Q4 2024 Principal Financial Group Inc Earnings Call

February 7, 2025

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Speaker Change: I would now like to turn the conference call over to Humphrey Lee Vice President of Investor Relations.

Thanks for watching!

Humphrey Lee: Thank you and good morning, welcome to principal financial group's fourth quarter and full year 2024 earnings and 2024 outlook conference call.

Speaker Change: As always <unk>.

Speaker Change: <unk> related to today's call are available on our website at investors principal dot com following a reading of our safe Harbor provision.

Speaker Change: The industry Moe and interim CFO, Joe <unk> will deliver some prepared remarks.

Speaker Change: We will then open the call for questions.

Speaker Change: Members of senior management are also available for Q&A.

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

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

Speaker Change: 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 reports on Form 10-K filed by the company with the U S Securities and Exchange Commission.

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

Speaker Change: Reconciliations of the non-GAAP financial measures to the most directly comparable U S. GAAP financial measures maybe found in our earnings release financial supplement and slide presentation Deanna.

Speaker Change: Humphrey and welcome to everyone on the call before I begin this morning, I'd like to recognize Dan House, then for his leadership as our CEO over the last 10 years.

Speaker Change: He has been instrumental in setting our growth agenda and has led us through significant transformation.

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 reports on Form 10-K filed by the company with the U S Securities and Exchange Commission.

Speaker Change: Principal is in a position of strength today and is well positioned for continued growth. Thanks to his tireless leadership.

Speaker Change: It has been an honor to work alongside Dan over the last seven years as CFO.

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

I look forward to building upon the strong foundation, we've established under Dan's leadership.

Reconciliations of the non-GAAP financial measures to the most directly comparable U S. GAAP financial measures maybe found in our earnings release financial supplement and slide presentation Deanna.

Speaker Change: I am extremely grateful to continue to have him serve as the executive chair of our board.

Speaker Change: This morning, I will discuss key milestones and highlights from the fourth quarter and full year 2024.

Humphrey: Humphrey and welcome to everyone on the call before I begin this morning, I'd like to recognize Dan Houston for his leadership as our CEO over the last 10 years.

Speaker Change: I will follow with additional details.

Speaker Change: Principal delivered a strong 2024.

Humphrey: He has been instrumental in setting our growth agenda and has led us through significant transformation.

Speaker Change: We began the year with an ambitious outlook, we committed to growing earnings per share in the 9% to 12% range targeting a 75% to 85% free capital flow conversion and expanding our OE toward our targeted range of 14% to 16%.

Humphrey: Principal is in a position of strength today and is well positioned for continued growth. Thanks to his tireless leadership.

Speaker Change: And it's been an honor to work alongside Dan over the last seven years as a CFO.

Speaker Change: I'm extremely pleased that we've delivered on this guidance.

Speaker Change: I look forward to building upon the strong foundation, we've established under Dan's leadership.

Speaker Change: Our adjusted non-GAAP earnings per share growth in 2024 was 11% with a strong 16% increase in the fourth quarter.

Speaker Change: I am extremely grateful to continue to have him serve as the executive chair of our board.

Speaker Change: This was driven by strong topline growth across the enterprise as well as the benefits from equity market tailwind, which more than offset impacts from foreign currency.

Speaker Change: This morning, I will discuss key milestones and highlights from the fourth quarter and full year 2024.

Speaker Change: I will follow with additional details.

Speaker Change: Our free capital flow conversion ratio ended the year at the midpoint of our 75% to 85% target.

Speaker Change: Principal delivered a strong 2024.

Speaker Change: And we improved our ROE by 90 basis points year over year and are on track to achieve our 14% to 16% target in 2025.

Speaker Change: Our strong capital position and free capital flow enabled us to deliver on our capital deployment guidance.

Speaker Change: I'm extremely pleased that we've delivered on this guidance.

Speaker Change: We returned $1 $7 billion of capital to shareholders in 2024.

Speaker Change: Our adjusted non-GAAP earnings per share growth in 2024 was 11% with a strong 16% increase in the fourth quarter.

Speaker Change: Our total capital returned to shareholders included share buybacks, which were above the midpoint of our targeted range and a 10% increase in our annual common stock dividend.

Speaker Change: This was driven by strong topline growth across the enterprise as well as the benefits from equity market tailwind, which more than offset impacts from foreign currency.

Speaker Change: Our board of directors, just approved a new share repurchase authorization for $1 $5 billion. This is in addition to the nearly $800 million remaining under the prior authorization at the end of the year.

Speaker Change: Our free capital flow conversion ratio ended the year at the midpoint of our 75% to 85% target and we improved our ROE by 90 basis points year over year and are on track to achieve our 14% to 16% target in 2025.

Speaker Change: At our recent Investor day, we laid out our strategic areas of focus for sustained growth.

Speaker Change: Abroad retirement ecosystem, small and midsize businesses and global asset management.

Speaker Change: Our strong capital position and free capital flow enabled us to deliver on our capital deployment guidance.

Speaker Change: I'm happy to highlight some of our achievements related to these.

Speaker Change: We returned $1 $7 billion of capital to shareholders in 2024.

Speaker Change: As part of our retirement ecosystem strategy. We've recently expanded our suite of target date offerings to now include both personalized and passive options addressing the evolving needs of plan sponsors and participants.

Speaker Change: Our total capital returned to shareholders included share buybacks, which were above the midpoint of our targeted range and a 10% increase in our annual common stock dividend.

Speaker Change: Our differentiated capabilities across retirement and asset management also led to an off platform retirement investment mandate win of nearly $1 billion into our hybrid target date in the fourth quarter.

Our board of directors, just approved a new share repurchase authorization for $1 $5 billion. This is in addition to the nearly $800 million remaining under the prior authorization at the end of the year.

Speaker Change: This highlights our opportunity to unlock incremental value at the intersection of our businesses.

Speaker Change: At our recent Investor day, we laid out our strategic areas of focus for sustained growth.

Speaker Change: Over decades, we have built a resilient and valuable SMB customer base. This segment is large with significant opportunities for growth.

Speaker Change: Abroad retirement ecosystem small and mid sized businesses and global asset management.

Speaker Change: I'm happy to highlight some of our achievements related to these.

Speaker Change: We remain uniquely positioned to serve this market and look to expand on our leadership position in a disciplined way.

Speaker Change: And as we continue to experience strong growth in this segment was 8% recurring deposit growth in 2024 outpacing the large case segment.

Our differentiated capabilities across retirement and asset management also led to an off platform retirement investment mandate win of nearly $1 billion into our hybrid target date in the fourth quarter.

Speaker Change: And specialty benefits our customers on average have more than three products with us up 4% compared to 2023.

We have deep customer relationships, a strong leadership position and a long track record of above market growth and the attractive SMB segment and.

Speaker Change: This highlights our opportunity to unlock incremental value at the intersection of our businesses.

Speaker Change: Over decades, we have built a resilient and valuable SMB customer base. This segment is large with significant opportunities for growth.

Speaker Change: In asset management, we continue to expand our private in multi asset solutions, gaining traction and next generation real estate and credit strategies with clients globally.

Speaker Change: We remain uniquely positioned to serve this market and look to expand on our leadership position in a disciplined way.

Speaker Change: Our largest real estate fund data center growth and income fund is currently raised over $3 $6 billion across 11 countries and 18 months.

Speaker Change: And yes, we continue to experience strong growth in this segment with 8% recurring deposit growth in 2020 for outpacing the large case segment.

Speaker Change: This will materialize through net cash flow over time.

Speaker Change: Notably new institutional clients represent 36% of the fund's total commitments.

Speaker Change: And specialty benefits our customers on average have more than three products with us up 4% compared to 2023.

Speaker Change: Beyond real estate, we are advancing our private and multi asset capabilities, including the launch of our private credit REIT fund and the build out of our private infrastructure in that team.

Speaker Change: We have deep customer relationships, a strong leadership position and a long track record of above market growth and the attractive SMB segment and.

Speaker Change: Our clear strategy and strong execution across these three distinct growth platforms delivered strong results in 2024 and will continue going forward.

Speaker Change: In asset management, we continue to expand our private in multi asset solutions, gaining traction and next generation real estate and credit strategies with clients globally.

Speaker Change: We ended 2024 was $712 billion of total company managed AUM down 4% sequentially, but up 3% from 2023.

Our largest real estate fund data center growth and income fund is currently raised over $3 $6 billion across 11 countries and 18 months.

Speaker Change: Strong market performance despite market volatility in the final weeks of the year more than offset the impacts from FX and that cash flow.

That's all materialize through net cash flow over time.

Speaker Change: Notably new institutional clients represent 36% of the fund's total commitments.

Speaker Change: Total company net cash flow improved for both the fourth quarter and full year 2024 compared to the year ago period, specifically.

Speaker Change: Specifically positive institutional and retail flows in the quarter helped to partially offset what is typically our weakest quarter due to seasonality in U S retirement sales and lapse activity.

Speaker Change: Our clear strategy and strong execution across these three distinct growth platforms delivered strong results in 2024 and will continue going forward.

Speaker Change: Now turning to our business segments in retirement, we generated strong revenue and earnings growth. In 2024. This was driven by favorable market conditions and continued growth in our business due to the breadth and depth of our integrated suite of retirement solutions spanning record keeping asset management and retirement income.

Speaker Change: We ended 2024 was $712 billion of total company managed AUM down 4% sequentially, but up 3% from 2023.

Speaker Change: Strong market performance despite market volatility in the final weeks of the year more than offset the impacts from FX and that cash flow.

Speaker Change: The underlying fundamentals across retirement remain healthy recurring deposits for our total block in 2024 increased 7% over 2023, driven by the strength in the SMB segment.

Speaker Change: Total company net cash flow improved for both the fourth quarter and full year 2024, compared to the year ago period spin.

Speaker Change: The number of individuals' deferring and receiving employer matches are up 3% compared to fourth quarter of 2023. In addition, the dollar amount of these deferrals of matches increased by over 7% during the same period.

Speaker Change: Now turning to our business segments and retirement, we generated strong revenue and earnings growth. In 2024. This was driven by favorable market conditions and continued growth in our business due to the breadth and depth of our integrated suite of retirement solutions spanning record keeping asset management and retirement income.

Speaker Change: There is growing interest in participation in employer sponsored retirement plans employers and plan sponsors are choosing to partner with us because of our full suite of solutions, we offer and how we serve advisors plan sponsors and participants.

Speaker Change: And while higher account values driven by strong equity markets over the last couple of years has led to an increase in withdrawal amounts. We are encouraged that the rate of participant withdrawals stabilized in the quarter.

Speaker Change: The underlying fundamentals across retirement remained healthy recurring deposits for our total block in 2024 increased 7% over 2023, driven by the strength in the SMB segment.

Speaker Change: Contact retention rates also improved substantially in 2024 compared to the previous two years better retention and an improved sales pipeline are generating strong momentum in our business.

Speaker Change: Pension risk transfer sales were nearly $900 million in the fourth quarter, bringing our full year sales to over $3 billion at attractive returns.

Speaker Change: Our T market remains robust and we are positioned to take advantage of it.

Speaker Change: Our defined benefits business continues to be a valuable source for PRT, new business with nearly 40% of our 'twenty 'twenty four new contracts coming from existing defined benefit customer relationships.

Speaker Change: In asset management, we realigned our businesses into investment management and international pension in the fourth quarter.

Speaker Change: Asset management ended the year with $683 billion of AUM strong market performance in 2024 was partially offset by nearly $28 billion of FX impacts.

Speaker Change: Pension risk transfer sales were nearly $900 million in the fourth quarter, bringing our full year sales to over $3 billion at attractive returns.

Speaker Change: Net flows for the year improved compared to 2023 and investment management as non affiliated flows benefited from improvement across all channels.

Speaker Change: PRT market remains robust and we are positioned to take advantage of it.

Speaker Change: We continue to evolve our global asset management business positioning against new opportunities for growth and even stronger client outcomes are.

Speaker Change: Our defined benefits business continues to be a valuable source for PRT, new business with nearly 40% of our 2024, new contracts coming from existing defined benefit customer relationships.

Speaker Change: Our strategic focus remains unattractive businesses that leverage our competitive differentiators and leadership positions as.

Speaker Change: As evidence of this evolution. We recently took several actions to streamline our business portfolio within asset management.

Speaker Change: In asset management, we realigned our businesses into investment management and international pension in the fourth quarter.

Speaker Change: Most impactful is Hong Kong, where a changing regulatory environment necessitates us evolving our presence in the market focusing on our core expertise of retirement asset management, while pursuing a new partnership with an industry leader in pension services, our transaction with Bank Consortium Trust RBC T y.

Speaker Change: Asset management ended the year with $683 billion of AUM strong market performance in 2024 was partially offset by nearly $28 billion of FX impacts.

Speaker Change: Net flows for the year improved compared to 2023 and investment management as non affiliated flows benefited from improvement across all channels.

Speaker Change: Unapproved what transition our M. P F schemes to be C T and expand our role as an investment manager with assets from the combined pension schemes the financial impact has been factored into our outlook.

Speaker Change: We continue to evolve our global asset management business positioning against new opportunities for growth and even stronger client outcomes are.

Speaker Change: Our strategic focus remains an attractive businesses that leverage our competitive differentiators and leadership positions as.

Speaker Change: Turning to our benefits and protection, we continue to generate above market growth of 7% in specialty benefits in 2024.

Speaker Change: As evidence of this evolution. We recently took several actions to streamline our business portfolio within asset management.

Speaker Change: This reflects net new business growth, while maintaining pricing discipline and life our focus on the business owner is resonating as our business market premium and fees grew over 16% in 2024.

Speaker Change: As I look at the opportunities in front of us I am confident in our ability to drive value through deeper market penetration and F&B, expanding our offering within the retirement ecosystem and sharpening our focus and global asset management.

Speaker Change: I proved we transition our M. P F schemes to be C T and expand our role as an investment manager with assets from the combined pension schemes.

Joel: Before turning it over to Joel I'd like to highlight two important recognitions. We received recently principal was named one of America's most just companies by just capital ranking number 11 on the 20th twenty-five just 100 list.

Speaker Change: Financial impact has been factored into our outlook.

Speaker Change: Turning to benefits and protection, we continue to generate above market growth of 7% in specialty benefits in 2024.

Joel: This recognition reflects our leadership in the industry and our commitment to serving our employees customers communities and shareholders.

Joel: Additionally for the 13th consecutive year principal asset management was named a best place to work in money management by pensions and investments, earning this recognition every year since the inception of the award recognitions like this reinforce our culture and core values help us attract and retain top talent and allow.

As I look at the opportunities in front of us I am confident in our ability to drive value through deeper market penetration and F&B, expanding our offering within the retirement ecosystem and sharpening our focus and global asset management.

Joel: How us to stand out in the competitive marketplace.

Joel: For turning it over to Joel I'd like to highlight two important recognitions. We received recently principal was named one of America's most just companies by just capital ranking number 11 on the 20th twenty-five just 100 list.

Joel: We closed 2024 with momentum across our diverse portfolio of businesses. Our success is a testament to the focus and hard work of our 20000 global employees.

Joel: Their ongoing commitment to excellence and to our customers enabled us to seize opportunities and has set the stage for future growth Joel.

This recognition reflects our leadership in the industry and our commitment to serving our employees customers communities and shareholders.

Joel: Thanks, Diana good morning to everyone on the call I'll walk through our financial performance for the fourth quarter and full year provide updates on our investment portfolio and capital position and share details of our outlook for 2025.

Joel: As shown on slides three and four excluding significant variances full year non-GAAP operating earnings were $1 $8 billion or $7 65 per diluted share.

Joel: A standout in the competitive marketplace.

Joel: We closed 2024 with momentum across our diverse portfolio of businesses. Our success is a testament to the focus and hard work of our 20000 global employees.

Joel: This represents an 11% increase in EPS over 2023 comfortably within our 9% to 12% EPS guidance.

Joel: Results for the quarter were equally strong with non-GAAP operating earnings excluding significant variances of $485 million.

Joel: Their ongoing commitment to excellence and to our customers enabled us to seize opportunities and has set the stage for future growth Joel.

Joel: Our $2.10 per diluted share.

Joel: A 16% increase over the year ago quarter.

Joel: Thanks, Tina and good morning to everyone on the call.

Joel: You can find a significant variance items on slide 17 through 19.

Joel: Walk through our financial performance for the fourth quarter and full year provide updates on our investment portfolio and capital position and share details of our outlook for 2025.

Joel: Full year reported net income excluding exited business was $1 $5 billion with modest credit losses, and drift, both slightly better than our expectations at the beginning of the year non-GAAP operating ROE for 2024, excluding our actuarial assumption review was 13, 7% in.

Joel: As shown on slides three and four excluding significant variances full year non-GAAP operating earnings were $1 $8 billion or $7 65 per diluted share.

Joel: This represents an 11% increase in EPS over 2023 comfortably within our 9% to 12% EPS guidance.

Joel: An improvement of 90 basis points compared to the year ago period.

Joel: We remain on track to deliver our 14% to 16% targeted ROE by 2025.

Joel: Results for the quarter were equally strong with non-GAAP operating earnings excluding significant variances of $485 million or $2 10 per diluted share of <unk>.

Joel: 2024 equity markets created favorable tailwind with strong total returns across major indices.

Joel: The S&P 500 gained 25% for the year with more modest growth and small cap mid cap real estate and international equities.

Joel: 16% increase over the year ago quarter.

Joel: You can find a significant variance items on slide 17 through 19.

Joel: Full year reported net income excluding exited business was $1 $5 billion with modest credit losses and drift.

Joel: Our diversified equity asset mix, along with our allocation to fixed income asset classes results in market performance that varies from the S&P 500.

Joel: Slightly better than our expectations at the beginning of the year non-GAAP operating ROE for 2024, excluding our actuarial assumption review was 13, 7%.

Joel: This underscores the importance of recognizing the asset mix within our AUM, which can be found in the appendix on slide 16.

Joel: Foreign exchange rates negatively impacted AUM by 28 billion for the full year and 17 billion for the quarter.

Joel: An improvement of 90 basis points compared to the year ago period.

Joel: We remain on track to deliver our 14% to 16% targeted ROE by 2025.

Joel: Despite this impact equity market performance more than offset the FX impacts for the full year.

Joel: 2024 equity markets created favorable tailwind with strong total returns across major indices.

Joel: The following commentary excludes significant variances.

Joel: Our full year results demonstrate the strength of our integrated businesses, which enabled us to deliver on our 2020 for enterprise guidance of 9% to 12% EPS growth.

Joel: The S&P 500 gained 25% for the year with more modest growth and small cap mid cap real estate and international equities.

Joel: Our diversified equity asset mix, along with our allocation to fixed income asset classes results in market performance that varies from the S&P 500.

We delivered topline growth of 5% across the company in 2020 for.

Joel: This coupled with expense discipline, while investing in our business resulted in non-GAAP margin expansion of 60 basis points during the year start.

Joel: This underscores the importance of recognizing the asset mix within our AUM, which can be found in the appendix on slide 16.

Joel: Starting with RIS full year pre tax operating earnings increased 9% over 2023, driven by strong business growth favorable market conditions and higher net investment income.

Joel: Foreign exchange rates negatively impacted AUM by 28 billion for the full year and 17 billion for the quarter.

Joel: Despite this impact equity market performance more than offset the FX impacts for the full year.

Joel: Net revenue growth of 7% for the full year exceeded our long term target and our guidance for 2024.

The following commentary excludes significant variances.

Joel: The 40% margin was at the high end of our guided range.

Joel: Our full year results demonstrate the strength of our integrated businesses, which enabled us to deliver on our 2020 for enterprise guidance of 9% to 12% EPS growth.

Joel: These results highlight our disciplined focus on profitable revenue growth supported by favorable macroeconomic tailwind.

Joel: Principal asset management delivered strong results for the year.

We delivered topline growth of 5% across the company in 2020 for.

Joel: Specifically investment management pre tax operating earnings increased 6% over 2023.

Joel: This coupled with expense discipline, while investing in our business resulted in non-GAAP margin expansion of 60 basis points during the year Star.

Joel: Driven by higher management fees, resulting from strong market performance.

Joel: Starting with RIS full year pre tax operating earnings increased 9% over 2023, driven by strong business growth favorable market conditions and higher net investment income.

Joel: Full year operating margin of 35% expanded 100 basis points from a year ago.

Joel: Worthy accomplishment in a year with limited contributions from performance fees.

Joel: Net revenue growth of 7% for the full year exceeded our long term target and our guidance for 2024.

Joel: International Pensions pretax operating earnings were relatively flat compared to 2023.

Joel: Due to $26 million of FX impacts in the year.

Joel: The 40% margin was at the high end of our guided range.

Joel: A constant currency basis earnings increased 9% driven.

Joel: These results highlight our disciplined focus on profitable revenue growth supported by favorable macroeconomic tailwind.

Joel: Driven by 4% growth in net revenue.

Joel: Operating margin improved by 100 basis points, reflecting growth and strong execution in our targeted markets.

Joel: Principal asset management delivered strong results for the year.

Joel: Although we revised the presentation. It is worth noting that pgi delivered on full year guidance as the principal international on a constant currency basis.

Joel: Specifically investment management pre tax operating earnings increased 6% over 2023.

Joel: Driven by higher management fees, resulting from strong market performance.

Joel: Especially benefits continues to deliver attractive premium and fees growth up 7% compared to full year 2023.

Joel: Full year operating margin of 35% expanded 100 basis points from a year ago.

Joel: Quarter over quarter comparisons are impacted by a large single premium sale in the fourth quarter of 2023.

Joel: Worthy accomplishment in a year with limited contributions from performance fees.

Joel: International pension pre tax operating earnings were relatively flat compared to 2023.

Joel: Which makes direct comparisons less meaningful.

Joel: Notably, especially benefits produced record earnings in the fourth quarter as well as full year 2024.

Joel: Due to $26 million of FX impacts in the year.

Joel: A constant currency basis earnings increased 9% driven.

Joel: Loss ratio for the year of 64% was favorable and at the low end of our guided range and.

Joel: Driven by 4% growth in net revenue.

Joel: Operating margin improved by 100 basis points, reflecting growth and strong execution in our targeted markets.

Joel: And operating margin of 15% was above the midpoint of our guided range.

Joel: Although we revised the presentation. It is worth noting that pgi delivered on full year guidance as the principal international on a constant currency basis.

Joel: These results underscore the effectiveness of management actions to drive profitable growth.

Joel: In our life business growth in our business market continues to outpace the roll off of the legacy block full year life premium and fees increased 1% overall.

Joel: Especially benefits continues to deliver attractive premium and fees growth up 7% compared to full year 2023.

Joel: With business market premium and fees up 16% year over year.

Joel: Quarter over quarter comparisons are impacted by a large single premium sale in the fourth quarter of 2023.

Joel: We executed another wire T reinsurance transaction as we continue to Derisk the legacy life portfolio.

Joel: Which makes direct comparisons less meaningful.

Joel: This had an immaterial impact on earnings and a slight decrease to premium and fees.

Joel: Notably, especially benefits produced record earnings in the fourth quarter as well as full year 2024.

Joel: Excluding the 2020 for reinsurance transactions premium and fees growth was 3% in 2024.

Joel: Loss ratio for the year of 64% was favorable and at the low end of our guided range and.

Joel: Turning to our investment portfolio, we maintain a well diversified and high quality portfolio that aligns with our liability profile.

Joel: And operating margin of 15% was above the midpoint of our guided range.

Joel: These results underscore the effectiveness of management actions to drive profitable growth.

Joel: It is well positioned to perform across a variety of economic conditions.

Joel: In our life business growth in our business market continues to outpace the roll off of the legacy block full year life premium and fees increased 1% overall.

Joel: While commercial mortgage loans may still be on some investors' minds, our portfolio is of high quality.

Joel: With an average loan to value ratio of 50%.

Joel: With business market premium and fees up 16% year over year.

Joel: And debt service coverage ratio of two three times.

Joel: We executed another wire T reinsurance transaction as we continue to Derisk the legacy life portfolio.

Joel: We continue to re underwrite our office loans each quarter.

Joel: After successfully resolving our 2024 office loan maturities.

Joel: This had an immaterial impact on earnings and a slight decrease to premium and fees.

Joel: We entered 2025 with continued optimism.

Joel: Excluding the 2020 for reinsurance transactions premium and fees growth was 3% in 2024.

Joel: Maturities in the coming year are lower than in 2024 at $310 million.

Joel: We are off to a good start with $75 million already having been paid off.

Joel: Turning to our investment portfolio, we maintain a well diversified and high quality portfolio that aligns with our liability profile.

Joel: Revival in capital market activity will help the office market continue its recovery path.

Joel: It is well positioned to perform across a variety of economic conditions.

Joel: For more detailed information we have provided supplemental investment slides available on our website.

Joel: While commercial mortgage loans may still be on some investors' minds, our portfolio is of high quality.

Turning to capital and liquidity, we ended the year at a very strong position with $1 $6 billion of excess and available capital.

Joel: With an average loan to value ratio of 50%.

Joel: And debt service coverage ratio of two three times.

Joel: This includes $830 million at the holding company above our 800 million targeted level.

Joel: We continue to re underwrite our office loans each quarter.

Joel: After successfully resolving our 2024 office loan maturities.

Joel: $300 million in our subsidiaries.

Joel: And $430 million in excess of our targeted 375% risk based capital ratio, which was 404% at year end.

Joel: We entered 2025 with continued optimism.

Joel: Maturities in the coming year are lower than in 2024 at $310 million.

On a full year basis, we delivered 80% free capital flow conversion comfortably within our 75% to 85% targeted range.

Joel: We are off to a good start was $75 million already having been paid off.

Joel: Revival in capital market activity will help the office market continue its recovery path.

Joel: As shown on slide three we returned $1 $7 billion to shareholders in 2024 <unk>.

Joel: For more detailed information we have provided supplemental investment slides available on our website.

Joel: Including 1 billion via share repurchases and $660 million in common stock dividends.

Joel: Turning to capital and liquidity, we ended the year at a very strong position with $1 $6 billion of excess and available capital.

Joel: As Deanna noted previously this was above the midpoint of our 2020 for guidance.

Joel: This includes $830 million at the holding company above our 800 million targeted level.

Joel: This included just under $470 million of capital returned to shareholders in the fourth quarter.

Joel: $300 million in share repurchases and $170 million in dividends.

Joel: $300 million in our subsidiaries.

Joel: $430 million in excess of our targeted 375% risk based capital ratio, which was 404% at year end.

Joel: Last night, we announced a 75 common stock dividend payable in the first quarter.

Joel: This represents a 2% increase over the prior quarter's dividend.

Joel: On a full year basis, we delivered 80% free capital flow conversion comfortably within our 75% to 85% targeted range.

Joel: A 10% dividend growth rate on a trailing 12 month basis.

Joel: Aligns with our targeted 40% dividend payout ratio.

Joel: As shown on slide three we returned $1 $7 billion to shareholders in 2024 <unk>.

Joel: Underscoring our confidence in continued growth and strong performance.

Joel: Our results reinforce our balanced approach to capital deployment, creating long term value for shareholders, while maintaining financial flexibility to support growth opportunities.

Joel: Including 1 billion via share repurchases and $660 million in common stock dividends.

As Deanna noted previously this was above the midpoint of our 2020 for guidance.

Joel: Turning to our outlook starting on slide 11, we are well positioned to deliver on our enterprise long term financial targets again in 2025.

Speaker Change: This included just under $470 million of capital returned to shareholders in the fourth quarter.

Speaker Change: $300 million in share repurchases and $170 million in dividends.

Joel: These were reaffirmed at Investor day, with 9% to 12% growth in earnings per share.

Speaker Change: Last night, we announced a 75 common stock dividend payable in the first quarter.

Joel: 75% to 85% free capital flow conversion in 2014% to 16% return on equity.

Speaker Change: This represents a <unk> <unk> increase over the prior quarter's dividend.

Joel: As a reminder, these targets are excluding significant variances.

Speaker Change: A 10% dividend growth rate on a trailing 12 month basis.

Joel: We expect to see even stronger EPS growth on a reported basis.

Speaker Change: Aligns with our targeted 40% dividend payout ratio.

We remain committed to returning excess capital to shareholders and are targeting one four to $1 $7 billion of capital deployment in 2025.

Speaker Change: Underscoring our confidence in continued growth and strong performance.

Speaker Change: Our results reinforce our balanced approach to capital deployment, creating long term value for shareholders, while maintaining financial flexibility to support growth opportunities.

Joel: This includes $700 million to $1 billion of share repurchases and a 40% dividend payout ratio.

Speaker Change: Turning to our outlook starting on slide 11, we are well positioned to deliver on our enterprise long term financial targets again in 2025.

Joel: Our guidance assumes run rate variable investment income or VII, and we will continue to quantify the impact to reported results from higher lower than expected VII.

Speaker Change: These were reaffirmed at Investor day, with 9% to 12% growth in earnings per share.

Joel: A significant variance on our earnings call throughout the year.

Speaker Change: 75% to 85% free capital flow conversion in 2014% to 16% return on equity.

Joel: For 2025, we expect VII to improve compared to 2024.

Joel: Turning to our business units slide 12 outlines our 2025 enterprise outlook.

Speaker Change: As a reminder, these targets are excluding significant variances.

Speaker Change: We expect to see even stronger EPS growth on a reported basis.

Joel: Medium term business unit expectations for 2025 through 2027 and modeling considerations for 2025.

Speaker Change: We remain committed to returning excess capital to shareholders and are targeting one four to $1 $7 billion of capital deployment in 2025.

Joel: Business unit guidance assumes normal market conditions.

Joel: Taken together this guidance reinforces our confidence in the sustained delivery of our financial targets at the enterprise level.

This includes $700 million to $1 billion of share repurchases and a 40% dividend payout ratio.

Joel: And our I S building on the strong results in 2024, we are revising our margin guidance upward and net revenue guidance of 2% to 5% remains intact.

Speaker Change: Our guidance assumes run rate variable investment income or VII, we will continue to quantify the impacts reported results from higher or lower than expected VII.

Joel: In investment management medium term guidance reflects the underlying strength of our global asset management business.

Speaker Change: At a significant variance on our earnings call throughout the year.

Speaker Change: For 2025, we expect VII to improve compared to 2024.

Joel: We expect revenue growth and margin to be within these ranges in 2025.

Speaker Change: Turning to our business units slide 12 outlines our 2025 enterprise outlook medium term business unit expectations for 2025 through 2027 and modeling considerations for 2025.

Joel: And international pension our guidance looks different from what we showed in the past for principal international due to the re segmentation and a change in the net revenue metric to better align with the rest of the enterprise.

Speaker Change: Business unit guidance assumes normal market conditions.

Joel: We expect net revenue to be at the midpoint of the range on a constant currency basis, but below the range on a reported basis due to the strengthening of the U S dollar relative to last year.

Speaker Change: Taken together this guidance reinforces our confidence in the sustained delivery of our financial targets at the enterprise level.

Speaker Change: And our I S building on the strong results in 2024, we're revising our margin guidance upward.

Joel: Margin is expected to improve from 2024 levels be.

Joel: To be at the low end of the range in 2025 and improving thereafter.

Speaker Change: Our net revenue guidance of 2% to 5% remains intact.

Joel: And specialty benefits the dental market with dynamic during 2024.

Speaker Change: In investment management medium term guidance reflects the underlying strength of our global asset management business.

Joel: We maintained our underwriting discipline, resulting in lower sales in the second half of the year.

Speaker Change: We expect revenue growth and margin to be within these ranges in 2025.

Joel: As a result, we are revising our medium term premium fees guidance to 6% to 9%, which remains above industry growth.

Speaker Change: And international pension our guidance looks different from what we showed in the past for principal international due to the re segmentation and a change in the net revenue metric to better align with the rest of the enterprise.

Joel: In 2025, we expect growth to be near the low end of this range with growth improving throughout the year.

Speaker Change: We expect net revenue to be at the midpoint of the range on a constant currency basis, but below the range on a reported basis due to the strengthening of the U S dollar relative to last year.

Joel: The ongoing discipline in underwriting is contributing to continued strength in our block.

Joel: Leading us to improve our loss ratio and margin targets.

Joel: Reflecting confidence in the overall business fundamentals and health of this business.

Speaker Change: Margin is expected to improve from 2024 levels.

Joel: In life premiums and fees growth is expected to be at or above the high end of the range for the year.

Speaker Change: Be at the low end of the range in 2025 and improving thereafter.

Speaker Change: And specialty benefits the dental market with dynamic during 2024.

Joel: With high teens growth in our business market block P.

Joel: Partially offset by the runoff of our legacy block.

Speaker Change: We maintained our underwriting discipline, resulting in lower sales in the second half of the year.

Joel: Our revised margin guidance reflects improvement over 2024.

Speaker Change: As a result, we are revising our medium term premium fees guidance to 6% to 9%, which remains above industry growth.

Joel: Before opening for questions I want to remind you of a few seasonality impacts.

Joel: In investment management, the first quarter is typically our lowest quarter for earnings.

Speaker Change: In 2025, we expect growth to be near the low end of this range with growth improving throughout the year.

Joel: Due to the seasonality of deferred compensation and elevated payroll taxes.

Joel: Specifically, we expect approximately $40 million of seasonally higher expenses in the first quarter with no impact to full year outlook.

Speaker Change: The ongoing discipline in underwriting is contributing to continued strength in our block.

Speaker Change: Leading us to improve our loss ratio and margin targets.

Joel: And specialty benefits dental claims are typically higher in the first half of the year.

Speaker Change: Reflecting confidence in the overall business fundamentals and health of this business.

Joel: Similar to the pattern in 2020 for these factors will contribute to earnings being meaningfully higher in the second half than the first half of 2025.

Speaker Change: In life premium and fee growth is expected to be at or above the high end of the range for the year.

Speaker Change: With high teens growth in our business market block P.

Joel: Additionally, they drive the seasonal pattern of free capital flow, which typically lightest in the first half of the year and increases in the second half.

Speaker Change: Partially offset by the runoff of our legacy block.

Speaker Change: Our revised margin guidance reflects improvement over 2024.

Speaker Change: Before opening for questions I want to remind you of a few seasonality impacts.

Joel: We have good momentum as we start 2025 with a strong capital position and we are well positioned to deliver on our long term financial targets were.

Speaker Change: In investment management, the first quarter is typically our lowest quarter for earnings due to the seasonality of deferred compensation and elevated payroll taxes.

Joel: We are grounded in our growth drivers of the retirement ecosystem small and midsize businesses and global asset management, while continuing to drive long term shareholder value.

Speaker Change: Specifically, we expect approximately $40 million of seasonally higher expenses in the first quarter with no impact to full year outlook.

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

Speaker Change: And specialty benefits dental claims are typically higher in the first half of the year.

Speaker Change: At this time I would like to remind everyone that you ask a question press star one one on your telephone.

Similar to the pattern in 2020 for these factors will contribute to earnings being meaningfully higher in the second half than the first half of 2025.

Speaker Change: Well pause for just a moment to compile the Q&A roster.

Speaker Change: Additionally, they drive the seasonal pattern of free capital flow, which typically lightest in the first half of the year and increases in the second half.

Speaker Change: The first question comes from Ryan Krueger from K B W.

Ryan Krueger: Hey, Thanks. Good morning. My first question was can you provide some initial thoughts on the pension reform that was passed in Chile, and how to think about how that may impact principle going forward.

Speaker Change: We have good momentum as we start 2025 with a strong capital position and we are well positioned to deliver on our long term financial targets.

Speaker Change: We are grounded in our growth drivers of the retirement ecosystem small and mid sized businesses and global asset management, while continuing to drive long term shareholder value.

Speaker Change: Yeah. Thanks, Brian for the question I'll give a brief comment and then pass it over to combo as you know we've been a we've been in Chile for a long time, and we remain committed to supporting our customers. There. We are optimistic that this reform will provide additional clarity on how we navigate the future, but will take time to play out with that.

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

Speaker Change: At this time I would like to remind everyone that you ask a question press star one one on your telephone.

Speaker Change: And I'll ask Carl to give a further update on what we're seeing them sure. Thanks, Dan Good morning, Brian.

Speaker Change: Well pause for just a moment to compile the Q&A roster.

Carl: Just to add to DNS comments, so first the reform will bring some positive changes.

Carl: Particularly data you're affirming the defined contribution system, which is important to us and are dosing in <unk>, which.

Speaker Change: The first question comes from Ryan Krueger from K B W.

Carl: Which will improve which will help improve the systems efficiency.

Speaker Change: Hey, Thanks. Good morning. My first question was can you provide some initial thoughts on the pension reform that was passed in Chile, and how to think about how that may impact principle going forward.

Carl: We also anticipate a smooth transition to target date investment vehicles.

Carl: Which we believe is a key step forward for the marketplace.

Carl: At this stage, we are confident in our ability to navigate these changes over time as we have done in the past and are optimistic about the long term outlook for our business in Chile, Yeah, Ryan and obviously, we'll continue to update as more of this gets firmed up as we move forward, but do you have an additional question.

Speaker Change: Yes, Thanks, Brian for the question I'll give a brief comment and then pass it over to combo. As you know we've been we've been in Chile for a long time, and we remain committed to supporting our customers. There. We are optimistic that this reform will provide additional clarity on how we navigate the future, but will take time to play out with that.

Speaker Change: Yes. This is a bit of a higher level question. There has been more talk of I guess, particularly by alternative asset managers about.

Speaker Change: The last comment further.

Further update on what we're seeing there sure.

Brian: Thanks, Dan Good morning, Brian.

Speaker Change: Getting more private assets within <unk> plans.

Speaker Change: To add to DNS comments, so first the reform will bring some positive changes.

Speaker Change: Be interested in your thoughts on that.

Speaker Change: Clearly the idea you're affirming the defined contribution system, which is important to us and or do you think in <unk>, which will improve which will help improve the systems efficiency.

Speaker Change: It could evolve over time for the industry.

Speaker Change: Yeah as you know, we've obviously have a focus on privates and had been in real estate for decades, but I'll see if Chris has some comments specifically around private within the 401k lineup.

Speaker Change: We also anticipate a smooth transition to target date investment vehicles, which we believe is a key step forward for the marketplace.

Chris: Yes, thanks for the question Ryan I.

Speaker Change: At this stage, we are confident in our ability to navigate these changes over time as we have done in the past and are optimistic about the long term outlook for our business in Chile.

Speaker Change: I think we see and I think the industry is seeing some significant opportunity for increased use of privates and retirement plans. There's obviously, some regulatory hurdles that needed to be overcome and some other issues in terms of liquidity buffers and the like that would need to be paired along for retirement customers. So we do think that there is.

Speaker Change: Ryan and obviously, we'll continue to update as more of this gets firmed up as we move forward, but do you have an additional question.

Speaker Change: Yes. This is a bit of a higher level question. There has been more talk of.

Speaker Change: Significant potential for privates in retirement, but I think there is a little bit of work to do still on the regulatory environment and getting a product in a vehicle that works for sort of retirement customers and I think that will take a little bit of time before we see momentum I think youll see it initially packaged in target dates or managed account offerings.

Speaker Change: I guess, particularly by alternative asset managers about getting more private assets within <unk> plans would be interested in your thoughts on that and how that could evolve over time for the industry.

Speaker Change: Yeah as you know we've.

Speaker Change: Obviously have a focus on private and had been in real estate for decades, but I'll see if Chris has some comments specifically around private within the 401k lineup.

Speaker Change: So I think youll see some innovation in that space over the course of the next year or two.

Brian: Brian for the question. Thank you.

Speaker Change: Our next question comes from the line of Joel Horowitz with Dowling and partners.

Yes, thanks for the question Ryan.

Chris: I think we see and I think the industry is seeing some significant opportunity for increased use of privates and retirement plans. There's obviously, some regulatory hurdles that needed to be overcome and some other issues in terms of liquidity buffers and the like that would need to be paired along for retirement customers. So we do think that there is <unk>.

Speaker Change: Hey, good morning wanted to unpack some of the comments you guys made on RIS flows.

Can you provide some more color on just the level of stabilization you saw with participant withdrawals.

Speaker Change: And then just how much contract lapses are improved year over year, and then I guess just any color on the pipeline as we enter 2025 and how the outlook at least maybe for the first quarter. It looks on flows.

Significant potential for privates in retirement, but I think there is a little bit of work to do still on the regulatory environment and getting a product in a vehicle that works for sort of retirement customers and I think that will take a little bit of time before we see momentum I think youll see it initially packaged in target dates or managed account offering.

Speaker Change: Yeah. So thanks for the question <unk> had a great year. When you look at their revenue growth and how that translated in some margin and earnings and as we've talked about in the past that really is our primary focus but I'll have Chris talk about all.

Speaker Change: All of the specifics that you mentioned, they're both.

Chris: So I think youll see some innovation in that space over the course of the next year or two.

Chris: For the year and the quarter as well as as we think about first quarter of 2005.

Chris: Thanks, Brian for the question. Thank you.

Speaker Change: Yes, thanks sure.

Speaker Change: Our next question comes from the line of Joel Horowitz with Dowling and partners.

Speaker Change: And thanks for that the entity I think as we've stated previously quarters before I dive deeply into flows I mean, we do prioritize revenue and margin overflows flows are important but our focus is on generating profitable revenue growth, which we did in 2004 exceeding our net revenue guidance and being at the top end of our margin. So we feel really good about that.

Joel Horowitz: Hey, good morning wanted to unpack some of the comments you guys made on RIS flows could you provide some more color on just the level of stabilization you saw with participant withdrawals.

Joel Horowitz: And then just how much contract lapses improved year over year, and then I guess just any color on the pipeline as we enter 2025 and how the outlook at least maybe for the first quarter. It looks on flows.

Speaker Change: I think as you all know on the call as well rising equity markets are positive for our fee based businesses, but they do create pressures for us in other metrics, including net flows.

Speaker Change: Yes. So thanks for the question RIS had a great year. When you look at their revenue growth and how that translated in some margin and earnings and as we've talked about in the past that really is our primary focus but I'll have Chris talk about all.

Speaker Change: And fee revenue rates.

Speaker Change: In the fourth quarter.

Speaker Change: Our fee based flows were improved sequentially and over the year ago, because we saw a healthy recurring deposit growth of one six over 6%.

Joel Horowitz: All of the specifics that you mentioned, they're both.

Speaker Change: We saw strong transfer deposits and.

Joel Horowitz: For the year and the quarter as well as as we think about first quarter of 2005.

Speaker Change: And we had record retention nwf's or us, which resulted largely from a slightly lower participant withdrawal rates.

Joel Horowitz: Yes, thanks sure.

And thanks for that again.

Joel Horowitz: I think as we've stated previously quarters before I dive deeply into flows I mean, we do prioritize revenue and margin overflows flows are important but our focus is on generating profitable revenue growth, which we did in 2004 exceeding our net revenue guidance and being at the top end of our margin. So we feel really good about that I think as you all know on the call as well.

Speaker Change: As well as lower contract lapses, particularly in the large market.

Speaker Change: So again, what we saw in the fourth quarter as lower withdrawal rates and so all of the flows are really attributable to those higher performing equity markets.

Speaker Change: I think another thing that I want to note with respect to flows and if you look at the sort of full year. We are seeing pressure from VA lapses va's with <unk> of about $1 billion over the course of 2024 and many of those are being exchanged into our rigor, which are registered index linked annuity product with income and recapturing.

Joel Horowitz: Rising equity markets are positive for our fee based businesses, but they do create pressures for us in other metrics, including net flows.

Joel Horowitz: And fee revenue rates.

Joel Horowitz: In the fourth quarter, our fee based flows were improved sequentially and over the year ago, because we saw a healthy recurring deposit growth of one six over 6%.

Speaker Change: A very significant percentage of wry, though but that is converting from a fee based flow to our spread based close. So we are seeing that dynamic as well.

Joel Horowitz: Saw strong transfer deposits and.

Joel Horowitz: And we had record retention NWS Rs, which resulted largely from a slightly lower participant withdrawal rates.

Speaker Change: The other thing I'd say about flows as we do see continue to see very good health and SMB flows our recurring deposit growth is higher than the averages and we're seeing positive net cash flow in SMB. So again feel really good about the position in SMB as we turn to the outlook for 2025, we currently forecast the participant withdrawal rate will will stabilize.

Joel Horowitz: As well as lower contract lapses, particularly in the large market.

Joel Horowitz: So again, what we saw in the fourth quarter as lower withdrawal rates and so all of the flows are really attributable to those higher performing equity markets.

Speaker Change: And that will continue to see health in recurring in transfer deposits, but we do expect the flows will be impacted by higher market performance and the lingering impact of the strong equity markets from 2024.

Joel Horowitz: I think another thing that I want to note with respect to flows is if you look at the sort of full year. We are seeing pressure from VA lapses va's with <unk> of about $1 billion over the course of 2024 and many of those are being exchanged into our river, which are registered index linked annuity product with income and recapturing.

Speaker Change: We could expect to see continued net outflows from the VA traditional block, which is an overall industry trend, but capturing those some of those or a good portion of those and rigor.

Speaker Change: In the first quarter, we do know that we have one large market outflow of about $2 $3 billion with minimal fee revenue impact our client again as we look at profitable business that we chose to terminate that relationship but that will be one outflow in the first quarter and then we expect to see.

Joel Horowitz: A very significant percentage of wry, though but that is converting from a fee based flow to our spread based close. So we are seeing that dynamic as well.

Joel Horowitz: The other thing I'd say about flows as we do see continue to see very good health and SMB flows.

Joel Horowitz: Recurring deposit growth is higher than the averages and we're seeing positive net cash flow in SMB. So again feel really good about the position in SMB as we turn to the outlook for 2025, we currently forecast the participant withdrawal rate will will stabilize and that will continue to see health in recurring in transfer deposits, but we do expect the flows will be impacted by.

Speaker Change: A more normalized maybe slightly lower contract retention rate compared to the record retention we saw in 2024.

All that being said again.

Speaker Change: Net cash flows in a measure and it's and we do look at it but flows all have a different profile on revenue and profit and our focus is really remaining disciplined on pricing generating profitable revenue growth and delivering on our net revenue and margin guidance in 2025.

Joel Horowitz: Higher market performance and the lingering impact of the strong equity markets from 2024.

Joel Horowitz: We could expect to see continued net outflows from the VA traditional block, which is an overall industry trend, but capturing those some of those or a good portion of those and rigor.

Speaker Change: Well I hope that helps you have additional question.

Yeah, and then just shifting to sort of real estate transactional activity. What are you. What are you expecting for 'twenty five and just any more color on on variable investment income expectations and in performance fees in investment management for the year.

In the first quarter, we do know that we have one large market outflow of about $2 $3 billion with minimal fee revenue impact our client again as we look at profitable business that we chose to terminate that relationship but that will be one outflow in the first quarter and then we expect to see.

Speaker Change: Yes. Thank you for that question, obviously real estate is a core competency both as we drive flows to unaffiliated clients, but also within our general account I'm going to ask Com will then give some general comments regarding kind of the the state of the real estate market and then I'll ask bill to add any specifics.

Joel Horowitz: A more normalized maybe slightly lower contract retention rate compared to the record retention we saw in 2024.

Joel Horowitz: All that being said again.

Joel Horowitz: Net cash flows in a measure and we do look at it but flows all have a different profile on revenue and profit and our focus is really remaining disciplined on pricing generating profitable revenue growth and delivering on our net revenue and margin guidance in 2025.

Speaker Change: Regarding the our general account and the implications on VII.

Speaker Change: Good morning, guys.

Speaker Change: So let me, let me pick up where it left off on the state of the real estate market. So from where we said we do see commercial real estate sort of entering this early stages of a gradual but probably a more volatile recovery period than we have seen in the past one of the things that has started.

Joel Horowitz: Well I hope that helps you have additional questions.

Speaker Change: Yes, and then just shifting to sort of real estate transactional activity. What are you. What are you expecting for 'twenty five and just any more color on on variable investment income expectations in performance fees in investment management for the year.

Speaker Change: Happy News, we are actually seeing real transactional activity happened in the marketplace and in parallel data has been robust growth in CRE credit that is available to real estate transactions.

Speaker Change: Yes. Thank you for that question, obviously real estate is a core competency both as we drive flows to unaffiliated clients, but also within our general account I'm going to ask Com will they give some general comments regarding kind of the the state of the real estate market and then I'll ask bill to add any specifics.

Speaker Change: As a very important signal for this market to continue to expand in fact, when you look at for Q. There has been a substantial increase in equity transaction activity, 32% year over year. So clearly transactions are starting to happen now which is important because it leads through to price discovery.

Speaker Change: Regarding.

Speaker Change: Our general account and the implications on VII.

Speaker Change: Good morning, guys.

Speaker Change: So let me, let me pick up where it left off on the state of the real estate market.

And that allows the marketplace to find a floor.

Speaker Change: <unk> market has been unusually strong we had over 100 billion of new issuance just in 2024, so thats certainly helping on the credit side.

Speaker Change: So from where we said, we do see commercial real estate sort of entering this early stages of a gradual but probably a more volatile recovery period than we have seen in the past one of the things that has started to happen as we had actually seeing real transactional activity happened in the marketplace.

Speaker Change: Just to look at our own book in <unk>, we almost put $1 9 billion of private capital to work that was up from $1 billion earlier in the year. So almost two X increase so I'm pretty confident on the transactional side I'll turn it over to Joel on the second part, yes, So Joe good morning, and thanks for the question, we do expect them.

Speaker Change: And in parallel data has been robust growth in CRE credit that is available to real estate transactions. Those are very important signal for this market to continue to expand in fact, when you look at for Q, there hasn't been a substantial increase in equity transaction activity.

Speaker Change: Returns in 2025 relative to 2024 for all of our VII portfolio, and importantly, with key asset classes at or approaching long term expectation in 'twenty five.

Speaker Change: As you know within our own portfolio real estate is a very prominent part of that 50% of our portfolio.

Speaker Change: 32% year over year. So clearly transactions are starting to happen now which is important because it leads through to price discovery and that allows the marketplace to find a floor.

Speaker Change: We don't have much less concentration in P and hedge funds.

Speaker Change: Real estate returns have improved from 2023 to 2024, and we expect that trend to continue in 2025.

Speaker Change: <unk> market has been unusually strong we had over 100 billion of new issuance just in 2024, so thats certainly helping on the credit side.

Speaker Change: Given our strong capabilities that commonly referenced we invest directly in real estate.

Speaker Change: Therefore, these assets are not fair valued every quarter as it will be the case, if we were investing under a fund structure.

Speaker Change: So as you can see in the investment supplement that we provided on slide five these real estate properties are sitting in a meaningful unrealized gain position.

Speaker Change: So this appreciation in those unrealized gains will be recognized at the time of sale, resulting in some quarterly volatility within our <unk> metric.

Speaker Change: Returns in 2025 relative to 2024 for all of our VII portfolio, and importantly, with key asset classes at or approaching long term expectation in 'twenty five.

Speaker Change: When this emerges we'll be sure to highlight that activity over time, which we expect to be weighted towards the middle and latter half of the year in 2025.

Speaker Change: As you know within our alts portfolio real estate is a very prominent part of that 50% of our portfolio.

So in summary, with some volatility along the way due to the timing of sales, we do expect relevant improvement VII for the upcoming year.

Speaker Change: We don't have much less concentration in P and hedge funds.

Speaker Change: So does that help.

Speaker Change: Real estate returns have improved from 2023 to 2024, and we expect that trend to continue in 2025.

Speaker Change: Thank you.

Speaker Change: Yes, well move to the next question.

will Novartis: The next question comes from will Novartis from Raymond James.

Speaker Change: Given our strong capabilities that commonly referenced we invest directly in real estate.

will Novartis: Hey, good morning, there's been some litigation in the larger end of the PRT market understand the setup for the different for PFG.

Speaker Change: These assets are not fair valued every quarter as it will be the case, if we were investing under a fund structure.

Speaker Change: So as you can see in the investment supplement that we provided on slide five these real estate properties are sitting in a meaningful unrealized gain position.

will Novartis: Given some of Thats been more a little bit more focus on the offshore model, but could you see this moving into smaller into the market or have you.

Speaker Change: So this appreciation in those unrealized gains will be recognized at the time of sale, resulting in some quarterly volatility within our VII metric.

will Novartis: I guess I'm sort of getting activity yet thanks.

Speaker Change: Yes, Thanks Shlomo for the question, we've obviously been in the PRT business for decades.

Speaker Change: When this emerges we'll be sure to highlight that activity over time, which we expect to be weighted towards the middle and latter half of the year in 2025.

Speaker Change: Our great expertise, there and I'll see if Chris can directly answer your question regarding the recent litigation.

Speaker Change: Yes, thanks, well I mean, I think as Dan pointed out we've been in this business for over 80 years.

Speaker Change: So in summary, with some volatility along the way due to the timing of sales, we do expect relevant improvement VII for the upcoming year.

Speaker Change: And haven't ever missed a payment to a customer.

Speaker Change: So does that help.

Speaker Change: Thank you.

Speaker Change: I think we haven't seen the litigation migrate down I think certainly its focused more on.

Speaker Change: Yes, well move to the next question.

will <unk>: The next question comes from will <unk> from Raymond James.

Speaker Change: Piggybacked providers of PRT transactions with one notable exception in a more traditional carrier I suspect that they'll wait and see how those.

Speaker Change: Hey, good morning, there's been some litigation in the larger end of the PRT market understand the setup for the different for PFG.

Speaker Change: Given some of Thats been more a little bit more focus on the offshore model, but could you see this moving into smaller into the market or have you.

Speaker Change: Lawsuits turn out.

Speaker Change: In terms of.

Speaker Change: The validity of those lawsuits are not again I don't I don't believe any of those customers who have not received their payments under those transactions. So I think from our perspective, it hasnt impacted our business, we haven't seen a lot of activity in the small to mid sized business and we remain a very trusted.

Speaker Change: I guess I'm sort of getting activity yet.

Speaker Change: Yes, Thanks Shlomo for the question, we've obviously been in the PRT business for decades.

Speaker Change: Great expertise, there and I'll see if Chris can directly answer your question regarding the recent litigation.

Yes, thanks, well I mean, I think as Dan pointed out we've been in this business for over 80 years.

Speaker Change: Liable provider of risk transfer solutions for people that have pensions.

Speaker Change: And haven't ever missed a payment to a to.

Speaker Change: Yes, Thanks Shlomo for that we had a great <unk> and we are confident that that's going to continue as we move into 2025 do you have additional question.

Speaker Change: To a customer.

Speaker Change: Think we haven't seen the litigation migrate down I think certainly its focused more on.

Speaker Change: Yeah, 80 years pretty good track record.

Speaker Change: Piggybacked.

Speaker Change: Yeah could you just talk a little bit about what's going on in specialty benefits that you're exercising all underwriting discipline in 2025.

Providers of PRT transactions with one notable exception in a more traditional carrier I suspect that they'll wait and see how those.

Speaker Change: Yes, Thanks, Shlomo for the question, especially benefits.

Speaker Change: Lawsuits turn out.

Speaker Change: In terms of.

Speaker Change: Accretable quarter in a really great year, when you look at it from an earnings perspective, which again is.

Speaker Change: Our focus has been for decades on making sure we're driving profitable growth and with that I'll move it over to Amy to talk specifically about what we're seeing and then how that translates to our discipline in our approach to underwriting and pricing sure. Thanks. Thanks for all the things I do think when we look at SPD looking across all.

Liable provider of risk transfer solutions for people that have pensions.

Amy: The metrics that we've given guidance on for outlook, it's probably helpful to understand how the underwriting discipline comes back in so just as a just as a reminder, we've tightened both the loss ratio and the margin ranges for outlook. So we're moving the margin to the lower end.

Speaker Change: Yes, Thanks Shlomo for that we had a great CRT here and we are confident that thats going to continue as we move into 2025 additional question.

Speaker Change: Yeah, 80 years pretty good track record.

Speaker Change: Yeah could you just talk a little bit about what's going on in specialty benefits that you're exercising all underwriting discipline in 2025.

Amy: Up to 13, and then the loss ratio down to 64. So we've also adjusted that overall premium growth to reflect those competitive factors that are really at the heart of your question. So when I look at the competition, what we're seeing is especially in the second half of 2024, we saw.

Speaker Change: Yes, Thanks Shlomo for the question specialty.

Speaker Change: Specialty benefits had an incredible quarter in a really great year. When you look at it from an earnings perspective, which again is.

Amy: The market get a little bit more aggressive we think that'll continue in 2025 and the product that we've probably seen the most competitive pressures on is dental.

Amy: We along with the whole industry has experienced pretty high utilization of dental and that's meant that we are doing some re pricing in 2024. So this has impacted some of the new sales in the back half of 2024 and it will impact we think at least that front half of 2025.

Speaker Change: The metrics that we've given guidance on for outlook, it's probably helpful to understand how the underwriting discipline comes back in so just as a just as a reminder, we've tightened both the loss ratio and the margin ranges for outlook. So we're moving that margin to the lower end.

Amy: Do keep in mind that we sell as a bundle of products and so dental does tend to be a meaningful product in that bundle and win dental was impacted you can see some impacts on some of the other products.

Speaker Change: Up to 13, and then the loss ratio down to 64. So we've also adjusted that overall premium growth to reflect those competitive factors that are really at the heart of your question. So when I look at the competition, what we're seeing is especially in the second half of 2024, we saw.

Amy: Note, though is that over the long term disciplined underwriting for all of our products is really critical to building and maintaining a profitable growth in a profitable block.

Speaker Change: The market get a little bit more aggressive we think that'll continue in 2025 and the product that we've probably seen the most competitive pressures on is dental.

Amy: It is critical to maintaining stable predictable renewals too. So it's not just that front end new sale, it's creating this stable predictable renewals that are both our brokers and our employer customers need from us when we think about our expertise in that small market we've got to have.

Speaker Change: We along with the whole industry has experienced pretty high utilization of dental and that's meant that we are doing some re pricing in 2024. So this has impacted some of the new sales in the back half of 2024 and it will impact we think at least that front half of 2025.

Something that's a bit more predictable in that small market cash flow concerns are very significant for small and mid sized customers. So keeping that stable predictable flow is really important and sometimes the trade off it will take a little bit less looking a little bit less growth to make sure that we have.

Speaker Change: Do keep in mind that we sell as a bundle of products and so dental does tend to be a meaningful product in that bundle and win dental was impacted you can see some impact on some of the other products.

Amy: Got the merging and make sure we've got the the type of loss ratio that we need for that business. So I'm really confident that that underwriting discipline is just part of the package over the course of time and our ability to grow above the industry is going to be focused on that knowledge of the SMB market that broad and deep brew.

Speaker Change: No, though is that over the long term disciplined underwriting for all of our products is really critical to building and maintaining a profitable growth in a profitable block.

Speaker Change: It is critical to maintaining stable predictable renewals too. So it's not just that front end new sale, it's creating this stable predictable renewals that are both our brokers and our employer customers need from us when we think about our expertise in that small market we've got to have.

Amy: OCA relationships, we have our use of technology and the service that we provide so it's all a package and I feel really comfortable with how 2025 looks great.

Amy: Thanks, well no further questions.

Amy: Thank you.

Speaker Change: Something that's a bit more predictable in that small market cash flow concerns are very significant for small and mid sized customers. So keeping that stable predictable flow is really important and sometimes the trade off.

Amy: The next question comes from Alex Scott from Barclays.

Amy: Okay.

Alex Scott: Hey, good morning.

Speaker Change: First one I have is on the free cash flow.

Speaker Change: It looks like the outlook for capital return was pretty strong and I think in the last few.

Speaker Change: We will take a little bit less looking a little bit less growth to make sure that we've got the margin and make sure. We've got the the type of loss ratio that we need for that business. So I'm really confident that that underwriting discipline is just part of the package over the course of time and our ability to grow above the <unk>.

Speaker Change: Or is it sort of.

At a time instead of in excess of what you guide to in terms of free cash flow conversion of verdicts.

Speaker Change: I was just interested in commentary there I mean is it further drawdown of excess capital or.

Speaker Change: Free cash flow conversion getting better how do I think through all that.

Speaker Change: History is going to be focused on that knowledge of the SMB market that broad and deep broker relationships, we have our use of technology and the service that we provide so it's all a package and I feel really comfortable with how 2025 looks great.

Speaker Change: Yeah, Alex Thanks for the question when we think about it we look at both kind of the <unk>.

Speaker Change: Ongoing free cash flow that is generated for our business and then how that translates into our capital deployment and Youre right over the last few years, it's partially just because of how we started each of the years and drawing that down there's been a little bit higher of deployment.

Speaker Change: Thanks, well no further questions.

Speaker Change: Thank you.

Speaker Change: The next question comes from Alex Scott from Barclays.

Speaker Change: Okay.

Alex Scott: Hey, good morning.

Speaker Change: From that perspective, but again, we like our business model and I'll, just ask Phil to add some additional flavor there.

Speaker Change: First one I have is on the free cash flow.

Speaker Change: Yes, it looks like the outlook for capital return was pretty strong and I think in the last few.

Alex Scott: Alex Thanks for the question as you said, we are starting to position of strengths $1 6 billion of excess available capital coming into 2025.

Speaker Change: Or is it sort of.

Speaker Change: At a time instead of in excess of what you guide to in terms of free cash flow conversion of verdicts.

Alex Scott: And if you look at our long term guidance, which is 40% dividend payout ratio and share repurchases of 35% to 45% our share buyback plan for 2025 is outsized.

Speaker Change: I was just interested in commentary there I mean is it further drawdown of excess capital or.

Speaker Change: Free cash flow conversion getting better how do I think through all that.

Alex Scott: A lot of that is because of we do have a strong excess capital position coming into the year and so again really proud of the results that we're delivering there on that front and we feel really good about our $700 billion to $1 billion target that we have for the year.

Alex Scott: Yeah, Alex Thanks for the question when we think about it we look at both kind of the.

Alex Scott: Ongoing free cash flow that is generated for our business and then how that translates into our capital deployment and Youre right over the last few years, it's partially just because of how we started each of the years and drawing that down there's been a little bit higher of deployment.

Alex Scott: We did hear some comments I'm looking at the reports about it seems less.

Alex Scott: And the Big reason is less just because we drew down more coming into 25% and we did coming into 'twenty. Four if you look at our RBC ratio coming into the year. It was <unk>.

Alex Scott: From that perspective, but again, we like our business model and I'll, just ask Phil to add some additional flavor there.

Alex Scott: 427% coming into 2024 and as we sit here today is 404%. So again, we're still at excess but just not see excess we had one year ago.

Phil: Alex Thanks for the question as you said, we are starting to position of strengths $1 6 billion of excess available capital coming into 2025.

Alex Scott: So again outsized share buy back $700 million 1 billion translates to about 40% to 60% payout ratio above our guidance and Thats a product of our strong capital flow generation.

Phil: And if you look at our long term guidance, which is 40% dividend payout ratio and share repurchases of 35% to 45% our share buyback plan for 2025 is outsized.

Alex Scott: We have a follow up question.

Phil: A lot of that is because of we do have a strong excess capital position coming into the year and so again really proud of the results that we're delivering there on that front and we feel really good about our $700 billion to $1 billion target that we have for the year.

Alex Scott: Yeah. So for a follow up I wanted to ask about sort of what to expect on that.

Alex Scott: The fees are.

Alex Scott: Yes.

Alex Scott: Just as I look at your margins.

Alex Scott: Record levels are near record levels and empower same thing I think and power had the best margins they've ever had in the history of the company guided to more.

Phil: We did hear some comments looking at the reports about it seems less.

Phil: And the Big reason is less just because we drew down more coming into 25% and we did coming into 'twenty. Four if you look at our RBC ratio coming into the year.

Speaker Change: Spansion next year, so just thinking through how strong the profit margins are for your business in some of your biggest peers.

Phil: 427% coming into 2024 and as we sit here today is 404%. So again, we're still at excess but just not see excess we had one year ago.

Speaker Change: What are you seeing in the competitive environment I would think this is a pretty competitive.

Speaker Change: Business.

Speaker Change: Or are you seeing signs that.

Phil: So again outsized share buyback $700 million 1 billion translates to about 40% to 60% payout ratio above our guidance and thats a product of our strong capital flow generation.

Speaker Change: Yes.

Speaker Change: Strong margins are.

Speaker Change: Yes.

Speaker Change: More pricing competition.

Speaker Change: Yeah, Thanks, Alsace Christa does that.

Speaker Change: Yeah, I mean without commenting on our competitors' margins I mean, I think our margin performance has been strong and we expect it to improve from levels that we delivered in 2024.

al: Thanks Al do you have a follow up question.

al: Yeah. So for a follow up I wanted to ask about sort of what to expect on that.

al: The fees are.

al: Yes.

al: Just as I look at your margins.

Speaker Change: This has always been a very competitive market and fee compression is something that we've consistently had to manage through and work through we're not seeing anything thats, particularly unusual from what we've generally seen is just competition I think there's also recognition that this is so a lot of cost in <unk>.

al: Levels are near record levels.

al: Power same thing I think and power had the best margins they've ever had in the history of the company guided to more expansion next year. So just thinking through how strong the profit margins are for your business in some of your biggest peers.

al: What are you seeing in the competitive environment I would think this is a pretty competitive.

Speaker Change: Flexibility in managing our retirement business and so I think there is also a recognition that when you look at the services that we provide there needs to be a reasonable returns.

al: Business.

al: Or are you seeing signs that.

al: The strong margins are.

Speaker Change: On the services that we provide so I don't think that there's sort of this irrational competition.

al: Yes.

al: Lead to more pricing competition.

al: Yes, Thanks, Alex I'll ask Christa does that.

Speaker Change: Competition out there I just think it's tough the industry is consolidating we're at scale. We've consol, we've been part of that consolidation I think that will continue and as I've mentioned in the past a lot of the consolidation that's happening organically not inorganically now obviously you saw some smaller.

al: Yeah, I mean without commenting on our competitors' margins I mean, I think our margin performance.

al: It's been strong and we expect it to improve from levels that we delivered in 2024.

al: This has always been a very competitive market and fee compression is something that we've consistently had to manage through and work through we're not seeing anything thats, particularly unusual.

Speaker Change: Organic transaction, so I would say it's tough.

Speaker Change: Tough market environment.

Speaker Change: We are winning in it and we have confidence that we will be able to continue to win as a scale player in the space and Chris I think you've guided to that two to three basis point range, which is where we landed this year at the high end just given the equity market improvements.

al: From what we've generally seen is just competition I think there's also recognition that this is still a lot of cost and complexity in managing our retirement business and so I think there is also a recognition that when you look at the services that we provide there needs to be a reasonable return on the on the services that we provide so.

Speaker Change: We are guiding to that same as we think about 2025 as well.

Speaker Change: Alright, thank you.

al: I don't think that there's sort of this irrational.

Speaker Change: The next question comes from Jimmy <unk> from J P. Morgan.

al: Petition out there I just think it's tough the industry is consolidating we're at scale. We've consulted we've been part of that consolidation I think that will continue and as I've mentioned in the past a lot of the consolidation that's happening organically not inorganically now obviously you saw some smaller.

Speaker Change: Hey, good morning, So first question for Chris on flows in the RIS fee business.

Speaker Change: And I realize there is some seasonality inflows as well, but the flows have been negative.

Speaker Change: For the past three years because of some of the things you discussed on the call earlier is it reasonable to assume that there's not going to be a major change in your flows at least in the.

Speaker Change: Inorganic transactions.

Speaker Change: I would say, it's tough it's a tough market environment.

Speaker Change: We are winning in it and we have confidence that we will be able to continue to win as a scale player in this space and Chris I think you've guided to that two to three basis point range, which is where we landed this year at the high end just given the equity market improvements.

Speaker Change: Next one to two years or do you think theres the chance that they turn positive.

Speaker Change: And if yes, what would change.

Speaker Change: Yes.

Speaker Change: Thank you Jimmy and I think Thats, a senior prior notes and analysis as well I think you've identified there. So there's some large macro pressures from our people that have been saving for many decades in the 401K system that are now reaching retirement.

Speaker Change: I think we're guiding to that theme as we think about 2025 as well.

Speaker Change: Alright, thank you.

Jimmy Mueller: The next question comes from Jimmy Mueller from J P. Morgan.

Speaker Change: So we are certainly seeing some of that pressure and withdrawal rates.

Jimmy Mueller: Hey, good morning, So first had a question for Chris on flows in the ASP.

Speaker Change: I don't see an inflection where it is going to immediately turn greatly positive here over the next couple of years, but I think you've also identified the demographic trend that we get through the next couple of years. What we are seeing is the generations that are earlier in their working careers are saving earlier in their careers and saving more than those that.

Jimmy Mueller: ASP business.

Jimmy Mueller: And I realize there is some seasonality inflows as well, but the flows have been negative.

Jimmy Mueller: For the past three years because of some of the things you discussed on the call earlier is it reasonable to assume that there's not going to be a major change in your flows at least in the.

Speaker Change: <unk> and have been in that sort of the generation X.

Jimmy Mueller: Next one to two years or do you think theres the chance that they turned positive.

Speaker Change: Generation. So we think the long term dynamics are very positive for retirement.

Jimmy Mueller: And if yes, what would change.

Jimmy Mueller: Yes.

Speaker Change: But we do see some short term flow pressures as I think you rightly pointed out and even with those negative flows Jimmy our account values are increasing <unk> over the last few years, which obviously then does translate into revenue and Ernie. So you have a follow up question.

Jimmy Mueller: Thank you Jimmy and I think Thats, a senior prior notes and analysis as well I think you've identified there. So there is some large macro pressures from people that have been saving for many decades in 401K system that are now reaching retirement.

Jimmy Mueller: So we are certainly seeing some of that pressure and withdrawal rates.

Speaker Change: Yes, just for Amy on employee benefits you've been in the process of repricing. Your dental book I think a couple of years now, but should we assume that that.

Jimmy Mueller: I don't see an inflection where it's going to immediately turn greatly positive here over the next couple of years, but I think you've also identified the demographic trend that we get through the next couple of years. What we are seeing is the.

Speaker Change: That is that's done completely or is that an ongoing process and margins. If we look standalone dental more.

Jimmy Mueller: Generations that are earlier in their working careers are saving earlier in their careers and saving more than those that are in have been in that sort of the generation X.

Speaker Change: Normalized until beyond 2025.

Speaker Change: Yeah, Yeah, So I would say that the bulk of those actions are moving through our block right now so what that really means is.

Jimmy Mueller: Generation. So we think the long term dynamics are very positive for retirement.

Speaker Change: Some of them are already going to be coming through the results that we see.

Speaker Change: But we do see some short term flow pressures I think you rightly pointed out and even with those negative flows Jimmy our account values are increasing size of <unk> over the last few years, which obviously then does translate into revenue and earnings. So you have a follow up question.

Speaker Change: Some of them will continue to flow through the first half of the year I think the really important point of your question is are we tend to see are we going to see in margins look better for dental if we looked at that as a standalone entity in 2025 and the answer is yes, I do expect the loss ratio to look a bit more like historical pattern.

Speaker Change: Yes, just for Amy on employee benefits you have been in the process of re pricing. Your dental book I think a couple of years now, but should we assume that that.

Speaker Change: And I expect.

Speaker Change: The production that comes from that line too.

Speaker Change: That is that's done completely or is that an ongoing process and margins. If we look standalone on dental.

Speaker Change: To look positive in 2025, what I would make sure to put back into is we rarely sell any of these products alone. So again. These are always going to be a function of a bundle I think we mentioned it in some of our opening comments were up or <unk>.

Speaker Change: Normalized until beyond 2025.

Speaker Change: I mean, you can address that yes, yes, so I would say that the bulk of those actions are moving through our block right now so what that really means is.

Speaker Change: Average bundle, whether youre talking about new sailor enforced is up over three coverages for products. So it's it's rare that any of our relationships really just rely on any one product in terms of how we price and work with them and.

Speaker Change: Some of them are already going to be coming through the results that we see.

Speaker Change: Some of them will continue to flow through the first half of the year I think the really important 0.8. Your question is.

Speaker Change: And then a couple of things there one of the advantages of focusing on the SMB business is almost.

Speaker Change: We can see are we going to see in margins look better for dental if we looked at that as a standalone entity in 2025 and the answer is yes, I do expect the loss ratio to look a bit more like historical patterns and I expect that.

Speaker Change: Almost all of our business only has a one year rate guarantee and then the other thing that I think is really important it really builds on Amy's last point, which is because there is a bundle. You also have seen that we've had very positive underwriting results in life and disability and so from a bundle perspective.

Speaker Change: The production that comes from that line.

Speaker Change: Can we can take all of that into account and they may see a little bit of increase in their dental rates.

But as we look at the overall package, we can mute that increase across all of the products and so again feel good about how we're a protein that profitable growth and expect to see continued great results out of specialty benefits. So thank you Jimmy.

Speaker Change: Ridges per product. So it's rare that any of our relationships really just rely on any one product in terms of how we price and work with them and.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: The next question comes from Jack Morton from BMO capital markets.

Speaker Change: And then a couple of things there one of the advantages of focusing on the SMB business is almost.

Jack Morton: Hi, good morning.

Jack Morton: The first question I had is on the international pension growth guidance and I know if you re segmented and changed the definition of net revenue. There I guess, if you adjust for those two things was there any change at all to the growth outlook I know you mentioned changes in Hong Kong.

Speaker Change: Almost all of our business only has a one year rate guarantee and then the other thing that I think is really important it really builds on Amy's last point, which is because there is bundled you'll also have seen that we've had very positive underwriting results in life and disability and so from a bundle perspective.

Jack Morton: That changed your outlook at all and were there any offsets in your other markets.

Speaker Change: Yes that first of all thanks for initiating coverage and we look forward to interacting with you more as we go forward I'll ask Jon to address that obviously FX continues to be pressure as we think of international attention and we did have some in high impact as well, but maybe as we think about the guidance you can give some specific app.

Speaker Change: We can we can take all of that into account and they may see a little bit of increase in their dental rates.

Speaker Change: But as we look at the overall package, we can mute that increase across all of the products and so again feel good about how we're a protein that profitable growth and expect to see continued great results out of specialty benefits. So thank you Jimmy.

Speaker Change: Yeah. So Jack Thanks for the question on the international pension front, it's very similar to what we had in 2024, so on a constant currency basis. So we had in 2024 was 4%.

Jimmy Mueller: Thank you.

Speaker Change: Yes.

Speaker Change: The next question comes from Jack Morton from BMO capital markets.

Speaker Change: Both in revenues and 9% growth in earnings as.

Jack Morton: Hi, good morning.

Speaker Change: As you fast forward, what we expect for 2025, it's going to be more of the same.

Speaker Change: It's going to be if you look at the midpoint of the range. It's all due to FX as why we are being drawn down so relatively flat year over year, but importantly is going to be continued margin expansion within that business. In 2024. There was a 100 basis point margin expansion within that business and we're expecting continued expansion in 2025 and beyond so really well positioned in those targeted maher.

Jack Morton: That changed your outlook at all and were there any offsets in your other markets.

Jack Morton: Yes that first of all thanks for initiating coverage and we look forward to interacting with you more as we go forward I'll ask Joe to address that obviously FX continues to be pressure as we think of international pension and we did have some in high impact as well, but maybe as we think about the guidance you can give some specific app.

Speaker Change: <unk> and feel really good about the growth prospects within that business.

Speaker Change: In fact, we have a follow up question.

Speaker Change: Yes. Thanks.

Oh, absolutely investment management that cash flows.

Speaker Change: Deposits were pretty healthy, but withdrawal continue to be somewhat elevated I guess, if you could just touch on trends in parts of your net flows there and how you see things developing going into 2025.

Jack Morton: Aspects there, yes, so Jack thanks for the question on International pension front, it's very similar to what we had in 2024. So on a constant currency basis. So we had in 2024 was 4% growth in revenues and 9% growth in earnings as you fast forward, what we expect for 2025, it's going to be more of the same.

Speaker Change: Yeah.

Speaker Change: Carlos will give some color on that if you do look at our overall net cash flow on an <unk> level for the enterprise, even though still negative we would have saw significant improvement both for the quarter and the full year.

Jack Morton: It's going to be if you look at the midpoint of the range. It's all due to FX as why we are being drawn down so relatively flat year over year, but importantly, it's going to be continued margin expansion within that business. In 2024. There was 100 basis point margin expansion within that business and we're expecting continued expansion in 2025 and beyond so really well positioned in those targeted mark.

Speaker Change: But I'll ask <unk> to give some specifics on the drivers there and also how we're thinking about that as we go into 2025 sure good morning Jack.

Speaker Change: I'll start with.

Speaker Change: Maybe the international pension piece first and then give you more color on the one thing I would highlight for you. In addition to what Joe said is we actually also had positive net cash flow and an international pension business. When you look at 'twenty before we actually had positive $600 million of net cash flow growth, so not only managing the business well, but we had actually attracting new.

Jack Morton: And feel really good about the growth prospects within that business.

Jack Morton: In fact, we have a follow up question.

Jack Morton: Yes, thanks and.

Jack Morton: A follow up.

Jack Morton: Investment management that cash flows.

Speaker Change: $1 in a very mature business, but just turning back to investment management I would say a very very strong result, Chris did talk about some of the affiliated flows but when I look at non affiliated flows we had a very strong quarter always $500 million of positive net cash flow and the diversity of our cash flow is is <unk>.

Jack Morton: Yeah.

Jack Morton: Ask Carl to give some color on that if you do look at our overall net cash flow on an AUM level for the enterprise, even though still negative we would have saw significant improvement both for the quarter and the full year.

Speaker Change: Creasing. These flows came from multiple distribution channels.

Jack Morton: But I'll ask <unk> to give some specific on on the drivers there and also how we're thinking about that as we go into 2025 sure good morning Jack.

Speaker Change: For our clients and they also came from a lot of international geographies, which is quite valuable for US just to highlight net flows in international institutional were particularly strong we had over $2 billion large mandate win in credit and then DNO earlier talked about almost a $1 billion billion U S retirement.

I'll start with.

Jack Morton: Maybe the international pension piece first and then give you more color on the one thing I would highlight for you. In addition to what Joe said is we actually also had positive net cash flow and an international pension business. When you look at 'twenty before we actually had positive $600 million of net cash flow growth, so not only managing the business well, but we are actually attracting new.

Speaker Change: Solutions, so really strong wins in that space.

If I look at full year.

Speaker Change: From our local regional clients, we had almost $2 7 billion positive net cash flow for all of 2024, a significant milestone for us and sequentially year over ear non affiliated cash flow is up by $6 5 billion and I'll. Just remind you. This is what we laid out at Investor day, the power of global.

Speaker Change: Creasing. These flows came from multiple distribution channels.

Speaker Change: Asset management as we diversify our client base and channels you could see that in those numbers.

Speaker Change: For our clients and they also came from a lot of international geographies, which is quite valuable for us.

Speaker Change: To the second part that DNR is which is what do I see moving forward.

Speaker Change: Just to highlight net flows in international institutional were particularly strong we had over $2 billion large mandate win in credit and then DNO earlier talked about almost a 1 billion dollar win in U S retirement solutions.

I think we mentioned earlier.

Speaker Change: We are exceeding target on our largest real estate fund raise.

Speaker Change: To date, it's going to be not only a milestone for us with respect to growing our business. We have actually added over 50, new sizable relationships across the world.

Speaker Change: So really strong wins in that space.

Speaker Change: If I look at full year.

Speaker Change: Beyond just the clients we have historically had in public pensions, we have new litigation shifts with foreign insurance companies know you've added Premier U S Endowment and foundations and now you also have regional asset managers in Asia, who are investing with us. So I would highlight that the momentum will continue to grow in the private market.

Speaker Change: Asset management as we diversify our client base and channels you could see that in those numbers.

Speaker Change: Side and the last thing I would highlight for you as I look forward. We would also recently just highlighted as the top performing investment grade U S Bond fund.

Speaker Change: To the second part is which is what do I see moving forward.

Speaker Change: This year in 2024, and that's a category that actually continues to get active management flows.

Speaker Change: I think we mentioned earlier.

Speaker Change: We are exceeding target on our largest real estate fund raise.

Speaker Change: Does that help you.

Speaker Change: Thanks, Jeff for the question.

Speaker Change: Tuesday.

Speaker Change: Going to be not only a milestone for us with respect to growing our business.

Speaker Change: Thank you.

Speaker Change: The next question comes from John Barnidge from Piper Sandler.

Speaker Change: <unk> added over 50, new sizable relationships across the world.

Speaker Change: Good morning, Thanks for the opportunity so the Hong Kong.

Speaker Change: Beyond just the clients we have historically had in public pensions.

Speaker Change: Change and then the Y <unk> in the quarter sure perpetual focus on improvement here, how much further de risking do you see either in international markets or within the life insurance business. Thank you.

Speaker Change: New litigation shifts with foreign insurance companies know, we've added Premier U S Endowment and foundations and now you also have regional asset manager with an ACO or investing with us. So I would highlight that the momentum will continue to grow in the private market side and the last thing I would highlight for you as I look forward we would also.

Speaker Change: Yeah. The first thing I would say there is as you know I was very involved in our recent strategic review that led to some really sizable changes to our business portfolio, but more importantly put us in a great position to deliver on our strategic and financial objectives, we have with the portfolio, we need to deliver on what we laid.

Speaker Change: We simply just highlighted.

Speaker Change: Performing investment grade U S Bond fund.

Speaker Change: This year in 2024, and that's a category that actually continues to get active management flows.

Speaker Change: But we will obviously continuously assess our portfolio make changes as needed.

Speaker Change: Does that help you.

Speaker Change: Thanks, Jeff for the question.

Speaker Change: Thank you.

Speaker Change: De risk, where it makes sense or in places, where we just don't see the path too.

Speaker Change: The next question comes from John Barnidge from Piper Sandler.

Speaker Change: Driving growth.

Speaker Change: We'll make the decisions to make pivots, there and you did mention the one that we highlighted in this call.

John Barnidge: Good morning, Thanks for the opportunity.

John Barnidge: So the Hong Kong.

John Barnidge: <unk> and then the Y <unk> in the quarter kind of sure perpetual will focus on improvement here how much further derisking do you see either in international markets or within the life insurance business. Thank you.

Speaker Change: It was somewhat driven by the regulatory changes that are happening in that market.

Speaker Change: And so again bottom line, we feel good about where we're at.

Speaker Change: Both from a product portfolio perspective have been specifically in life and how we think about our why our key risk exposure.

John Barnidge: Yes, the first thing I would say there is as you know very involved in our recent strategic review that led to some really sizable changes to our business portfolio, but more importantly put us in a great position to deliver on our strategic and financial objectives, we have with the portfolio, we need to deliver on what we laid.

Speaker Change: But obviously, we will continue to stay disciplined as we look at those factors going forward.

Speaker Change: Okay.

Speaker Change: Thank you and my follow up question complete.

Speaker Change: Completely understand the primary focus of principal serving the small and medium sized customer.

John Barnidge: But we will obviously continuously assess our portfolio make changes as needed.

Speaker Change: But within your retirement benefits business can you talk about how much exposure or non exposure you have to government nonprofit government contracting your businesses. Thank you.

John Barnidge: Derisk, where it makes sense or in places, where we just don't see the path too.

John Barnidge: Driving growth.

Speaker Change: Yeah, I'll, maybe just ask Amy and Chris too quickly.

John Barnidge: We'll make the decisions to make pivots, there and you did mention the one that we highlighted in the call.

Speaker Change: Quickly address that.

Speaker Change: And if we don't have the answers.

John Barnidge: It was somewhat driven by the regulatory changes that are happening in that market and.

Speaker Change: Here today, we will make sure we get back to you bet, Chris anything from a retirement perspective, I would say that we are not a large player in the governmental marketplace. Jon. So I don't have the exact composition of our business. We have some but we're not known as a very large player in the governmental end of the business, but we can follow up with with more.

John Barnidge: So again bottom line, we feel good about where we're at.

John Barnidge: Both from a product portfolio perspective have been specifically in life and how we think about our why our key risk exposure.

John Barnidge: But obviously, we'll continue to stay disciplined as we look at those factors going forward.

Speaker Change: Details on the composition, yes. This is Emil chime in I would agree with Chris's comment I might even take it one step further for the specialty benefits business and say we are just not a player in the government marketplace, that's not been where we've seen some of our historical growth and.

John Barnidge: Okay.

Speaker Change: Thank you and my follow up question.

Speaker Change: Completely understand the primary focus of principal serving the small and medium sized customer.

Speaker Change: But within your retirement and benefits business can you talk about how much exposure or non exposure you have to government nonprofit government contracting your businesses. Thank you.

Speaker Change: They tend to operate with a different set of variables that just don't align is clearly with how we built our machine in process and pricing and technology and so we're just simply not a player in that market.

Speaker Change: Yeah, I'll, maybe just ask Amy and Chris.

Speaker Change: Ill quickly address that.

Speaker Change: Answer those questions.

Speaker Change: And if we don't have the the answers here.

Speaker Change: Thank you.

Speaker Change: Here today, we will make sure we get back that Chris anything from a retirement perspective, I would say that we are not a large player in the governmental marketplace. John So I don't have the exact composition of our business. We have some but we're not known as a very large player in the governmental end of the business, but we can follow up with with more.

Speaker Change: The last question comes from SUNY comment from Jefferies.

Speaker Change: Hi, Thanks, Dan I wanted to ask about M&A now that you're in the seat.

Speaker Change: Youre at a 10% capital allocation suggests kind of small deals.

Speaker Change: But if something big were to come along similar to kind of IRT is that the kind of thing you look at and say we know how to do these deals if it pencils out we'd be interested or is it sort of the other way, where we've already done a big deal and we'd rather just focus on what we have and maybe take advantage of some lapses I just wanted to get your sense.

Speaker Change: You're now the CEO.

Speaker Change: Yes, I mean I'll start with.

They tend to operate with a different set of variables that just don't align is clearly with how we built our machine in process and pricing and technology and so we're just simply not a player in that market. Thanks.

Speaker Change: Obviously I was involved in our strategy around M&A pretty integral as forward. So I don't think you would expect any significant changes there what I would say is we are inquisitive about M&A opportunities across all of our businesses.

Speaker Change: Thanks, Tom for those questions.

Speaker Change: Thank you.

Speaker Change: The last question comes from Sydney comment from Jefferies.

Speaker Change: And if we did them they would be focused around the growth areas that we really talked about at Investor day, Yes.

Speaker Change: Hi, Thanks, Dan I wanted to ask about M&A now that you're in the seat.

Speaker Change: Yes, the the allocation within our total cap.

Speaker Change: Zero to 10% capital allocations suggest kind of small deals but.

Speaker Change: Capital allocation that zero to 10 is small the other thing you have to marry that with US we have a very low leverage ratio and so if something did come across that met all of our three thresholds, which is cultural fit financial fit and strategic fit.

Speaker Change: Have the capabilities to lean into that if it made sense.

Speaker Change: But I'd also say the bar is high as we think about M&A and how they fit into our overall growth platform going forward.

Speaker Change: As you know the CEO.

Speaker Change: Yes, I mean I'll start with you.

Speaker Change: And if we did them they would be focused around the growth areas that we really talked about at Investor day, Yes.

Speaker Change: And ultimately we will continue to be disciplined, but obviously inquisitive about additions that would make sense.

Speaker Change: Yes.

Speaker Change: Got it and then just a real quick for Chris any thoughts around these in plan annuity products for target date funds that a lot of asset managers are rolling out.

Speaker Change: Allocation within our total cap.

Speaker Change: Yeah, Yeah, Thanks, Amit so.

Chris: We think there are promising I think as I've mentioned in prior quarters, I think the opportunity to package them in some sort of target date fund or a managed account solution is probably the best solution to increase penetration. So we're getting on the shelf so more and more plan sponsors are open to having it as an option in the plan lineup.

Speaker Change: Have the capabilities to lean into that if it made sense.

Speaker Change: But I'd also say the bar is high as we think about M&A and how they fit into our overall growth platform going forward.

Speaker Change: I will kind of come back to where I started is if you look at our financial targets, we don't need M&A activity to reach those we feel our organic growth engines can deliver on those results and ultimately we will continue to be disciplined, but obviously inquisitive about additions that would make sense.

Chris: We're still just not seeing a tremendous amount of participants deposits and utilization yet, but I do think that will change as people start understanding it and as those designs.

Chris: Improve and change and enhance over the next little bit. So a lot of activity I think you'll see a lot of activity from us and others over the course of the next year or two in this space.

Speaker Change: Got it and then just a real quick for Chris any thoughts around these in plan annuity products for target date funds that a lot of asset managers are rolling out.

Chris: I do think if you think about sort of that last frontier to address its really how do you convert the savings that Americans have accumulated and therefore, one can plan into that guaranteed retirement income for them that won't that they wont out live and so I do think that theres. Some real promise here, but it's still early days in terms of.

Speaker Change: Yes.

Speaker Change: Yeah. Thanks Sidney.

Speaker Change: No.

Speaker Change: We think they are promising I think as I've mentioned in prior quarters, I think the opportunity to package them in some sort of target date fund or a managed account solution is probably the best solution to increase penetration. So we're getting on the shelf so more and more plan sponsors are open to having it as an option in the plan lineup.

Chris: So utilization.

Speaker Change: Thank you for your question.

Chris: Thanks.

Speaker Change: We have reached the end of our Q&A Mr. <unk> Your closing comments please.

Okay. Thank you as we close today's call I want to reiterate that 2024 was a strong year capped off by a very strong quarter. We delivered on all of our enterprise objectives, and we're well positioned to continue this success in 2025, our ability to access and grow in the most attractive parts of the market combined with our disciplined approach.

Speaker Change: We're still just not seeing a tremendous amount of participants deposits and utilization yet, but I do think that will change as people start understanding it and as those designs.

Speaker Change: Improve and change and enhance over the next little bit. So a lot of activity I think you'll see a lot of activity from us and others over the course of the next year or two in this space.

Speaker Change: So everything we do positions us well for the future we remain focused on executing the strategy that we laid out at Investor day, and those priorities guide our decisions every day as we navigate this evolving landscape. Thank you for your time today for your questions and your continued support of principle, we look forward to connecting with many of you in the near future have a great.

Speaker Change: I do think if you think about sort of that last frontier to address its really how do you convert the savings that Americans have accumulated and therefore, one can plan into that guaranteed retirement income for them that won't that they won't outlive and so I do think that there are some real promise here, but it is still early days in terms of.

Speaker Change: Hey.

Speaker Change: So utilization.

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

Speaker Change: Thank you for your questions.

Speaker Change: Thanks.

Speaker Change: Yeah.

Speaker Change: We have reached the end of our Q&A Mr. <unk> Your closing comments please.

Speaker Change: Okay. Thank you as we close today's call I want to reiterate that 2024 was a strong year capped off by a very strong quarter. We delivered on all of our enterprise objectives, and we're well positioned to continue this success in 2025, our ability to access and grow in the most attractive parts of the market combined with our disciplined approach.

Speaker Change: Hey.

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

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Speaker Change: Good morning, and welcome to the principal financial group fourth quarter 2024 financial results and 2025 outlook Conference call.

Speaker Change: There will be a question and answer period. After the speakers have completed their prepared remarks.

Speaker Change: Ask a question during this session you will need to press star one one on your telephone.

Speaker Change: To withdraw 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 to everyone in the queue.

Speaker Change: I would now like to turn the conference call over to Humphrey Lee Vice President of Investor Relations.

Speaker Change: Thank you and good morning, welcome to principal financial group's fourth quarter and full year 2024 earnings and 2024 outlook conference call.

Speaker Change: As always materials related to today's call are available on our website at investors principal dot com.

Speaker Change: Following a reading of the safe Harbor provision CEO illustrate mall and interim CFO, Joel Pitts will deliver some prepared remarks.

Speaker Change: We will then open the call for questions.

Speaker Change: Members of senior management are also available for Q&A.

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

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

Speaker Change: The 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.

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

Humphrey Lee: Humphrey and welcome to everyone on the call before I begin this morning, I'd like to recognize Dan Houston for his leadership as our CEO over the last 10 years.

Humphrey Lee: He has been instrumental in setting our growth agenda and has let us through significant transformation.

Humphrey Lee: Principal is in a position of strength today and is well positioned for continued growth. Thanks to his tireless leadership.

Speaker Change: And it's been an honor to work alongside Dan over the last seven years as a CFO.

Speaker Change: I look forward to building upon the strong foundation, we've established under Dan's leadership.

Speaker Change: I am extremely grateful to continue to have him serve as the executive chair of our board.

Speaker Change: This morning, I will discuss key milestones and highlights from the fourth quarter and full year 2024.

Speaker Change: I will follow with additional details.

Principal delivered a strong 2024.

Speaker Change: I'm extremely pleased that we've delivered on this guidance.

Speaker Change: Our adjusted non-GAAP earnings per share growth in 2024 was 11% with a strong 16% increase in the fourth quarter.

Speaker Change: This was driven by strong top line growth across the enterprise as well as the benefits from equity market tailwind, which more than offset impacts from foreign currency.

Speaker Change: Our strong capital position and free capital flow enabled us to deliver on our capital deployment guidance.

Speaker Change: We returned $1 $7 billion of capital to shareholders in 2024.

Speaker Change: Our total capital returned to shareholders included share buybacks, which were above the midpoint of our targeted range and a 10% increase in our annual common stock dividend.

Speaker Change: At our recent Investor day, we laid out our strategic areas of focus for sustained growth.

Broad retirement ecosystem small and mid sized businesses and global asset management.

Speaker Change: I'm happy to highlight some of our achievements related to these.

Q4 2024 Principal Financial Group Inc Earnings Call

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