and other products and somewhat relatedly do you have any plans for in plan annuity offerings in your and your RAC business.

Speaker Change: Yes.

Speaker Change: Good question, Yes, we absolutely have been investing in capabilities to provide implanted base all of that benefit event and thereafter, I think competitively people generally don't share the overall amount, but we can capture a significant portion and I think there's still opportunity and room for us to improve that.

We do have in plan annuity options as you know in the industry those haven't gotten a lot of traction yet and that's real innovation is building retirement income into sort of a <unk> a solution like a target date and you will see us with those sort of solutions as we head into 2025.

Speaker Change: Yes.

I'd add to that again just to finish off your question. We do have a lot of capabilities of capturing economics within those faithful accounts within principal bank, we see it in our own annuity operations and when we do retain assets on the.

Speaker Change: And the mutual fund platform, which again will show up in our not in RIS, but it's going to show up within the.

Speaker Change: <unk> principal asset management business units. So there is significant economics that are spread across the organization and again the source was the retirement platform I appreciate the questions. Yes. Thank you.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

Our next question comes from Ryan Krueger with <unk>. Your line is open.

Speaker Change: Hey, good morning.

Pgi. So it seems like you are seeing improved momentum on gross inflows, but withdrawals about been increasing.

Speaker Change: So we didn't.

Speaker Change: Net outflows can you give some.

Speaker Change: Perspective.

Speaker Change: Andrea play with those two things and how do you think that May play out as we move forward here.

Speaker Change: Oh please.

Speaker Change: Alright, and thank you for your question. Good morning, So let me start a little bit on <unk>.

Our net cash flow and then I'll go deeper into the pgi component of it.

Speaker Change: First of all I'd like to highlight this quarter. We are quite pleased its a testament to the global diversified operating model, we are building an asset management.

Speaker Change: Particularly how you see the result, so far synergies, we are putting together between pgi and Pi and you could see that with the excellent results we reported under the Pi segment.

Speaker Change: Just to highlight we reported record $2 3 billion of positive flows under the Pi segment $2 1 billion of that is investment management flows that are coming from from.

Speaker Change: All lines that we have typically seen on the pgi side.

Speaker Change: I would I would even highlight further for you if you take that $2 1 billion.

Speaker Change: Almost 1 billion effect is coming from new client relationships. These are really high quality global multinational corporations, who are now doing business with us in Latam and Asia. So it shows the power of word asset management bespoke taken together in terms of how we operate and generate positive net cash flow as an asset management segment.

Speaker Change: One of the things you highlighted is how do we feel about the cash flow within pgi.

Speaker Change: I would highlight the positive favorable mcf trajectory as the year has gone by if I just looked at the Pgi and Pi sourced efforts. This year, we almost have $950 million of positive NCI. If that does come from the source efforts of Pgi and Pi for Pgi This quarter.

Speaker Change: <unk> sourced flows were roughly breakeven and retail which have improved as the year has gone by they were positive in our private institutional market efforts and yes, they were offset by higher outflows and public institutional and so thats why youll see youll see that.

The result, you highlighted and I would highlight that the investment management flows and new strategic it can be lumpy in nature and there is some seasonality in international pension fluids, but we are quite pleased with the progress we are seeing in our net cash flow both the direction and how we're thinking about this as a global business.

Speaker Change: Thanks, a quick follow up is do you have any can you give us any insight into potential performance fees for pgi that you would expect in the fourth quarter.

Speaker Change: Sure.

Speaker Change: Ill.

Highlight for you what we did this quarter.

Speaker Change: As you know our performance fees are primarily driven by real estate transaction and as we have noted in our outlook. We are expecting global real estate related performance fees. This year during the third quarter, we recognized roughly $6 million of performance fee from our real estate.

Speaker Change: <unk> actions.

Speaker Change: Year to date up to $7 million as I said, the first half was always de minimus. So we have seen an uptick in that.

Speaker Change: In a normal year, we would typically see 30% to $35 million of growth performance fee, which can obviously significantly vary and as you know what this is this is a longer and different real estate cycle. So that has historically been the norm. We do expect 25 to improve but not ramp up very quickly given.

The nature of this cycle one of the things I would highlight for you on the performance fee is.

Speaker Change: The business, we started building in private credit is slowly ramping up and over longer term. In addition to real estate you will see the tremendous power that would create on the performance fee side. Obviously these things are long term investing projects and they will show up in time, but that would be the other piece I would highlight for you.

Speaker Change: Thank you.

One moment for our next question.

Our next question comes from John Barnidge with Piper Sandler Your line is open.

Speaker Change: Okay.

John Barnidge: Good morning, Thanks for the opportunity and congrats on the new role Deanna.

Speaker Change: Thank you question.

John Barnidge: Brown your comment on a slight uptick in the rate of withdrawal among older cohort.

John Barnidge: With the baby Boomer generation more and more entering peak retirement years.

Speaker Change: I expect that rate of withdraw uptake will have a more meaningful impact or increase thank you.

Thanks, Chris.

Speaker Change: John It's Steve. Thanks for the question I think I think it's hard to project that what I would say is it's a slight uptick year over year, but it was actually down sequentially slightly.

Speaker Change: So we don't expect to see sort of big changes in it but obviously to the extent you have very large account values small ticks can can impact those withdrawal rates pretty significantly. So we're not seeing like this very significant increase in the participant withdrawal rate, but and we are seeing it bounce around a little bit quarter to quarter.

Sure.

Speaker Change: And then the question on the severance I think February three.

Speaker Change: RIS and Ti.

Speaker Change: Another fee based companies had severance in the quarter and it's continuing for a number of quarters do you have any plans for additional severance that will not be called out as a significant variance in there.

Speaker Change: I don't.

Speaker Change: Yes, I don't see that on the horizon.

Speaker Change: Again, we align our expenses with the revenues that we are able to draw down upon and I would say each one of the businesses and support areas are constantly looking at opportunities to be more efficient, but I don't see on the foreseeable horizon any shortage of large <unk>.

Speaker Change: Severance adjustments that we'd be making.

Speaker Change: Thank you.

Speaker Change: Thank you I appreciate the questions.

One of them before our next question.

Speaker Change: Our next question comes from women Virtus with Raymond James Your line is open.

Speaker Change: Hey, good morning, and congrats to Diana.

Speaker Change: Principal International performance was favorable in the quarter could you discuss the drivers and it's a sustainable and I think especially on a constant currency basis. It was up quite a bit. Thanks.

Speaker Change: Yeah, So and I'll, let Joel take that but I just wanted to just recognize Thomas Chong and Pablo Springer Pablo's, new within the last year, the organization really dug into Latin America, and making adjustments and we're seeing traction in our Brazilian Chilean and Mexican operations and Couldnt be more proud of what he is doing and then.

Speaker Change: Secondly, and you heard the numbers as it related to China and some of the other actions in southeast Asia. There is some unfreezing. If you will of a pretty challenging macro environment, there, but I'll have Joe will add to that.

Speaker Change: Yes, well thanks for the question very strong quarter for principal international record record operating earnings of $121 million record assets under management of 185 billion up 8% from just a quarter ago and highest net cash flows at $2 3 billion since the first quarter of 2018, so what those results we're very confident in.

Our ability to deliver on the 2024 outlook, which as a reminder for revenues with low single digit growth.

Speaker Change: You look over the trailing 12 month period, our reported growth of 6% as you mentioned a strong constant currency results of 5% year over year and the margin front, what we committed to coming into the year with a $30 to 34% guidance and.

And we've actually delivered a 50 basis point improvement year over year at 32% comfortably within that margin on a trailing 12 month basis.

Speaker Change: Again adjusting for those items for the significant variances that you saw within the slides on pages 12 and 13.

We did have a good solid 8% year over year increase despite $7 million of FX headwinds.

Speaker Change: So we continue to see strong underlying fundamentals in our businesses that we expect to lead to solid earnings growth and positive although tempered from the strong third quarter net cash flows in the fourth quarter of 'twenty four.

Speaker Change: Thank you and then can you talk a little bit more about the capital generation outlook for the remainder of the year and also into 2025.

Speaker Change: Hi, it's Dan I'll take that one thank you and thank you for the congratulations as well I'm really looking forward to the new role I think as we came into the year, we committed to our 75% to 85% and we recognize that that tends to ramp up throughout the year. So I'll start with that we're very proud with our free cash flow.

And in the third quarter.

Speaker Change: And we remain confident in our full year targeted free cash flow as well and as I as we go into 2025, we will give more specifics on that an outlook, but still feel really good about remaining in that target. If you look at it for the quarter, our excess and available capital remained relatively stable with.

Speaker Change: Last quarter, despite a very strong capital return of $416 million.

Speaker Change: So that it generates an implied free cash flow actually above our targeted range.

Speaker Change: And we still feel confident that our fourth quarter will have a strong free cash flow component as well, bringing the full year to that 75% to 85% target.

Okay. Thank you okay that helps.

Speaker Change: Thank you.

Speaker Change: One of them for our next question.

Speaker Change: Our next question comes from Tom Gallagher with Evercore ISI. Your line is open.

Tom Gallagher: Good morning, Deanna just first a question on earnings three cents of elevated Chevron and RIS in Pi should we should we on a normalized <unk> basis should we be thinking about.

Tom Gallagher: Adding the <unk> back to that 205, starting with.

Tom Gallagher: Two oh wait as kind of a baseline.

Tom Gallagher: Heading into Q4 or would you offer any other adjustments to thinking about run rate.

Speaker Change: Yeah, Yeah, what I would say is I think two five is a good one to jump off of obviously in the quarter, we had some pluses and minuses.

Speaker Change: Obviously corporate had a very strong earnings quarter, our tax rate was a little bit lower than I expected and as you mentioned, we had severance that we did not identify and so I think net net two five is a good one to think about.

Speaker Change: As I mentioned in the prepared remarks, we do have seasonality of expenses in the fourth quarter I expect those to be similar to what we saw in the last couple of years, So think of that as low to low single digit increase relative to the average of the first three quarters.

Speaker Change: But on the flip side, we also expect that the underwriting results in specialty benefits, so will improve in the fourth quarter as well. So I think net net 205 I think ultimately when you put some of the puts and takes in the quarter I feel that's a good run rate for the quarter.

Speaker Change: Got you and then.

Speaker Change: Listening to what some of the alternative managers are saying about the real estate market there.

Speaker Change: It sounds like Theres, a lot more optimism that commercial real estate has bottomed and is maybe starting to improve and I know thats pretty important for you guys. Both in flows.

Speaker Change: On alternative returns.

And any thoughts on.

Speaker Change: If you agree with that and if you would expect to see improvement in transaction.

Speaker Change: Levels, because I think that will determine and drive.

Speaker Change: Some levers on earnings bolt on alternative returns and you didnt transactional fees in Pgi, but just curious on that general theme, what what you think.

Speaker Change: Yes, Tom really really appreciate that question and we convene our investment Committee every week and we get into the details of each of the asset classes and as you might expect real estate gets a lot of our attention and ironically enough. We just had this discussion yesterday and again credit goes to the real estate team for having <unk>.

Speaker Change: Sells off a big exposure to office years and years ago. It wasn't a new phenomenon the portfolio was incredibly diverse by property type by geography.

Speaker Change: And again, we would agree with the sentiment that you described which is there is a recovery going on and it's an incredibly resilient asset class. It's amazing to me how they re positions itself and a lot of these properties are reconfigured to do something different and there is still a lot of building going on but I'll I'll go.

Speaker Change: The expert here have comp will make some additional comments on real estate specifically sure. Thank you Dan Good morning, Tom.

So I think you had a two part question one was just how do we see the sentiment in real estate given the indicators you've heard from others and then second piece related to transactions. So I'll take I'll take both in order.

Speaker Change: I would agree with the improving sentiment.

Speaker Change: We do see a little bit more of the bottoming out of devaluations in real estate just to give you. An example, this quarter we printed the first gross positive portfolio total return in our core real estate fund, which has broad diversified exposure to all real estate, obviously, including office as well and this is a.

First when we have seen through this market cycle. So obviously these things take a while to bottom out before they go upward, but certainly that first positive brand is a good sign for us.

Speaker Change: And we'll be monitoring that trend more closely it's quite interesting to see when you look at the performance of office Reits. As you know we are we have a fairly large magnitude and reach as well and we monitor that sector closely it's almost up 66% from its bottom in October of 2003.

Clearly the public markets.

Dissipating this darn.

Speaker Change: I'm going back to your transaction question I would say.

The impact of rates on transactional activity and money flow has been slightly slower than we would have anticipated.

Speaker Change: Right now there are a lot of crosscurrents in the marketplace.

Speaker Change: Some due to inconsistent economic data that we not just us, but do you see in the macroeconomic world.

Speaker Change: There is elements of elections and geopolitics. There's also demographic shifts that are happening, which makes this cycle somewhat unusual compared to prior cycles. So when we look particularly in real estate Gordon construction deal flow remains below historical norms. While most activity right now is in more bridge type short term financing to <unk>.

Speaker Change: Extend maturing loans. So there is transactional activity, but it is not of the long term in nature. So what I would say is as we continue to monitor it probably had longer cycle as you try to call related to transactional fees and then obviously there is a little bit more tearing you would need to see in the multifamily commercial real estate sector.

Speaker Change: As well, which we are quite active and hope that answers your question.

Speaker Change: That does thanks guys.

I appreciate it Tom.

Speaker Change: One moment for our next question.

Speaker Change: Our next question comes from West Carmichael with Autonomous Research Your line is open.

West Carmichael: Hey, Thanks. Good morning. My first question was on the life insurance segment.

Speaker Change: With the assumption review there is a small impact to ongoing GAAP earnings.

West Carmichael: And for that segment in particular, I think the operating margin, it's been trending a little bit below your guide of 13% to 15%. So just wondering if we should think about that kind of continuing to be a little bit below that range as we look forward.

Speaker Change: Yeah, I'll take that thanks a lot.

West Carmichael: So so west appreciate the question.

Speaker Change: And if some of this does get into the <unk>. We can we can pull Jill in and help with any clarification on that but what I would say is that that trend that amount that youre seeing right. There at about $33 million sits in a pretty good range in terms of how I think of run rate of course, we're going to have claims volatility.

We think of that in the range of plus or minus $5 million. The point I would clarify on here, though is the results that we're posting actually include any of those ongoing impact. So those are embedded within the results that we put in there for third quarter on the E. R. Any small impacts on run rate.

Speaker Change: Got it thanks, Amy how question just maybe yeah no. It does it does.

Speaker Change: And then just maybe my follow up on on VII I know, it's a little bit early data, but is there any kind of look towards the fourth quarter I guess it kind of follows maybe Tom's question, a little bit on transactional activity, but should we expect variable investment income to be.

Below long term expectations going forward.

Speaker Change: Yes, so I'll give a little bit of color on the quarter, and then talk about kind of expectations for the future, which obviously, we'll refine as we go into outlook in February.

Speaker Change: We have given you a kind of an outline of the basket of assets that comprise our variable investment income some of which we have more direct line of sight than others. We did continue to see pressure in the third quarter with some mixed drivers than what we've seen from from previous quarters on the plus side, we did see slight outperformed.

Speaker Change: <unk> from real estate really driven by a transaction in the quarter. We also saw very strong totally equity returns in the quarter.

That run through the corporate segment, but that was more than offset by negative returns from our private equity portfolio and continued minimal prepayments.

Regarding private equity this is a smaller percent of our portfolio, but I think the returns that we saw very similar to what our peers have signaled and was the driver of the pressure in the quarter. So hopefully that makes you understand what happened this quarter, if I think of fourth quarter and 2025, I think there's some moving parts.

Speaker Change: That may come into that.

Speaker Change: Partially driven by the trajectory of interest rates and if we see prepayments come back to normal levels I think as I think of of 24. The end of 'twenty four 'twenty five I still think we will see some pressure in variable investment income.

Speaker Change: If I think of fourth quarter, we could have some moving pieces, where I don't foresee a real estate transaction, but I.

I'm hopeful that private equity returns.

Speaker Change: Come to a more positive light that could offset that a little bit and so.

Speaker Change: Net net we have seen improvement in variable investment income in 2024 relative to what we saw in 2023.

Speaker Change: Well I think we will continue to see that ramp up to run rate, but we might continue to see some pressure over the next few quarters.

Speaker Change: Thank you.

One moment for our next question.

Our next question comes from Elyse Greenspan with Wells Fargo. Your line is open.

Hi, Carlos.

Elyse Greenspan: Good morning, My first question on just on the PRT side of things. It sounds like you guys expect to come in at the high end of your prior guide 3 billion for the year is there anything kind of new there that youre seeing activity either in the Q3 expectations for the balance of the year and also just kind of some initial thoughts on 2020.

Speaker Change: Five.

Speaker Change: Yeah, I'll have Chris take down where again, it's been a very opportunistic business for us and the environment has been very favorable and Christmas team has done a good job taking advantage of it.

Speaker Change: Yes, thanks for the question Lisa.

Speaker Change: We saw a nice third quarter.

Chris: And we've maintained our pricing discipline through the third quarter through a very competitive quarter, we expect to see a pretty robust fourth quarter and so we feel very confident in being able to deliver to the $3 billion at attractive at attractive returns again, as we think about our PRT business, we're constantly balancing that growth versus returns and making sure that.

Chris: We're getting an appropriate return on the capital we're investing in our PRT business. So so we're taking that view toward it.

Chris: With respect to 25, it's still too early to markets I mean, the pension funds are still through 930% to 170% funded according to Mercer. So we continue to see nice opportunities for us on a go forward basis into 2025, and we will look to grow that.

Chris: What we do in 'twenty five over 24, but a little bit too early to give us give a number at this point.

Speaker Change: Thanks, and then my second question just any additional color that you can just give an RIS fee compression that you've seen so far this year just an update on just the drivers and just the outlook there.

Speaker Change: Yes, Chris please.

Speaker Change: Yes.

Speaker Change: I think.

Speaker Change: With respect to fee rate. The one thing I wanted to start by saying, it's probably to make sure that we understand that when we think about our retirement business theres, both fee and spread revenue tied to our retirement business. It's not just fully fee. So when we think about the <unk> product that we sell through our retirement plans or co manufacturing solutions those are driving.

Speaker Change: Spread revenue to that's showing up not.

Speaker Change: Not in fee.

Speaker Change: And with rising markets. It's a similar story with respect to fee revenue right as it is with having that cash flow. The rise the significant rise in markets pressures fee revenue right because the denominator is more sensitive to those returns then the numerator in the calculation so all that being said.

Speaker Change: What I'd say about fee revenue right as we're we're down about two bps versus year ago and about <unk>.

Speaker Change: Two bps in the 12 trailing 12 months compare and we believe the trailing 12 months compares the best way to look at fee revenue rate given the functions that can occur from quarter to quarter.

Speaker Change: And despite all that noise, when we look at sort of the market performance.

Speaker Change: When we talk historically on our guidance, we've sort of said two to three bps of compression can be expected in normal markets. These are well above normal markets and we actually think that those stronger equity markets are pressuring fee revenue rate another half a bit to a bit just given the strong performance, but take all that into account we.

Speaker Change: Think of when we get to the end of the year on a trailing 12 month basis will be within our guidance of the two to three compression for the full year.

Speaker Change: Thank you.

Speaker Change: One moment for our next question.

Okay.

Speaker Change: Our next question comes from Josh Shanker with Bank of America. Your line is open.

Josh Shanker: Thank you, yes, I wanted to talk a little bit about the assumption review.

Speaker Change: Two thirds of the.

Speaker Change: Chart, particularly in the life business was related to refinements in.

Speaker Change: <unk>.

Speaker Change: You're better at analyzing the data does that mean that going forward there should be less volatile in the assumption reviews and can you talk about what those refinements are we're more comfortable with the changes.

Speaker Change: Yeah, and I'll have Joe take that and just another one of those reminders and Joel already mentioned earlier. This post <unk> environment is going to create a little bit more noise, a little more volatility, but I'll have bill take that one yes, Josh. Thanks for the question I promise I'll get to your specific question Humphrey and team of field several questions on our annual assumption review this quarter.

Speaker Change: So we'd like to take a step back and provide a holistic response.

Speaker Change: Given how long, we and the industry prepared for last year's implementation of L. DTI, It's actually hard to believe it's only the second annual assumption review under the new guidance.

Speaker Change: But as a reminder, and as Dan said balances subject to the assumption review our much larger under L. DTI for PFG. The balances subject to review are now 35 billion or seven times larger than pre <unk> levels.

Speaker Change: As such a slight change in assumption can result in a relevant one time impact.

Speaker Change: The 82 million one time impact for all of <unk>, you were referencing the life piece, but all our PMT was $82 million that equates to a <unk>, 2% of our actuarial balances and largely offsets the positive pre tax impact of a year ago.

Speaker Change: Importantly, the impact of this quarter. The <unk> was GAAP only noncash and had an immaterial impact of free capital flow.

Speaker Change: As Dan noted in her remarks earlier the run rate impact is immaterial.

Speaker Change: With a slight positive in RIS NPI at less than a penny a share per quarter, a slight decrease in SPD in life also less than a penny a share per quarter. These.

These run rate impacts are reflect in our three key results so everything else being equal serve as a good run rate going forward.

So double clicking and your specific question as you said two thirds does come from experience.

Speaker Change: It's relatively equal among the following three.

Speaker Change: Theres lots of experience in the VA business within RIS.

Speaker Change: Theres lapses experience in life.

Speaker Change: And then claim termination of incident rates in the individual disability business, which largely offsets the benefit from a year ago.

Speaker Change: And then the remaining one third of that onetime impact comes from model refinements you talked about so let me address that specific question.

Speaker Change: It relates to wire T modeling enhancements.

Speaker Change: We have improved the granularity this modeling and refinement is a product of our more sophisticated modeling capabilities at the treaty level.

Speaker Change: Our expected cost of IRT has not changed.

Speaker Change: Rather we have refined the pattern by which the cost is amortized.

Speaker Change: That is why this refinement has no economic or stat impact as our expectation of why our T cost remains intact.

As it relates to volatility we can't guarantee there won't be volatility in the future. When you deal with balances of that magnitude, but we feel really good about our assumption setting process and feel really good about the enhancements. We've made as we prepare the organization for complying with all DTI.

Speaker Change: I'm very proud of the work that was done in the finance community would not only comply with LD Jive. We also modernize our systems to gain better insights that we're going to benefit from greatly going forward.

Speaker Change: So Josh I hope that helps.

Speaker Change: Alright.

Speaker Change: Then there was also the issue of reputation.

Speaker Change: And Humphrey did talk to me about this one still trying to understand it.

Speaker Change: And some.

Speaker Change: Some term life contracts or not lapsing as quickly as anticipated and there was a change there, but I think I'm on my own term product and I don't think that it's.

Speaker Change: I hope not but I don't think for life insurance and you have to pay out a claim on that and and I'm only 50 and probably in the next six seven years My term product will no longer active and you will have gotten payments for me for the next seven years on that why does that necessarily create a charge isn't that money good business and you were.

Speaker Change: Like everybody to serve up the entirety of their term policy.

Speaker Change: Yeah, that's a good point, Joe So that's why sometimes accounting is subject to interpretation and it doesn't always.

Speaker Change: Our state the obvious and so what I would say what that is that's a very small part of the life model refinement actually the LIFO impacts, it's only about 25% relates to the experience and then the change in lapses, but actually thats a product of the client as he said staying around longer which is a good thing for us, but it does actually result, and the impact of.

Speaker Change: Increasing our liability.

Speaker Change: Within the actuarial assumption review so again it is not always intuitive, but it is a situation where this is a product of the customers staying with us longer and longer and thats. Good for us. It's good for our customer, but it does have a maybe an illogical accounting result in this situation anything you'd like to add to that the one thing.

Speaker Change: I would add is keep in mind, Josh a lot of the term business. We're writing today is with that business market. Okay.

Speaker Change: When we're writing something that the key person insurance or that's part of a buy sell agreement and we're using term did you exit planning or succession planning.

Speaker Change: Leaving that in place.

As Joe just mentioned is good for us so when we get more constancy on that business market product for a term product, we really like the economics and how that helps with our overall strategy. So again accounting wise, it's a little bit it seems a little bit opposite in terms of how we would have to kind of take that charge.

Speaker Change: We like the strategy and we liked I personally like seeing that emerge in our findings for the term business.

Speaker Change: So to understand in the next few years on these countries youre going to receive the premium income and you're also going to reverse that benefit for like a double I guess like a double income sort of situation.

Speaker Change: We're going to receive the benefit for sure you hadn't I was with you on that the double benefit I'm not sure I would characterize it as that premium income I'm going to pay you the premiums for the next few uranium and epilepsy.

Speaker Change: Does that premium is a positive in that equation correct, Hey, Josh I think we can take this offline maybe I can try to help us a little bit. So if you think of a 20 year term policy and we have underwriting that happens before we write that policy you are always going to have better assumed mortality early in that 'twenty year.

Speaker Change: Period than later and so if our historical experience had.

Speaker Change: 80% of those going the whole 20 years and a portion of those lapsing, sometimes in the latter half of that and now we have a little bit more going toward the whole 20 years Youre just going to see a little bit more claims paid out than what we would have had anticipated which causes that.

Increase in the assumption does that makes some sense.

Speaker Change: Yes.

Speaker Change: Alright, well, thank you very much I'm, sorry, I'm going too in the weeds, but I appreciate it.

Technology Asher good I appreciate it.

Speaker Change: Yes.

Speaker Change: One moment for our next question.

Speaker Change: Yeah.

Speaker Change: Our last question comes from Alex Scott with Barclays. Your line is open.

Hi, Thanks for fitting me in.

Alex Scott: I wanted to ask you about just sort of your strategy and any initiatives you have going on when I think about flows and just try to push that towards positive territory. Certainly there is industry related things that are going on and you guys have talked about but what are some of the strategies. Maybe if you could talk about it for pgi and RIS.

Speaker Change: Currently.

Speaker Change: I can assure you it gets a lot of attention around here and I'm glad you broke out the difference in RIS fee and pgi, because those are actually quite different levers between the two respective businesses, but let me have comparable first and then Chris but a lot of time and attention on driving profitable growth and we know that retaining and acquiring.

Speaker Change: Wiring new assets is an important component of that sure. Thank you Dan.

Speaker Change: I'll be sitting here and I think you raise a very good question, which is as a management team how do we strategically leaner.

Leaning in to improve the quality and quantity of our net cash flow and I'll give you a couple of examples I think Dan in his prepared comments mentioned, how we are seeing increased RFP activities. One of the things. We are doing is to ensure we have a robust pipeline of these activities.

Speaker Change: I think as you heard our RFP activities are roughly up 12% and they've exceeded 23 in 'twenty two but really also ensuring as we are also engaging on early stage opportunities. So our pipeline remains robust one of the things that we have observed is as we have built out our teams we have seen more.

Speaker Change: Rfps come through our international equity capabilities. Historically, we had a strong pipeline with real estate and specialty income and it's our goal to expand the equity capabilities, we offer to the marketplace roughly 40% of the volume of Rfps is going that.

Speaker Change: The other capability I would highlight which is getting a lot of attention and will yield long term results is we are very good in global credit both on the public and private side and we are seeing increased interest from many clients globally. I mentioned the synergies we are seeing between Pgi and Pi and that's a core part of it and one of the things.

Speaker Change: That's gotten a lot of attention recently, we have been quietly building.

Strong private credit business, we have always deployed two and a half a billion dollars of capital and just this year almost $400 million of positive net cash flow as you can imagine the the earnings stream on these are long term and they are they are at a much higher multiple of revenue than we have seen in the past I'll turn it over to Chris.

Chris: Those would be my comments.

Yes. Thanks.

Chris: Thanks, Alex.

Chris: With respect to the retirement business I mean, I think as we've said in prior quarters.

Chris: All of those are created equal and we are really focused on flows where we can drive profitable revenue growth.

Chris: And so when we think about the areas. We're talking about we look at the fundamentals of our business.

Chris: <unk> flows were up 11% over a year ago.

Chris: Recurring deposits are up 10%, we are looking to drive activity to drive those flows up and what we're continuing we're going to have some pressure on is the lumpiness of large plan sales you're going to have quarters like last year's third quarter that was very strong from a large market sales. We didn't have that repeat this year, we've talked about the volatility large so youre going to see some.

Chris: Volatility results there and then earlier, we talked about participant withdrawals in the purchase withdrawals is going to bounce around it's got a slight uptick in rate, but a lot of that is really just driven by the strong equity market performance currently and so again, while our focus is prioritizing profitable revenue growth maintaining strong margins we're not.

Chris: Out to solve sort of this flow.

Chris: Problem, if it's at low or zero fee.

Chris: Or low profitability or zero profitability, we're really focused on really a value accretion to the shareholders.

Speaker Change: Got it.

Speaker Change: Yes, it does.

Speaker Change: Just as a quick follow up anything we should think about in terms of exposure to fed funds and so or in terms of our floating rate or any cash sweeps or things like that could you help us just making sure we understand the sensitivity.

Speaker Change: Yes, I'll just take that.

Speaker Change: I think if you go back to R. R.

Speaker Change: Sensitivities that we've talked about there's very little impact from interest rates and that.

Speaker Change: Sensitivity to interest rates went down significantly after our transaction with the fixed annuity business.

Speaker Change: And so again long term wed.

Speaker Change: We like higher rates, but short term that actually hurts us both from a earnings perspective, because of the impact on fixed income values.

Speaker Change: Floating rate debt exposure on floating rate is virtually none so we don't expect any impact there we do see some impact on the bank.

Speaker Change: And the trust business, but again I wouldn't expect anything significant relative to drop in rates as.

Speaker Change: As we move forward.

Speaker Change: Thanks for the questions Alex.

Speaker Change: Okay.

Speaker Change: We have reached the end of the Q&A Mr. Houston Your closing comments please.

Dan Houston: So first and foremost thanks for joining the call today I know there are a couple of analysts that we did not get to all have Humphrey and his team reach out to make sure that we get any unanswered questions answered secondly observation that from our perspective, whether it's capital deployment on stock buyback or dividend policy, our free cash flow or earnings per share targeted.

Dan Houston: 9% to 12%, we feel very good about where we're at in the progress that's been made and feel very confident in the full year. We look forward to seeing you at our Investor Day on November 18th in New York City, We will focus our discussion on the strategic opportunities in the retirement ecosystem, the SMB marketplace and the global reach of our <unk>.

Dan Houston: Asset management business and how we can leverage that for shareholders. So I appreciate the time today have a good one.

Speaker Change: Thank you. This concludes today's conference call you May now disconnect. Your lines at this time and we thank you for your participation.

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Speaker Change: Okay.

Speaker Change: Yes.

Okay.

Speaker Change: Okay.

Great.

Speaker Change: Okay.

Yes.

Speaker Change: Yes.

Sure.

Yes.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Okay.

Okay.

Speaker Change: Yes.

Q3 2024 Principal Financial Group Inc Earnings Call

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