Q1 2025 Principal Financial Group Inc Earnings Call

April 25, 2025

The speakers have completed their prepared remarks.

To ask a question during the session you will need to press star one one on your telephone.

To withdraw your question. Please press star one one again.

We would ask that you be respectful of others and limit your questions to one and a follow up so we can get to everyone in the queue.

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

Humphrey Lee: Thank you and good morning, welcome to principal financial group's first quarter 2025 earnings conference call.

Humphrey Lee: As always materials related to today's call are available on our website at investors not principal dot com.

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

Diana Strabo: CEO, Diana Strabo and interim CFO, Joe <unk> will deliver some prepared remarks.

Humphrey Lee: 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: 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.

Speaker Change: Installations 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.

Speaker Change: Deanna.

Deanna: Thanks, Humphrey good morning to everyone on the call.

Speaker Change: Before I get into the highlights for the quarter I'd like to make a few comments on the current environment.

Speaker Change: We are operating in a market that is incredibly dynamic policy chefs and uncertainty surrounding the market outlook have contributed to a more cautious investor town and heightened focus on resilience.

Speaker Change: The magnitude of the volatility we have seen in April has been extreme and unprecedented and impacts our fee revenue and retirement and asset management.

Speaker Change: We expect market volatility to persist, making upcoming quarters more difficult to predict.

Speaker Change: While complex, we have successfully navigated market volatility before with a clear strategy, a resilient and diversified business model and a strong commitment to supporting our customers when it matters most.

From a financial perspective, we will continue to focus on what we can control with a disciplined approach to aligning expenses with revenue actions.

Speaker Change: Actions to support this are underway.

Speaker Change: In addition, the actions we have taken over the last few years to transform our business smacks have uniquely positioned us to perform through market cycles.

Our conviction and our strategy has never been stronger with a laser focus on growth across the retirement ecosystem F N B's and global asset management.

Speaker Change: Each presents outsized market growth opportunities aligned with our strong differentiated capabilities.

Speaker Change: Slide four of our materials highlights the progress we're making in advancing these growth drivers.

Speaker Change: Turning to the quarter I am proud of our results, which reflect the strength and discipline of our strategy as well as the benefits of our diversified business.

Speaker Change: First quarter adjusted non-GAAP earnings, excluding significant variances was $439 million or $1.92 per diluted share a 10% increase in EPS over the first quarter of 2024.

Speaker Change: We returned $370 million of capital to shareholders in the first quarter, including $200 million of share repurchases and a continued increase in our common stock dividend.

Speaker Change: We have the capital flexibility to continue supporting our customers investing in growth and returning capital responsibly, our capital strategy remains grounded in long term financial discipline.

Speaker Change: Despite market volatility total company managed AUM increased to $718 billion at the end of the quarter, reflecting positive market performance and the beneficial impact of exchange rates.

Speaker Change: Net cash flow was negative 4 billion in the quarter driven by too low fee institutional fixed income withdrawals and investment management.

Speaker Change: Overall higher fee inflows relative to outflows are driving a positive impact to run rate revenue from institutional flows.

Speaker Change: We saw strong results in key asset classes, including private real estate preferred and stable value.

Speaker Change: In addition, we saw strong local investment management flows of $700 million total in Mexico, and South East Asia, reinforcing our local strategies and the benefits of our global business reach.

Speaker Change: We are also encouraged by signs of green shoots in high yield preferreds real estate and international equities, some of which have already funded in April pointing to additional growth in the quarters ahead.

Speaker Change: In retirement, we generated positive account value net cash flow of $400 million after adjusting for the low fee contract laughs discussed on our last call.

Speaker Change: We continue to see strong activity in our small and midsized market delivering $1 $3 billion of positive flows up from $1 billion in the year ago quarter.

Speaker Change: Turning to sales pension risk transfer volume grew year over year, reaching $800 million in the quarter.

Humphrey Lee: This will be a question and answer period after the speakers have completed their prepared remarks.

Total in Mexico, and South East Asia, reinforcing our local strategies and the benefits of our global business reach.

Speaker Change: We remain a leader in the industry ranking among the top four providers by sales premium and third by number of contracts based on the 'twenty 'twenty four lemere results.

Operator: To ask a question during the session, you will need to press star 11 on your telephone. For all your questions, please press star 11 again.

We are also encouraged by signs of green shoots in high yield preferreds real estate and international equities, some of which have already funded in April pointing to additional growth in the quarters ahead.

Speaker Change: Looking ahead, we see positive momentum in the pipeline across our retirement ecosystem.

Humphrey Lee: We would ask that you be respectful of others and limit your questions to one and a follow So he can get to everyone and make I would now like to turn the conference over to Humphrey Lee, Vice President of Investor Relations. Thank you and good morning.

Speaker Change: This momentum is being reinforced by recent industry recognition.

In retirement, we generated positive account value net cash flow of $400 million after adjusting for the low fee contract laughs discussed on our last call.

Speaker Change: Principal was top rated across all categories and the planned advisor survey and received 17 best in Class Awards from plan sponsor.

Humphrey Lee: Welcome to Principal Financial Group's first quarter 2025 earnings conference call. As always, materials related to today's call are available on our website at investors.principal.com.

Speaker Change: Moving to specialty benefits underwriting results were strong and overall growth has been impacted by the absence of new P. F M L markets and lower dental sales a result of our disciplined pricing actions.

We continue to see strong activity in our small and mid sized market delivering $1 $3 billion of positive flows up from $1 billion in the year ago quarter.

Humphrey Lee: Following a reading of the Safe Harbor Provision CEO Deanna Strable, and Interim CFO Joel Pitz will deliver some prepared remarks. We will then open the call for questions. Members of Senior Management are also available for Q&A.

Turning to sales pension risk transfer volume grew year over year, reaching $800 million in the quarter.

Speaker Change: And life sales were up 6% compared to the year ago quarter, driven by bundled business market sales and strong growth in nonqualified sales a key component of our total retirement solutions.

We remain a leader in the industry ranking among the top four providers by sales premium and third by number of contracts based on the 'twenty 'twenty four lemere results.

Deanna Strable: Some of the comments made during this conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The company does not revise or update them to reflect new information, subsequent events, or changes in strategy. 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: Importantly, our well established and long tenured SMB block remains resilient.

Looking ahead, we see positive momentum in the pipeline across our retirement ecosystem. This momentum is being reinforced by recent industry recognition.

Speaker Change: Findings from our recent F&B pulse survey indicate our customers are focused on adapting to the current environment through pricing actions shifting suppliers and managing margin with less emphasis on reducing benefits or staff.

Principal was top rated across all categories and the plan Advisor survey and received 17 best in Class Awards from plan sponsor.

Speaker Change: Across all of our businesses the key fundamentals remained strong including recurring deposits deferrals matches and waves unemployment growth.

Moving to specialty benefits underwriting results were strong and overall growth is being impacted by the absence of new P. F M L markets and lower dental sales a result of our disciplined pricing actions.

Deanna Strable: Additionally, some of the comments made during this conference call may refer to non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures may be found in our earnings release, financial supplement, and slide presentation.

Speaker Change: We remain focused on what matters, most delivering for our customers operating with discipline and executing on our long term strategy.

And life sales were up 6% compared to the year ago quarter, driven by bundled business market sales and strong growth in nonqualified sales a key component of our total retirement solutions.

Speaker Change: We have built this company to perform through many cycles resilient diversified and purpose led.

Importantly, our well established and long tenured SMB block remains resilient.

Speaker Change: Importantly, our approach continues to be recognized for the 14th time principal was named one of the 2025 world's most ethical companies by Ethisphere.

Humphrey Lee: Thanks, Humphrey.

Deanna Strable: Good morning to everyone on the call. Before I get into the highlights for the quarter, I'd like to make a few comments on the current environment. We are operating in a market that is incredibly dynamic. Policy shifts and uncertainty surrounding the market outlook have contributed to a more cautious investor tone and heightened focus on resilience. The magnitude of the volatility we have seen in April has been extreme and unprecedented and impacts our fee revenue in retirement and asset management. We expect market volatility to persist, making upcoming quarters more difficult to predict. While complex, we have successfully navigated market volatility before with a clear strategy, a resilient and diversified business model, and a strong commitment to supporting our customers when it matters most.

Findings from our recent F&B pulse survey indicate our customers are focused on adapting to the current environment through pricing actions shifting suppliers and managing margin with less emphasis on reducing benefits or staff.

Speaker Change: This award reflects our ongoing commitment to doing what's right for our customers employees and shareholders not just in times of strength, but especially in moments of uncertainty.

Across all of our businesses the key fundamentals remained strong including recurring deposits deferrals matches and wage and employment growth.

Speaker Change: We are also being recognized for how we use technology to work strategically our proprietary generative AI powered assistant page was honored with a CIO 100 award for its impact on employee productivity.

We remain focused on what matters, most delivering for our customers operating with discipline and executing on our long term strategy.

Speaker Change: And just one ear its help kind of task completion time in half streamline training and made it easier for teams to create content and serve our customers more efficiently.

We have built this company to perform through many cycles resilient diversified and purpose led.

Importantly, our approach continues to be recognized for the 14th time principal was named one of the 2025 world's most ethical companies by Ethisphere.

Speaker Change: Overall I am proud of our results this quarter and confident in the strength and resiliency of our integrated and diversified portfolio.

Deanna Strable: From a financial perspective, we will continue to focus on what we can control with a disciplined approach to aligning expenses with revenue. Actions to support this are underway. In addition, the actions we have taken over the last few years to transform our business mix have uniquely positioned us to perform through market cycles. Our conviction and our strategy has never been stronger, with a laser focus on growth across the retirement ecosystem, SMBs, and global asset management. Each presents outsized market growth opportunities aligned with our strong differentiated capabilities. Slide 4 of our materials highlights the progress we are making in advancing these growth drivers.

Speaker Change: We will continue to invest in growth operate with discipline and stay close to the evolving needs of our customers.

This award reflects our ongoing commitment to doing what's right for our customers employees and shareholders.

Speaker Change: And we will do so with the same clarity and commitment that have defined our success over the past 145 years.

Not just in times of strength, but especially in moments of uncertainty.

We're also being recognized for how we use technology to work strategically our proprietary generative AI powered assistant page was honored with a CIO 100 award for its impact on employee productivity.

Speaker Change: With that I'll turn it over to Joel to walk through the results in more detail Joel. Thanks, Diana Good morning to everyone on the call I will walk through our financial performance for the first quarter and provide updates on our investment portfolio and capital position.

And just one year, it's help kind of task completion time in half streamline training and made it easier for teams to create content and serve our customers more efficiently.

Joel: As shown on slide three excluding significant variances first quarter non-GAAP operating earnings were $439 million or $1 92 per diluted share.

Overall I am proud of our results this quarter and confident in the strength and resiliency of our integrated and diversified portfolio.

Joel: This represents a 10% increase in EPS over the first quarter of 2024 on an adjusted and a reported basis.

Deanna Strable: Turning to the quarter, I am proud of our results, which reflect the strength and discipline of our strategy, as well as the benefits of our diversified business. First quarter adjusted non-GAAP earnings excluding significant variances was $439 million, or $1.92 per diluted share, a 10% increase in EPS over the first quarter of 2024. We return $370 million of capital to shareholders in the first quarter, including $200 million of share repurchases and a continued increase in our common stock dividends. We have the capital flexibility to continue supporting our customers, investing in growth, and returning capital responsibly. Our capital strategy remains grounded in long-term financial discipline.

We will continue to invest in growth operate with discipline and stay close to the evolving needs of our customers.

Joel: As previously disclosed first quarter earnings were impacted by year over year elevated seasonal expenses and investment management.

And we will do so with the same clarity and commitment that have defined our success over the past 145 years.

Joel: This was offset by a lower tax rate during the quarter.

Joel: First quarter reported net income excluding exited business was $299 million with immaterial credit losses of $4 million.

With that I'll turn it over to Joel to walk through the results in more detail Joel. Thanks, Diana Good morning to everyone on the call I will walk through our financial performance for the first quarter and provide updates on our investment portfolio and capital position.

Joel: Net income reflects the noncash impact of the previously announced transition of our Hong Kong MTF schemes to Bank consortium trust or BTT.

Joel: As shown on slide three excluding significant variances first quarter non-GAAP operating earnings were $439 million or $1 92 per diluted share.

Joel: Importantly, this has no impact to free capital flow.

Joel: non-GAAP operating ROE for the quarter, excluding our actuarial assumption review was 14%.

Joel: The 100 basis point improvement from a year ago and within our targeted range.

Joel: This represents a 10% increase in EPS over the first quarter of 2024 on an adjusted and a reported basis.

Joel: Equity markets created modest tailwind for much of the first quarter those softened in the final weeks.

Deanna Strable: Despite market volatility, total company managed AUM increased to $718 billion at the end of the quarter, reflecting positive market performance and the beneficial impact of exchange rates. Net cash flow was negative $4 billion in the quarter, driven by two low-fee institutional fixed income withdrawals and investment management. Overall, higher fee inflows relative to outflows are driving a positive impact to run rate revenue from institutional flows. We saw strong results in key asset classes, including private real estate, preferred, and stable value. In addition, we saw strong local investment management flows of $700 million total in Mexico and Southeast Asia, reinforcing our local strategies and the benefits of our global business reach.

Joel: As previously disclosed first quarter earnings were impacted by year over year elevated seasonal expenses and investment management.

Joel: The S&P 500, small and mid cap and real estate all finished the quarter down while.

Joel: This was offset by a lower tax rate during the quarter.

Joel: While international equities and fixed income products delivered positive returns.

Joel: First quarter reported net income excluding exited business was $299 million with immaterial credit losses of $4 million.

Joel: Foreign exchange rates had a positive 8 billion impact on AUM for the quarter spot rates improved.

Joel: The following commentary excludes significant variances, which can be found on slide 12.

Joel: Net income reflects the noncash impact of the previously announced transition of our Hong Kong MTF schemes to Bank consortium trust or BTT.

Joel: Our first quarter results demonstrate the strength of our integrated and diversified businesses.

Joel: Which enabled us to deliver 10% year over year EPS growth.

Joel: Importantly, this has no impact to free capital flow.

Joel: non-GAAP operating ROE for the quarter, excluding our actuarial assumption review was 14% a 100 basis point improvement from a year ago and within our targeted range.

Joel: Starting with our yes first quarter top line growth was strong at 5%.

Joel: This coupled with expense discipline, while investing in the business resulted in a 41% margin.

Joel: Equity markets created modest tailwind for much of the first quarter those softened in the final weeks, yes.

Joel: 120 basis point improvement over the prior year quarter.

Deanna Strable: We are also encouraged by signs of green shoots in high yield, preferreds, real estate, and international equities, some of which have already funded in April, pointing to additional growth in the quarters ahead. In retirement, we generated positive account value net cash flow of $400 million after adjusting for the low-fee contract lapse discussed on our last call. We continue to see strong activity in our small and mid-sized market, delivering $1.3 billion of positive flows, up from $1 billion in the year-ago quarter. Turning to sales, pension risk transfer volume grew year over year, reaching $800 million in the quarter.

Joel: Pre tax operating earnings increased 8% for the first quarter 2024, driven by growth in the business higher net investment income and favorable year over year market performance.

Joel: SMP 500, small and mid cap and real estate all finished the quarter down.

Joel: While international equities and fixed income products delivered positive returns.

Joel: Foreign exchange rates had a positive 8 billion impact on AUM for the quarter spot rates improved.

Joel: Underlying fundamentals in our business remains strong recurring deposit growth of 9% in the quarter was strong across all segments with continued outperformance in our small and mid size business market generating 12% growth.

Joel: The following commentary excludes significant variances, which can be found on slide 12.

Joel: Our first quarter results demonstrate the strength of our integrated and diversified businesses, which enabled us to deliver 10% year over year EPS growth.

Joel: The number of individuals' deferring and receiving employer matches or up 4% compared to first quarter of 2024.

Joel: Starting with Arias first quarter top line growth was strong at 5%.

Joel: In addition, the dollar amount of these deferrals and matches increased by 5% and 4% respectively. During the same period.

Joel: This coupled with expense discipline, while investing in the business resulted in a 41% margin of 120 basis point improvement over the prior year quarter.

Deanna Strable: We remain a leader in the industry, ranking among the top four providers by sales premium and third by number of contracts based on the 2024 LMRA results. Looking ahead, we see positive momentum in the pipeline across our retirement ecosystem. This momentum is being reinforced by recent industry recognition. Principal was top rated across all categories in the Plan Advisor Survey and received 17 Best in Class awards from Plan Sponsor. Moving to specialty benefits, underwriting results were strong, and overall growth is being impacted by the absence of new PFML markets and lower dental sales, a result of our disciplined pricing actions.

Joel: Net revenue growth and margin or at the high end of our targeted range. This quarter a product of our disciplined focus on profitable revenue growth.

Joel: Pre tax operating earnings increased 8% for the first quarter 2024, driven by growth in the business higher net investment income and favorable year over year market performance.

Joel: In principal asset management investment management revenue increased 4% compared to the year ago quarter within our targeted range.

Joel: Management fees increased 5% year over year, driven by higher AUM and stable fee rate.

Joel: While transaction and borrower fees remained muted.

Joel: As discussed on last quarter's call seasonality played out largely as anticipated.

Joel: Investment management had $35 million of higher deferred compensation and payroll taxes compared to the fourth quarter parsed.

Joel: The number of individuals' deferring and receiving employer matches or up 4% compared to first quarter of 2024.

Joel: Partially offset by lower variable expenses.

Joel: In addition, the dollar amount of these deferrals and matches increased by 5% and 4% respectively. During the same period.

Deanna Strable: In life, sales were up 6% compared to the year ago quarter, driven by bundled business market sales and strong growth in non-qualified sales, a key component of our total retirement solution. Importantly, our well-established and long-tenured SMB block remains resilient. Findings from our recent SMB Pulse survey indicate our customers are focused on adapting to the current environment through pricing actions, shifting suppliers, and managing margin, with less emphasis on reducing benefits or staff. Across all of our businesses, the key fundamentals remain strong, including recurring deposits, deferrals, matches, and wage and employment growth. We remain focused on what matters most, delivering for our customers, operating with discipline, and executing on our long-term strategy.

Joel: These seasonal expenses are expected to return to normal levels, while we continue to invest in our business.

Joel: Net revenue growth and margin or at the high end of our targeted range this quarter product of our disciplined focus on profitable revenue growth.

Joel: These are factored in our outlook.

Joel: And international pension net revenue was down slightly primarily due to impacts from foreign currency.

Joel: In principal asset management investment management revenue increased 4% compared to the year ago quarter within our targeted range.

Joel: On a constant currency basis, net revenue increased 4% year over year.

Pre tax operating earnings increased 5% from the prior year quarter, Despite a $6 million FX headwind driven by strong expense discipline.

Joel: Management fees increased 5% year over year, driven by higher AUM and stable fee rate.

Joel: Transaction and borrower fees remained muted.

Joel: This resulted in margin expansion of nearly 400 basis points over the year ago quarter and is at the high end of our targeted range.

Joel: As discussed on last quarter's call seasonality played out largely as anticipated.

Joel: And specialty benefits premium and fees growth was 4% compared to the year ago quarter.

Joel: Investment management had $35 million of higher deferred compensation and payroll taxes compared to the fourth quarter.

Joel: As Deanna mentioned this result was impacted by lower dental sales and a difficult comparison from new P. F M L markets in the year ago quarter.

Joel: Partially offset by lower variable expenses.

Joel: These seasonal expenses are expected to return to normal levels, while we continue to invest in our business.

Joel: These were factored into our full year outlook, implying higher growth in future quarters.

Deanna Strable: We have built this company to perform through many cycles, resilient, diversified, and purpose-led. Importantly, our approach continues to be recognized.

Joel: These are factored in our outlook.

While the environment is competitive both employment and wage growth remain healthy that.

Joel: And international pension net revenue was down slightly primarily due to impacts from foreign currency.

Joel: Persistency remained stable, which contributed to the year over year growth.

Joel: On a constant currency basis, net revenue increased 4% year over year.

Deanna Strable: For the 14th time, Principal was named one of the 2025 World's Most Ethical Companies by Ethisphere. This award reflects our ongoing commitment to doing what's right for our customers, employees, and shareholders, not just in times of strength, but especially in moments of uncertainty. We are also being recognized for how we use technology to work strategically. Our proprietary generative AI powered assistant, Paige, was honored with a CIO 100 award for its impact on employee productivity. In just one year, it's helped cut task completion time in half, streamlined training, and made it easier for teams to create content and serve our customers more efficiently.

Joel: SPD pretax operating earnings grew 5% over the prior year quarter, driven by business growth more favorable underwriting experience and higher net investment income.

Joel: Pre tax operating earnings increased 5% from the prior year quarter, Despite a $6 million FX headwind driven by strong expense discipline.

Joel: Margin expanded compared to the year ago quarter and remains within our targeted range.

Joel: This resulted in margin expansion of nearly 400 basis points over the year ago quarter and is at the high end of our targeted range.

Joel: SPD loss ratio improved by 40 basis points year over year to 67%. It was at the low end of our targeted range driven by better group disability and group life results, partially offset by dental experience.

Joel: And specialty benefits premium and fees growth was 4% compared to the year ago quarter.

Joel: As Deanna mentioned this result was impacted by lower dental sales and a difficult comparison from new P. F M L markets in the year ago quarter.

Joel: Dental pricing changes continue to move through the block and we expect to see loss ratio improvement when comparing full year 2025 to 2024.

Joel: These were factored into our full year outlook, implying higher growth in future quarters.

Joel: While the environment is competitive both employment and wage growth remain healthy and persistency remains stable, which contributed to the year over year growth.

Joel: Premium and fees growth in our life business increased compared to the prior year quarter as strong business market growth was up 20% and at or above targeted returns.

Deanna Strable: Overall, I am proud of our results this quarter and confident in the strength and resiliency of our integrated and diversified portfolio. We will continue to invest in growth, operate with discipline, and stay close to the evolving needs of our customers. and we will do so with the same clarity and commitment that have defined our success over the past 145 years.

Joel: SPD pretax operating earnings grew 5% over the prior year quarter, driven by business growth more favorable underwriting experience and higher net investment income.

Joel: Pre tax operating earnings in the quarter were $40 million down from the prior year quarter, driven by higher mortality, primarily from net claims severity.

Joel: Margin expanded compared to the year ago quarter and remains within our targeted range.

Joel: This included a single claim of $5 million that was part of a much larger face amounts shared by many carriers issued in 1999.

Joel Pitz: With that, I'll turn it over to Joel to walk through the results in more detail. Joel? Thanks, Deanna. Good morning to everyone on the call. I will walk through our financial performance for the first quarter and provide updates on our investment portfolio and capital position. As shown on slide 3, excluding significant variances, first quarter non-GAAP operating earnings were $439 million, or $1.92 per diluted share. This represents a 10% increase in EPS over the first quarter of 2024 on an adjusted and a reported basis. As previously disclosed, first-quarter earnings were impacted by year-over-year elevated seasonal expenses in investment management.

Joel: While this impacted results in the quarter or one year and longer term mortality is at our expected levels our tax rate in the quarter was lower compared to the full year due to foreign tax credit benefits as well as seasonal impacts from share based compensation.

Joel: Dental pricing changes continue to move through the block and we expect to see loss ratio improvement when comparing full year 2025 to 2024.

Joel: We expect the tax rate to be within our targeted range of 17% to 20% for the full year 2025 or.

Joel: Our general account investment portfolio remains high quality align with our liability profile and well positioned for a variety of economic conditions.

Joel: Premium and fees growth in our life business increased compared to the prior year quarter, a strong business market growth was up 20% and at or above targeted returns.

Joel: The portfolio remains healthy from a credit risk perspective.

Joel: Pre tax operating earnings in the quarter were $40 million down from the prior year quarter, driven by higher mortality, primarily from net claim severity.

Joel: While we are closely monitoring the evolving trade policy landscape and its potential impact. Our current assessment is minimal exposure to industries, most likely to be directly affected by tariffs.

Joel Pitz: This was offset by a lower tax rate during the quarter. First quarter reported net income, excluding exit business, was $299 million, with immaterial credit losses of $4 million. Net income reflects the non-cash impact of the previously announced transition of our Hong Kong MPF schemes to Bank Consortium Trust, or BCT. Importantly, this has no impact to free capital flow. Non-GAAP Operating ROE for the quarter, excluding our Actuarial Assumption Review, was 14 percent, a 100 basis point improvement from a year ago and within our targeted range. Equity markets created modest tailwinds for much of the first quarter, though softened in the final week.

Joel: This included a single claim of $5 million that was part of a much larger face amounts shared by many carriers issued in 1999.

Joel: Our commercial mortgage loan portfolio remains healthy as.

Joel: As discussed on our last call. We had two scheduled loan maturities in the first quarter in our office portfolio.

Joel: Of which had been paid off.

Joel: The remainder of the office portfolio and the underlying metrics remained favorable and relatively unchanged from last quarter.

We expect the tax rate to be within our targeted range of 17% to 20% for the full year 2025, our.

Joel: Turning to capital and liquidity, we ended the quarter in a very strong position with $1 $8 billion of excess and available capital.

Joel: Our general account investment portfolio remains high quality align with our liability profile and well positioned for a variety of economic conditions.

Joel: This includes.

Joel: $1 2 billion at the holding company above our 800 million targeted level.

Joel: The portfolio remains healthy from a credit risk perspective.

Joel: $250 million in our subsidiaries.

Joel: And $300 million in excess of our targeted 375% risk based capital ratio, which was estimated at 395% at quarter end.

Joel Pitz: The S&P 500, small and mid-cap, and real estate all finished the quarter down, while international equities and fixed income products delivered positive returns. Foreign exchange rates had a positive $8 billion impact on AUM for the quarter as spot rates improved. The following commentary excludes significant variances, which can be found on slide 12. Our first quarter results demonstrate the strength of our integrated and diversified business community. which enabled us to deliver 10% year-over-year EPS growth. Starting with RIS, first quarter top line growth was strong at 5%. This, coupled with expense discipline, while investing in the business, resulted in a 41% margin, a 120 basis point improvement over the prior year quarter.

Joel: Capital was elevated by a $400 million this quarter as we exercise our 2028 P caps and we'll use the proceeds to pay down a $400 million debt maturity in may.

Joel: Our commercial mortgage loan portfolio remains healthy as.

Joel: As discussed in our last call. We had two scheduled loan maturities in the first quarter in our office portfolio.

Joel: Concurrently, we issued $500 million of new P caps in February.

Joel: Or which have been paid off.

Joel: The remainder of the office portfolio and the underlying metrics remained favorable and relatively unchanged from last quarter.

Joel: In the total off balance sheet facility to $850 million.

Joel: This addresses our near term maturities with our next maturity occurring in November 2026.

Joel: Turning to capital and liquidity, we ended the quarter in a very strong position with $1 $8 billion of excess and available capital.

Joel: We continue to deliver on our targeted 75% to 85% free capital flow.

Joel: This includes.

Joel: $1 2 billion at the holding company above our 800 million targeted level too.

Joel: As discussed on last quarter's call free capital flow is typically the lightest in the first quarter due to timing of capital generation and increases throughout the year.

Joel: $250 million in our subsidiaries and.

Joel: And $300 million in excess of our targeted 375% risk based capital ratio, which was estimated at 395% at quarter end.

Joel: As shown on slide three we returned $370 million to shareholders in the first quarter, including $200 million of share repurchases and $170 million of common stock dividends.

Joel Pitz: Pre-tax operating earnings increased 8% for the first quarter 2024, driven by growth in the business. Higher net investment income and favorable year-over-year market performance. Underlying fundamentals in the business remain strong. Recurring deposit growth of 9% in the quarter was strong across all segments. With continued outperformance in our small and mid-sized business market, generating 12% growth. The number of individuals deferring and receiving employer matches are up 4% compared to first quarter of 2024. In addition, the dollar amount of these deferrals and matches increased by 5% and 4%, respectively, during the same period. Net revenue growth and margin are at the high end of our targeted range this quarter, a product of our disciplined focus on profitable revenue growth.

Joel: Capital was elevated by a $400 million this quarter as we exercise our 2028 P caps and we'll use the proceeds to pay down a $400 million debt maturity in may.

Joel: Last night, we announced a 76 common stock dividend payable in the second quarter.

Joel: This represents a <unk> increase over the prior quarter's dividend and a 9% dividend growth rate on a trailing 12 month basis.

Joel: Concurrently, we issued $500 million of new P caps in February.

Joel: Bringing the total off balance sheet facility to $850 million.

Joel: We remain aligned with our targeted 40% dividend payout ratio underscoring our confidence in continued growth and overall performance.

Joel: This addresses our near term maturities with our next maturity occurring in November 2026.

Joel: As Deanne outlined our first quarter results reflect our resilient and diversified business that continues to perform through various market cycles.

Joel: We continue to deliver on our targeted 75% to 85% free capital flow.

Joel: As discussed on last quarter's call free capital flow is typically the lightest in the first quarter due to timing of capital generation and increases throughout the year.

We remain disciplined in how we deploy capital.

Joel: Confident in the fundamentals of our businesses and focused on delivering long term value to shareholders.

Joel: As shown on slide three we returned $370 million to shareholders in the first quarter, including $200 million of share repurchases and $170 million of common stock dividends.

Joel: While supporting customers when they need us most.

Joel Pitz: Principal Asset Management, Investment Management Revenue increased 4% compared to the year ago quarter within our targeted range. Management fees increased 5% year over year, driven by higher AUM and stable fee rate. while transaction and borrower fees remain muted. As discussed on last quarter's call, seasonality played out largely as anticipated. Investment management had $35 million of higher deferred compensation and payroll taxes compared to the fourth quarter, partially offset by lower variable expenses. These seasonal expenses are expected to return to normal levels while we continue to invest in our business. These are factored in our outlook. In international pension, net revenue was down slightly, primarily due to impacts from foreign currency.

Joel: As we have consistently done and as economic conditions evolve we remain committed to aligning expenses with revenue with actions already underway, while continuing to invest for growth.

Joel: Last night, we announced a 76 common stock dividend payable in the second quarter.

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

Joel: This represents a <unk> increase over the prior quarter's dividend and a 9% dividend growth rate on a trailing 12 month basis.

Speaker Change: At this time I would like to remind everyone.

Speaker Change: To ask a question. Please press star one one on your telephone we'll pause for just a moment to compile the Q&A roster.

Joel: We remain aligned with our targeted 40% dividend payout ratio underscoring our confidence in continued growth and overall performance.

Joel: As Deanna outlined our first quarter results reflect our resilient and diversified business that continues to perform through various market cycles.

Joel Hurwitz: Our first question comes from Joel Hurwitz with Dowling <unk> partners. Your line is open.

Joel: We remain disciplined in how we deploy capital.

Joel Hurwitz: Hi, Good morning wanted to start on how you're doing.

Joel: Confident in the fundamentals of our businesses and focused on delivering long term value to shareholders, while supporting customers when they need us most.

Joel Hurwitz: Wanted to start on your EPS growth outlook I know there remains a lot of uncertainty in the environment, but do you have the 9% to 12% EPS growth target how do you feel about that just given the current macro backdrop.

Joel Pitz: On a constant currency basis, net revenue increased 4% year over year. Pre-tax operating earnings increased 5% from the prior year quarter despite a $6 million FX headwind, driven by strong expense discipline. This resulted in margin expansion of nearly 400 basis points over the year-ago quarter and is at the high end of our targeted range. Specialty Benefits, premium fees growth was 4% compared to the year ago quarter. As Deanna mentioned, this result was impacted by lower dental sales and a difficult comparison from new PFML markets in the year-ago quarter. These were factored into our full year outlook, implying higher growth in future quarters.

Joel: As we have consistently done and as economic conditions evolve we remain committed to aligning expenses with revenue with actions already underway.

Yeah. Thanks for that question. So I'll give a few high level of markets and then turn it over to Joel to get into more details.

Joel: While continuing to invest for growth.

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

Joel Hurwitz: Listen back to my prepared remarks, I reiterated in as you just mentioned we're operating in an environment that is incredibly dynamic and also very unpredictable driven by policy shifts and uncertainty. If you just look at the daily volatility swings that we experienced in the last four weeks, both positive and negative they've been extreme end.

Joel: At this time I would like to remind everyone.

Joel: To ask a question. Please press star one one on your telephone.

Joel: Pause for just a moment to compile the Q&A roster.

Speaker Change: Our first question comes from Joel Hurwitz with Dowling <unk> partners. Your line is open.

Joel Hurwitz: Because of that that will have an impact on our fee revenue in both retirement and asset management I think it's important to remember that we have a diverse and resilient portfolio of businesses with revenue diversity by source by geography by asset class in customer base and that diversity is very critically important in times like.

Joel Hurwitz: Hi, good morning wanted to start on.

Joel Pitz: While the environment is competitive, both employment and wage growth remain healthy, and persistency remains stable, which contributed to the year-over-year growth. SBD pre-tax operating earnings grew 5% over the prior year quarter, driven by business growth, more favorable underwriting experience, and higher net investment income. Margin expanded compared to the year ago quarter and remains within our targeted range. SPD loss ratio improved by 40 basis points year over year to 60.7% and was at the low end of our targeted range, driven by better group disability and group life results. Partially offset by dental experience. Dental pricing changes continue to move through the block, and we expect to see loss ratio improvement when comparing full year 2025 to 2024.

Joel: Are you doing.

Speaker Change: I wanted to start on your EPS growth outlook I know there remains a lot of uncertainty in the environment, but do you have the 9% to 12% EPS growth target how do you feel about that just given the current macro backdrop.

Joel Hurwitz: This.

Joel Hurwitz: I'd start with the first quarter was a strong start to the year and I will now turn it over to Joel for more details, but keep in mind, we are going to continue to focus on what we can control, including being there for our customers leaning into growth and being smart about expenses, Joe Hey, Good morning, Joel. Thanks for the question when looking at the full year I think is important.

Speaker Change: Yeah. Thanks for that question. So I'll give a few high level of markets and then turn it over to Joel to get into more details.

Speaker Change: If you listen back to my prepared remarks, I reiterated in as you just mentioned we're operating in an environment that is incredibly dynamic and also very unpredictable driven by policy shifts and uncertainty. If you just look at the daily volatility swings that we experienced in the last four weeks, both positive and negative they've been extreme and.

Speaker Change: First ground ourselves in what happened during the first quarter.

Speaker Change: As I mentioned in my prepared remarks, our 10% earnings per share growth on a reported and adjusted basis first quarter is a really strong start to the year and in line with our 9% to 12% earnings per share guidance.

Speaker Change: Because of that that will have an impact on our fee revenue in both retirement and asset management I think it's important to remember that we have a diverse and resilient portfolio of businesses with revenue diversity by source by geography by asset class in customer base and that diversity is very critically important in <unk>.

Speaker Change: This is a product of a 4% revenue growth year over year, and 5% on a trailing 12 month basis, and 40% of margin expansion over the past year.

Joel Pitz: Premium and fees growth in our life business increased compared to the prior year quarter. A strong business market growth was up 20% and at or above targeted return. Pre-tax operating earnings in the quarter were $14 million, down from the prior year quarter driven by higher mortality, primarily from net claim severity. This included a single claim of $5 million that was part of a much larger face amount shared by many carriers issued in 1999. While this impact results in the quarter, our one-year and longer-term mortality is at our expected levels. Our tax rate in the quarter was lower compared to the full year due to foreign tax credit benefits, as well as seasonal impacts from share-based compensation.

Speaker Change: So although volatile the first quarter average macro conditions were largely in line with what we expected and outlook as a market downturn occurred later in the quarter.

Speaker Change: <unk> like this.

Speaker Change: I'd start with the first quarter was a strong start to the year and I will now turn it over to Joel for more details, but keep in mind, we are going to continue to focus on what we can control, including being there for our customers leaning into growth and being smart about expenses, Joe Hey, Good morning, Joel. Thanks for the question when looking at the full year I think is important to <unk>.

Speaker Change: So now to your question as it relates to the remainder of the year.

Speaker Change: The Ana noted we benefit in normal in volatile times from a diversified mix of business.

Speaker Change: Specifically, our benefits and protection and spread businesses are relatively insulated from the recent market volatility.

Speaker Change: So I realize it makes it difficult to model, but our portfolio of business is resilient in times of volatility.

Speaker Change: First ground ourselves in what happened during the first quarter.

Speaker Change: As I mentioned in my prepared remarks, 10% earnings per share growth on a reported and adjusted basis first quarter is a really strong start to the year and in line with our 9% to 12% earnings per share guidance.

Speaker Change: A proof point, we found on page three of our financial supplement.

Joel Pitz: We expect the tax rate to be within our targeted range of 17 to 20% for the full year 2025. Our general account investment portfolio remains high quality, aligned with our liability profile, and well positioned for a variety of economic conditions. Portfolio remains healthy from a credit risk perspective. While we are closely monitoring the evolving trade policy landscape and its potential impact, our current assessment is minimal exposure to industries most likely to be directly affected by tariffs. Our commercial mortgage loan portfolio remains healthy. As discussed in our last call, we had two scheduled loan maturities in the first quarter in our office portfolio.

Speaker Change: What about you can see we had a $3 5 billion increase in AUM from market performance during the quarter.

Speaker Change: This is a product of a 4% revenue growth year over year and 5% on a trailing 12 month basis.

Speaker Change: And this occurred despite a 5% decline in the S&P 500 during the quarter.

Speaker Change: 40% of margin expansion over the past year.

Speaker Change: So as for our fee businesses, the macro impact will depend on the severity and longevity of market disruption.

Speaker Change: So although volatile the first quarter average macro conditions were largely in line with what we expected and outlook as a market downturn occurred later in the quarter.

Speaker Change: On page 10 of the earnings call slide deck, you'll see we highlight the macro sensitivity.

Speaker Change: It's important to note these exclude the impact of management actions.

Speaker Change: So now to your question as it relates to the remainder of the year.

Speaker Change: And it also shows the AAV in AUM composition within investment management in RIS.

Speaker Change: Deanna noted we benefit in normal in volatile times from a diversified mix of business.

Speaker Change: So again these sensitivities to finding that page ignore the expense actions, we're taking to compensate for the macro headwinds that have emerged.

Speaker Change: Specifically, our benefits and protection and spread businesses are relatively insulated from the recent market volatility.

Joel Pitz: both of which have been paid off. The remainder of the office portfolio and the underlying metrics remain favorable and relatively unchanged from last quarter.

Speaker Change: During market volatility, we focus on what we can control.

Speaker Change: So I realize it makes it difficult to model, but our portfolio of business is resilient in times of volatility.

Speaker Change: We lean into expense management activities.

Speaker Change: A proof point, we found on page three of our financial supplement.

Speaker Change: I will not allow macro headwinds to hit our bottom line dollar for dollar.

Speaker Change: You can see we had a $3 5 billion increase in AUM from market performance during the quarter.

Joel Pitz: Turning to capital and liquidity, we ended the quarter in a very strong position with $1.8 billion of excess and available capital. This includes $1.2 billion at the holding company, above our $800 million targeted level. $250 million in our subsidiaries and $300 million in excess of our targeted 375% risk-based capital ratio, which was estimated at 395% at quarter end. Capital was elevated by $400 million this quarter as we exercise our 2028 PCAPs and will use the proceeds to pay down a $400 million debt maturity in May. And currently, we issued $500 million of new PCAPs in February, bringing the total off-balance sheet facility to $850 million.

Speaker Change: So in addition to expense management, it's important to note the beneficial impact on AUM levels from lower interest rates.

Speaker Change: And this occurred despite a 5% decline in the S&P 500 during the quarter.

Speaker Change: The decline in interest rates during the quarter provide a tailwind for our fee businesses during the quarter would be a higher AUM and account value levels.

Speaker Change: So as for our fee businesses, the macro impact will depend on the severity and longevity of market disruption.

Speaker Change: And then lastly, another relevant macro factor for us is FX.

Speaker Change: On page 10 of the earnings call slide deck, you'll see we highlight the macro sensitivities.

Speaker Change: These headwinds are importantly, dissipating.

Speaker Change: It is important to note these exclude the impact of management actions.

Speaker Change: The sequential basis, FX headwind in IP or international pension were less than $1 million compared to $32 million headwind on a trailing 12 month basis.

Speaker Change: And it also shows the AAV in AUM composition within investment management in RIS.

Speaker Change: So again these sensitivities to finding that page ignore the expense actions, we're taking to compensate for the macro headwinds that have emerged.

Speaker Change: On this front in first quarter alone the Brazilian reais strength and 8%.

Speaker Change: And the Chilean peso strengthened 4% relative to the U S dollar.

Speaker Change: During market volatility, we focus on what we can control.

Speaker Change: So it's a long way of saying there are a lot of macro variables in play.

Speaker Change: We lean into expense management activities.

Speaker Change: I will not allow macro headwinds to hit our bottom line dollar for dollar.

Speaker Change: But importantly, based on what we know today a path exists remain in the 9% to 12% EPS range.

Joel Pitz: This addresses our near-term maturities with our next maturity occurring in November 2026. We continue to deliver on our targeted 75-85% free capital flow. As discussed on last quarter's call, free capital flow is typically the lightest in the first quarter due to timing of capital generation and increases throughout the year. As shown on slide 3, we returned $370 million to shareholders in the first quarter, including $200 million of share repurchases and $170 million of common stock dividends. Last night, we announced a 76 cent common stock dividend payable in the second quarter. This represents a $0.01 increase over the prior quarter's dividend and a 90% dividend growth rate on a trailing 12-month basis.

Speaker Change: So in addition to expense management, it's important to note the beneficial impact on AUM levels from lower interest rates.

Speaker Change: But that will be dependent on duration and severity of market disruption from here on out.

Speaker Change: The decline in interest rates during the quarter provide a tailwind for our fee businesses during the quarter would be a higher AUM and account value levels.

Joel Hurwitz: So Joel I hope that helps.

Joel Hurwitz: Yeah very helpful. Thank you.

Speaker Change: Yes, a follow up question.

Speaker Change: And then lastly, another relevant macro factor for us is FX.

Speaker Change: Yeah, maybe just just on the management actions in the expense side can you just provide some more color on sort of how much flexibility you have on the expense side and what you've sort of taken thus far in Q2.

Speaker Change: These headwinds are importantly, dissipating.

Speaker Change: The sequential basis, FX headwind in IP or international pension were less than $1 million compared to $32 million headwind on a trailing 12 month basis.

Speaker Change: Yeah, I think I'd start with if you look back through every economic cycle, we have a proven track record of aligning expenses with revenue and that alignment is our north star.

Speaker Change: On this front in first quarter alone the Brazilian reais strength and 8%.

Speaker Change: And the Chilean peso strengthened 4% relative to the U S dollar.

Speaker Change: So it's a long way of saying there are a lot of macro variables in play.

Joel Hurwitz: Obviously critical in it and really the volatility really has started in the last four four weeks, but again, we're underway. There's a lot of flexibility and levers that we can pull will continue to be thoughtful disciplined and focused on it but Joel can you give just a little bit more color on how we're thinking about expenses, yes. So as I said in my prior comments some jewelry.

Joel Pitz: We remain aligned with our targeted 40% dividend payout ratio, underscoring our confidence in continued growth and overall performance. As Deanna outlined, our first quarter results reflect our resilient and diversified business that continues to perform through various market cycles. We remain disciplined in how we deploy capital. Confident in the fundamentals of our businesses and focused on delivering long-term value to shareholders while supporting customers when they need us most. As we have consistently done and as economic conditions evolve, we remain committed to aligning expenses with revenue, with actions already underway, while continuing to invest for growth.

Speaker Change: But importantly, based on what we know today a path exists remain in the 9% to 12% EPS range.

Speaker Change: But that will be dependent on duration and severity of market disruption from here on out.

Joel Hurwitz: So Joel I hope that helps.

Speaker Change: Yeah very helpful. Thank you.

Joel Hurwitz: We take it very seriously and want to make sure that we do align expenses with revenue and revenue is going to be our guide.

Speaker Change: Yes, a follow up question.

Joel Hurwitz: So on that front and it's evidenced by our continued margin expansion you look over the past year, our ability to align expenses with revenue is reflected in our 40 basis point improvement year over year and margins.

Joel Hurwitz: So again as I said before during periods of volatility like this what folks what we can control and lean into expense management activities.

Speaker Change: Yeah, I think I'd start with if you look back through every economic cycle, we have a proven track record of aligning expenses with revenue and that alignment is our north star.

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

Joel Hurwitz: Examples of those things are what you would expect certain travel delayed hiring consulting spend et cetera.

Operator: At this time, I would like to remind everyone to turn off your cell phones and turn on your that to ask a question, please press star 11 on your telephone. pause for just a moment to compile the Q&A rod.

Speaker Change: Obviously critical in it and really the volatility really has started in the last four four weeks, but again, we're underway, there's a lot of flexibility and levers that we can pull we will continue to be thoughtful disciplined and focused on it but Joel can you give just a little bit more color on how we're thinking about expenses, yes. So as I said in my prior comments some jewelry.

Joel Hurwitz: And as we've done historically, we will actively and importantly, responsibly align expenses with revenues.

Joel Hurwitz: Thanks, Joel for the question I got it.

Joel Hurwitz: Thank you.

Joel Hurwitz: Our first question comes from Joel Hurwitz with Dowling and Partners. Your line is open. Hi, good morning. I wanted to start on, how you doing? I wanted to start on your EPS growth outlook. I know there remains a lot of uncertainty in the environment, but you have the 9 to 12% EPS growth target. How do you feel about that just given the current macro backdrop? Yeah, thanks for that question, Joel.

Speaker Change: Thank you. Our next question comes from Ryan Krueger with <unk>. Your line is open.

Speaker Change: We take it very seriously and want to make sure that we do align expenses with revenue and revenue is going to be our guide.

Speaker Change: Good morning.

Ryan Krueger: Could you talk a little bit about <unk>.

Speaker Change: So on that front and it's evidenced by our continued margin expansion you look over the past year, our ability to align expenses with revenue is reflected in our 40 basis point improvement year over year and margins.

Ryan Krueger: Behavior in your asset management business.

Amit: Yes, Amit.

Amit: The elevated market volatility what what changes youre seeing how are you.

Amit: I think that will affect that.

Speaker Change: So again as I said before during periods of volatility like this what folks what we can control and lean into expense management activities.

Amit: Activity going forward.

Deanna Strable: I'll give a few high level remarks and then turn it over to Joel to get into more details. You know, if you listen back to my prepared remarks, I reiterated, and as you just mentioned, we're operating in an environment that is incredibly dynamic, and also very unpredictable, driven by policy shifts and uncertainty. If you just look at the daily volatility swings that we experienced in the last four weeks, both positive and negative, they've been extreme. And because of that, that will have an impact on our fee revenue in both retirement and asset management. I think it's important to remember that we have a diverse and resilient portfolio of businesses with revenue diversity by source, by geography, by asset class and customer base.

Ryan Krueger: Yeah, I think that's a great question Ryan as I mentioned in my remarks, we're seeing some good green shoots as we think about mandates and client activity as we go through the rest of the year, but I'll ask <unk> to give some more color relative to that.

Speaker Change: Examples of those things are what you would expect certain travel delayed hiring consulting spend et cetera.

Speaker Change: And as we've done historically, we will actively and importantly, responsibly align expenses with revenues.

Speaker Change: Thank you Diana and good morning.

Speaker Change: So I'll touch upon a couple of things I think.

Joel Hurwitz: Thanks, Joel for the question I got it.

Speaker Change: Client behavior.

Speaker Change: Thank you.

Speaker Change: Particularly given the macro environment has become a little bit more volatile.

Speaker Change: Thank you. Our next question comes from Ryan Krueger with <unk>. Your line is open.

Speaker Change: Given rebalancing, but from my seat what I'm seeing is a material improvement in our pipeline.

Speaker Change: Good morning.

Speaker Change: Could you talk a little bit about <unk>.

Speaker Change: Behavior in your asset management business.

Speaker Change: What I would highlight for you in what I'm. Most excited about is how clients are actually helping improve the business fundamentals.

Amit: Yes, Amit.

Amit: The elevated market volatility what what changes youre seeing how are you.

Deanna Strable: And that diversity is very critically important in times like this.

Speaker Change: Management and I'll give you three reasons, what I would highlight there for you.

Amit: I think that will affect <unk>.

Joel Pitz: I'd start with that first quarter was a strong start to the year, and I'll now turn it over to Joel for more details. But keep in mind, we are going to continue to focus on what we can control, including being there for our customers, leaning into growth, and being smart about expenses.

Amit: Activity going forward.

Amit: Yeah, I think that's a great question Ryan as I mentioned in my remarks, we're seeing some good green shoots as we think about mandates and client activity as we go through the rest of the year, but I'll ask <unk> to give some more color relative to that.

Speaker Change: One I think as you as you highlighted is Q1you highlighted at MTF behavior, but it truly doesn't capture the strengthening of our underlying business fundamentals because the net revenue rate for asset management continues to increase substantially in fact mandates that we are bringing.

Joel Pitz: Joel. Yeah. Good morning, Joel. Thanks for the question. When looking at the full year, I think it's important to first ground ourselves in what happened during the first quarter. As I mentioned in my prepared remarks, 10% earnings per share growth, unreported on an adjusted basis. First quarter is a really strong start to the year, and in line with our 9% to 12% earnings per share guidance. This is a product of a 4% revenue growth year over year, and 5% on a trailing 12-month basis, and 40% of margin expansion over the past year. So although volatile, the first quarter average macro conditions were largely in line with what we expected in Outlook, as a market downturn occurred later in the quarter.

Speaker Change: Thank you Diana and good morning.

Speaker Change: So I'll touch upon a couple of things.

Amit: Client behavior.

Speaker Change: And now are higher than our average book of business So that certainly.

Amit: Particularly given the macro environment has become a little bit more volatile.

Speaker Change: Aligned with our strength in private markets and some of the strategies, we have outside the U S.

Amit: Given rebalancing, but from my seat what I'm seeing is a material improvement in our pipeline.

Speaker Change: The other piece of client behavior that I would highlight for you.

Speaker Change: <unk> is our global pipeline, which we actively track is materially going up in fact, one of the measures that I see in client is right. Now there is an increased activity in business now versus business. Later, so the way to think about it rfps request for money now versus <unk>.

Amit: What I would highlight for you in what I'm. Most excited about is how clients are actually helping improve the business fundamentals.

Amit: Management and I'll give you three reasons, what I would highlight there for you.

Joel Pitz: So now to your question that relates to the remainder of the year. As Deanna noted, we benefit in normal and volatile times from a diversified mix of business. Specifically, our benefits and protection spread businesses are relatively insulated from the recent market volatility. So I realize it makes it difficult to model, but our portfolio business is resilient in times of volatility. A proof point we found on page 3 of our financial supplement, whereby you can see we had a $3.5 billion increase in AUM for market performance during the quarter, and this occurred despite a 5% decline in the S&P 500 during the quarter.

Amit: One I think as you as you highlighted is.

Amit: In <unk>, you highlighted at Mcf behavior, but it's truly doesn't capture the strengthening of our underlying business fundamentals because the net revenue rate for asset management continues to increase substantially in fact mandates that we are bringing in now are higher than our average book of business so that that certainly.

Speaker Change: It is informational request and we are seeing a lot of activity from our newest wind consolidates in fact, just in one queue. We are running at 40% of what the annual run rate volume so activity.

Speaker Change: The quality of mandates that are coming and we are participating is going up and the net revenue rate is going up with the client mandate.

Amit: <unk>.

Amit: Aligned with our strength in private markets and some of the strategies, we have outside the U S. The other piece of client behavior that I would highlight for you.

Brian: Thanks, Brian do you have a follow up.

Brian: Thanks, Yes, I guess, a similar question on the retirement of one of your competitors a few weeks ago said they were seeing elevated hardship withdrawals.

Amit: <unk> is our global pipeline, which we actively track is materially going up in fact, one of the measures that I see in client is right. Now there is an increased activity in business <unk> business. Later, so the way to think about it rfps request for money now versus other Pfizer.

Joel Pitz: So as for our fee businesses, the macro impact will depend on the severity and longevity of market disruption. On page 10 of the earnings call slide deck, you see we highlight the macrosensitivity. It's important to note these exclude the impact of management actions. and it also shows the AV and AUM composition within investment management and RIS. So again, any sensitivity defined in that page, ignore the expense actions we're taking to compensate for the macro headwinds that have emerged. During market volatility, we focus on what we can control. We lean into expense management activities and will not allow macro headwinds to hit our bottom line dollar for dollar.

Brian: Is that is that something you're seeing at all it seems like the metrics you were citing still seemed pretty constructive but wanted to hear what youre seeing there.

Brian: Hey, Chris I'll have you take that yeah, hi, Bryan Thank you.

Brian: Respect to participant behavior.

Amit: It is informational request and we are seeing a lot of activity from investment consultants. In fact, just in <unk>, we are running at 40% of what the annual run rate volume so activity.

Speaker Change: Broadly I'd say from an investment perspective, we're definitely seeing risk on to risk off activity and a change out into more guaranteed options.

Amit: The quality of mandates that are coming and we are participating is going up and the net revenue rate is going up with the client mandate.

Speaker Change: With respect to withdrawals, we really haven't seen hardship withdrawals in particular, we really haven't seen a significant increase in loans or hardship withdrawals from from our participants at this point. So it's largely in line with last year's quarter as well as on a quarter over quarter and a and a trailing 12.

Brian: Thanks, Brian do you have a follow up.

Joel Pitz: So in addition to expense management, it's important to note the beneficial impact on AUM levels from lower interest rates. The decline in interest rates during the quarter provided tailwind for our fee businesses during the quarter via higher AUM and account value levels. And then lastly, another relevant macro factor for us is FF. These headwinds are importantly dissipating. On a sequential basis, FX headwind and IP, or international pension, were less than $1 million compared to $32 million headwind on a trailing 12-month basis. On this front, in first quarter alone, the Brazilian REI strength in 8 percent and the Chilean peso strength at 4 percent relative to the U.S.

Speaker Change: Thanks, Yes, I guess, a similar question on the retirement of one of your competitors a.

Brian: A few weeks ago said, they were seeing elevated hardship withdrawals.

Speaker Change: Month's basis. So we're just we're not seeing that as a big driver.

Brian: Is that is that something you're seeing at all it seems like the metrics you were citing still seemed pretty constructive but wanted to hear what youre seeing there.

Speaker Change: Activity, if anything broadly just outside of loans and withdrawals in just about participant withdrawals in general.

Brian: Hey, Chris I'll have you take that yeah, hi, Bryan Thank you.

Speaker Change: That rate has stabilized as well and so when we look at participant draws both on a quarter over quarter in the trailing 12 month basis, it's largely in line and has stabilized as we indicated.

Brian: With respect to participant behavior.

Brian: Broadly.

Brian: I'd say from an investment perspective, we're definitely seeing risk on to risk off activity and a change out into more guaranteed options.

Speaker Change: That was our expectations last quarter and we've seen that come through now dollars of participant withdrawals are up but they're up in line with the increase in average EV, which really speaks to that impact that equity market performance has on flows and withdrawals. So overall, we're not seeing major.

Joel Pitz: dollar. So it's a long way of saying there are a lot of macro variables in play. But importantly, based on what we know today, a path exists to remain in the 9% to 12% EPS range, but that will be dependent on duration and severity of market disruption from here on out. So, Joel, I hope that helped. Yeah, very helpful. Thank you.

Brian: With respect to withdrawals, we really haven't seen hardship withdrawals in particular, we really haven't seen a significant increase in loans or hardship withdrawals from.

Brian: From our participants at this point so it's largely in line with last year's quarter as well as on a quarter over quarter and a and a trailing 12 month basis. We're just we're not seeing that as a big driver of activity, but I think broadly just outside of loans and withdrawals in just about participant withdrawals in general.

Speaker Change: Changes in either loans or hardship withdrawals or in participant withdrawal rate at this time.

Speaker Change: And I think I think if you look at the revenue growth in there and margin that Chris's business put out in the first quarter. It is a strength of our and a testament to the strategy.

Joel Pitz: Yeah, a follow up question. Yeah, maybe just just on the management actions and the expense side, can you just provide some some more color on sort of how much flexibility you have on the expense side and what you've sort of taken thus far in Q2? Yeah, I think I'd start with if you look back through every economic cycle, we have a proven track record of aligning expenses with revenue. And that alignment is our North Star. It's obviously critical in it. And really, the volatility really has started in the, you know, the last four, four weeks.

Brian: That rate has stabilized as well and so when we look at participant draws both on a quarter over quarter in the trailing 12 month basis, it's largely in line and has stabilized as we indicated.

And ultimately the fundamentals of that business remain very strong. So next question.

Speaker Change: Okay.

Speaker Change: Thank you. Our next question comes from Walmart Burtis with Raymond James Your line is open.

Brian: That was our expectation last quarter and we've seen that come through now dollars of participant withdrawals are up but they're up in line with the increase in average JV, which really speaks to that impact that equity market performance has on on flows and withdrawals. So overall, we're not seeing major change.

Walmart Burtis: Hey, good morning to you all heard a little bit more about mortality in the life business what were the drivers there and what's the result, you saw in line with the industry.

Joel Pitz: But again, we're underway, there's a lot of flexibility and levers that we can pull, we'll continue to be thoughtful, disciplined and focused on it. But Joel, can you get just a little bit more color on how we're thinking about expenses? Yeah, so as I said, in my prior comments, Joel, you know, we take it very seriously, we want to make sure that we do align expense with revenue, and revenue is going to be our guide. So on that front, it's evidenced by continued margin expansion, you know, you look over the past year, our ability to align expense with revenue is reflected in our 40 basis point improvement year over year in margins.

Walmart Burtis: Yeah, I'll ask Amy to answer that obviously mortality can be volatile quarter to quarter. So we can highlight what drove the quarterly results, but keep in mind. If we look at that over a one year and a longer term basis. Our mortality is still is aligned with our expectations, but EMEA a little bit more color on the quarter.

Brian: <unk> in either loans or hardship withdrawals or in participant withdrawal rate at this time.

Brian: Okay.

Brian: I think I think if you look at the revenue growth in there and margin that Chris's business put out in the first quarter. It is a strength of our and a testament to the strategy and ultimately the fundamentals of that business remain very strong so.

Speaker Change: Do you want to give a great starting point to think about the like mortality in the life business I am going to address a couple of points. There, though number one is the individual life business.

Brian: Next question.

Joel Pitz: And so again, as I said before, during periods of volatility like this, we'll focus on what we can control and lean into expense management activities. So examples of those things are what you would expect, you know, certain travel, delayed hiring, consulting spend, etc. And as we've done historically, we'll actively and importantly, responsibly align expense with revenues. Thanks, Joel, for the question.

Brian: Okay.

Walmart Burtis: Thank you. Our next question comes from Walmart Burtis with Raymond James Your line is open.

Speaker Change: Deanna hit on it it can be a bit volatile we saw some of that volatility flow through we still feel really good about when you look over one year three year five year.

Walmart Burtis: Hey, good morning to you on that a little bit more about mortality in the life business what were the drivers there.

Speaker Change: Mortality, we definitely did see a little severity bump we called out a specific.

Speaker Change: And what's the result, you saw in line with the industry. Thanks.

Speaker Change: Large.

Speaker Change: Impact this quarter, what I would also offer though is that group life, which tends to be more of that working age population produced a really nice result, this quarter. So the severity that we're tending to see tends to be where we pick up more all population not necessarily working population.

Speaker Change: Yeah, I'll ask Amy to answer that obviously mortality can be volatile quarter to quarter. So we can highlight what drove the quarterly results, but keep in mind. If we look at that over a one year and a longer term basis, our mortality still is aligned with our expectations, but EMEA a little bit more color on the quarter.

Joel Pitz: All right. Got it. Thank you.

Ryan Krueger: Our next question comes from Ryan Krueger with KBW.

Deanna Strable: Your line is Hey Ryan. Could you talk a little bit about client behavior in your asset management? I guess, amidst the elevated market volatility, what changes you're seeing and how you think that will affect activity going forward?

Speaker Change: Yeah, and Amy I do know the current quarter's results in individual life was driven much more by severity and I've been a single large claim so any color on that larger claim.

Speaker Change: Do you want to give a great starting point to think about the like mortality.

Speaker Change: And the life business I am going to address a couple of points there, though number one is the individual life business.

Speaker Change: Yes, I think we provided a little bit of color on that larger claim that larger claim is one that's been on our books for 2006 years. It is one where we took a small portion of what appears to be.

Speaker Change: Deanna hit on it it can be a bit volatile we saw some of that volatility flow through we still feel really good about when we look over one year three year five year mortality.

Kamal Bhatia: Yeah, I think that's a great question, Ryan. As I mentioned, in my remarks, we're seeing some good green shoots as we think about mandates and client activity as we go through the rest of the year.

Speaker Change: Mortality, we definitely did see a little severity bump we called out a specific.

Speaker Change: Much larger insurers.

Kamal Bhatia: But I'll ask Kamal to give some more color relative to that. Sure. Thank you, Deanna.

Speaker Change: Insurable benefit at the time and so my guess is that that particular claim.

Speaker Change: Large.

Speaker Change: Impart this quarter, what I would also offer though is that group life, which tends to be more of that working age population.

Kamal Bhatia: Ryan, good morning. So I'll touch upon a couple of things. I think client behavior, particularly given the macro environment, has become a little bit more volatile, given rebalancing. But from my seat, what I'm seeing is a material improvement in our pipeline. What I would highlight for you and what I'm most excited about is how clients are actually helping improve the business fundamentals of asset management. And I'll give you three reasons what I would highlight there for you. One, I think, as you as you highlighted, is in one cue, you highlighted our NCF behavior, but it truly doesn't capture the strengthening of our underlying business fundamentals, because the net revenue rate for asset management continues to increase substantially.

Speaker Change: I'll have some impact across the industry again that could be with with mutual or public companies and it could be with reinsurers as well. Thanks. So unless you have a follow up question.

Speaker Change: <unk> produced a really nice result, this quarter. So the severity that we're turning it tends to be where we pick up more all population not necessarily working population.

Speaker Change: Yeah.

Speaker Change: I'm sure could you provide a little bit of an update on the growth of the spread based products and retirement I think you've touched on this a bit earlier, but has it been growing and good market uncertainty accelerate that glide path.

Amy: Yeah and Amy.

Amy: The current quarter's results in individual life was driven much more by severity and I've been a single large claim so any color on that larger claim yes, I think we provided a little bit of color on that larger claim that larger claim is one that's been on our books for 26 years. It is one where we took a small portion of what appears to be.

Chris: Yes, that's a great question and obviously that's that does provide some resilience to our overall results and there is many different aspects of what drives that spread including even aspects from our 401k business. So Chris maybe give a little bit more of a flavor. There yes sure good morning Walmart.

Amy: A much larger insurable benefit at the time and so my guess is that that particular claim will have some impact across the industry again that could be with with mutual or public companies and it could be with reinsurers as well. Thanks a lot.

Speaker Change: Think about spread based growth.

Speaker Change: We're all we're seeing really strong performance in our spread based businesses we saw.

Kamal Bhatia: In fact, mandates that we are bringing in now are higher than our average book of business. So that's certainly aligned with our strength in private markets and some of the strategies we have outside the U.S. The other piece of client behavior that I would highlight for you is our global pipeline, which we actively track, is materially going up. In fact, one of the measures that I see in clients is right now, there is an increased activity in business now versus business later. So the way you think about it, RFPs are requests for money now versus RFIs, which is informational requests.

Speaker Change: Strong registered index linked annuity sales.

Speaker Change: Over $500 million, we had a strong PRT quarter over $800 million and we're also as part of our overall strategy continuing to drive additional utilization of our guaranteed fixed rate products into our retirement plans and so we're seeing nice gws Rs G grow.

Speaker Change: Do you have a follow up question.

Amy: Yeah.

Amy: Sure could you provide a little bit of an update on the growth of the spread based products in retirement.

Amy: On this a bit earlier, but has it been growing and good market uncertainty accelerate that glide path.

Chris: Yes, that's a great question and obviously that does provide some resilience to our overall results and there's many different aspects of what drives that spread including even aspects from our foreign K business. So Chris maybe give a little bit more of a flavor. There yes sure good morning Walmart.

Speaker Change: <unk> as well, so really really strong and thats really part of the strategy as we continue to drive profitable growth profitable plan dynamics.

Ryan Krueger: And we are seeing a lot of activity from investment consultants. In fact, just in one cue, we are running at 40% of our annual run rate volume. So activity, the quality of mandates that are coming and we are participating is going up and the net revenue rate is going up with the client mandate. Thanks, Ryan. Do you have a follow up? Thanks.

Speaker Change: And using a spread where it makes sense to serve our customers' needs and so we are seeing positive there.

Chris: When I think about spread based growth overall, we're seeing really strong performance in our spread based businesses we saw.

Speaker Change: You look at sort of where we see a little bit of pressure on the spread based it would be in the investment only so if you think about investment only thats, an opportunistic business for us we dial it up or down depending on what other opportunities we have to deploy capital and given the fact that we've been able to deploy capital.

Chris: Strong registered index linked annuity sales up.

Chris: Over 500 million, we had a strong PRT quarter over $800 million and we're also as part of our overall strategy continuing to drive additional utilization of our guaranteed fixed rate products into our retirement plans and so we're seeing nice dws our S. G.

Speaker Change: Nice returns and whether it's Ryan PRT or Ws for Us W. <unk> products, we have sort of dialed down investment only and that contributed.

Chris: Yes, I guess a similar question on retirement. One of your competitors a few weeks ago said they were seeing elevated hardship withdrawals. Is that something you're seeing at all? It seems like the metric you were citing still seems pretty constructive, but wanted to hear what you're seeing there.

Speaker Change: Drag of minus $500 million in the current quarter, given Io maturities and the issuance that we had lower issuance that we did in Q1 this year versus last year. So again really really seeing positive dynamics on spread and as part of our overall strategy in areas to drive overall total revenue and profitable.

Chris: <unk> growth as well, so really really strong and thats really part of the strategy as we continue to drive profitable growth profitable plan dynamics.

Chris: Hey, Chris, I'll have you take that. Yeah.

Chris: Hi, Brian. Thank you. Um, you know, with respect to participant behavior, broadly, I'd say from an investment perspective, we're definitely seeing risk on to risk off activity and a change out into more guaranteed options. With respect to withdrawals, we really haven't seen hardship withdrawals. In particular, we really haven't seen a significant increase in loans or hardship withdrawals from from our participants at this point. So it's largely in line with last year's quarter as well as on a quarter of a quarter and a trailing 12 month basis. We're just we're not seeing that as a big driver of activity.

Chris: And using spread where it makes sense to serve our customers' needs and so we are seeing positive there.

Speaker Change: <unk> revenue growth.

Speaker Change: Thanks, William Hill, well now hope that helped.

Chris: You look at sort of where we see a little bit of pressure on the spread based it would be in the investment only so if you think about investment only thats, an opportunistic business for us we dial it up or down depending on what other opportunities we have to deploy capital and given the fact that we've been able to deploy capital.

Speaker Change: Okay. Thank you.

Speaker Change: Next question.

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

Wes Carmichael: Good morning.

Speaker Change: Good morning, Dana on specialty benefits I was hoping you could talk a little bit about your approach to new business in the quarter. I think you mentioned dental price earnings, earning in there or are you done with actions on dental and any other products, where youre, taking price because I think sales were down across most lines and I'm asking this in recognition of very good underwriting results.

Chris: Nice returns and whether it's Ryan our PRT or Ws for us W. <unk> products, we have sort of dialed down investment only and that contributed.

Chris: Drag of minus $500 million in the current quarter.

Chris: If I think broadly, just outside of loans and withdrawals, and just about participant withdrawals in general, that rate is stabilized as well. And so when we look at participant draws both on a quarter of a quarter and the trailing 12 month basis, it's largely in line and has stabilized as we indicated, we, you know, that was our expectation last quarter. And we've seen that come through. Now dollars of participant withdrawals are up, but they're up in line with the increase in average AV, which really speaks to that impact that equity market performance has on on flows and withdrawals.

Chris: Given io maturities and and the issuance that we had lower issuance that we did in Q1 this year versus last year. So again really really seeing positive dynamics on spread and as part of our overall strategy and RBS to drive overall total revenue and profitable revenue growth.

Wes Carmichael: Okay.

Wes Carmichael: Yeah, I'll ask David to expand upon that obviously, we have a very competitive.

Wes Carmichael: <unk> product portfolio, there were some dynamics that impacted that growth rate year over year, including the PFM al volatility, but I'll ask Amy to give some more color on sales, what we're seeing and how it leads into our overall results.

Chris: Thanks, William Hill, well now hope that helped.

Thank you.

Chris: Next question.

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

Wes Carmichael: Yes, I think so.

Wes Carmichael: DNN Joe both caught this in the earlier prepared remarks, but new sales quarter over quarter is a difficult comparison, so we've mentioned that.

Wes Carmichael: Good morning good.

Chris: So overall, we're not seeing major changes in either loans or hardship withdrawals or in participant withdrawal rate at this I think if you look at the revenue growth and the margin that Chris's business put out in the first quarter, it is a strength of our, and a testament to the strategy. And ultimately the fundamentals of that business remain very strong.

Wes Carmichael: Good morning, Dana on specialty benefits I was hoping you could talk a little bit about your approach to new business in the quarter. I think you mentioned dental price earnings, earning in there or are you done with actions on dental and any other products, where youre, taking price because I think sales were down across most lines and I'm asking this in recognition of very good underwriting results.

Wes Carmichael: Keeping in mind that paid family medical leave does come through with that group disability line. So specifically, we had a state come online last year first quarter and so it makes those comparisons difficult. So when I when I back that out of the comparison, the new sales gap to expectations really is coming from dental.

Speaker Change: Yeah, I'll ask Amy to expand upon that obviously.

Wes Carmichael: Since third quarter of last year, we've we've experienced increased dental competition I think we've talked about it a few times, we're seeing some mutual companies medical carriers and to a lesser extent, probably other public company peers be really competitive in that space.

Wes Carmichael: Have a very competitive SB.

Wes Carmichael: SPD product portfolio, there were some dynamics that impacted that growth rate year over year, including the PFM al volatility, but I'll ask Amy to give some more color on sales, what we're seeing and how it leads into our overall results.

Operator: So next question.

Wilma Burdis: Thank you. Our next question comes from Wilma Burdis with Raymond James. Your line is Hey, good morning.

Wes Carmichael: So what we're doing there staying really disciplined we know that new sale pricing on all of our products, including dental benefits from staying disciplined when we got him.

Amy Friedrich: A little bit more about mortality in the life business. What were the drivers there? And what's the result you saw in line with the industry? Thanks.

Wes Carmichael: Yeah. Thanks.

Speaker Change: So DNN Joe both caught this in the earlier prepared remarks, but new sales quarter over quarter is a difficult comparison, so we've mentioned that.

Amy Friedrich: Yeah, I'll ask Amy to answer that. Obviously, mortality can be volatile quarter to quarter. So, you know, we can highlight what drove the quarterly results. But, you know, keep in mind, if we look at that over a one year and a longer term basis, our mortality still is aligned with our expectations, but Amy, a little bit more color on the quarter.

Wes Carmichael: Customer pricing impact, particularly for Smbs that moves around a lot that really means that their ability to plan for cash flow just isn't there. So we do everything we can to keep those consistent predictable renewals happening and that really starts with keeping that discipline on new sale.

Speaker Change: Keeping in mind that paid family medical leave does come through with that group disability line. So specifically, we had a a state come online last year first quarter and so it makes those comparisons difficult. So when I when I back that out of the comparison, the new sales gap to expectations really is coming from dental since third quarter of last year.

Amy Friedrich: Yeah, Deanna gave a great starting point to think about the mortality in the life business. I am going to address a couple points there, though. Number one is the individual life business. Deanna hit on it. It can be a bit volatile. We saw some of that volatility flow through. We still feel really good about when we look over one year, three year, five year mortality. We definitely did see a little severity bump. We called out a specific large impact this quarter. What I would also offer, though, is that group life, which tends to be more of that working age population, produced a really nice result this quarter.

Wes Carmichael: You had specifically asked about dental pricing, we had taken a series of actions on dental pricing throughout 'twenty four and even in early 'twenty five and the thing to keep in mind. There is that when we take those actions. They hit first on new sales. So when we we adjust that we see that immediately in our new sale and I would say that is.

Speaker Change: We've experienced increased dental competition I think we've talked about it a few times, we're seeing some mutual companies medical carriers and to a lesser extent, probably other public company peers be really competitive in that space.

Speaker Change: So what we're doing there staying really disciplined we know that.

Wes Carmichael: What we're seeing in the result.

Speaker Change: New sale pricing on all of our products, including dental benefits from staying disciplined when we've got a customer pricing impact, particularly for smbs that moves around a lot that really means that their ability to plan for cash flow just isn't there. So we do ever.

Wes Carmichael: Quarter over quarter, what what is a little bit harder to keep the bead on is that those pricing actions are going to be aligned with policy anniversaries for the in force block of business. So it is going to blend in through the next 12 months to come in through the rest of the portfolio, what I feel really comfortable about it.

Amy Friedrich: So, the severity that we're tending tends to be where we pick up more all population, not necessarily working population.

Speaker Change: Anything we can to keep those consistent predictable renewals happening and that really starts with keeping that discipline on new sale.

Wes Carmichael: That when I look at its impact on loss ratio, we are going to see a loss ratio in full year 'twenty five that is better than we saw in full year 'twenty for the other thing I would add is keep in mind, we function and sell and service on an in force basis with a bundle of products group benefits really hit an all time.

Amy Friedrich: Yeah, Amy, I do know the current quarters results in individual life was driven much more by severity and even a single large claim. So any color on that larger claim? Yeah, I think we provided a little bit of color on that larger claim. That larger claim is one that's been on our books for 26 years. It is one where we took a small portion of what appears to be a much larger, you know, insurable benefit at the time. And so my guess is that that particular claim will have some impact across the industry. Again, that could be with with mutual or public companies, and it could be with reinsurers as well.

Speaker Change: Specifically asked about dental pricing, we had taken a series of actions on dental pricing throughout 'twenty four and even in early 'twenty five and the thing to keep in mind. There is that when we take those actions. They hit first on new sales. So when we we adjust that we see that immediately in our new sale and I would say that is what we're seeing.

Wes Carmichael: Hi, this quarter in terms of in terms of our bundles. So that's the total coverage as we have with our customer.

Wes Carmichael: Within that bundle, we are doing things that are not only taking action on those coverages like dental that need some corrective action, but we're also taking action on products that were seeing good experience flows through so we're putting things back into the rates that are very positive for us on life and disability. So.

Speaker Change: And the result.

Speaker Change: Quarter over quarter, what what is a little bit harder to keep the beat on is that those pricing actions are going to be aligned with policy anniversaries for the in force block of business. So it is going to blend in through the next 12 months to come in through the rest of the portfolio, what I feel really comfortable about.

Wilma Burdis: Thanks, Wilma.

Wilma Burdis: Do you have a follow up question? Sure. Could you provide a little bit of an update on the growth of the spread based products in retirement? I think you touched on this a bit earlier, but has it been growing and could market uncertainty accelerate that glide path? Thanks. Yeah, that's a great question. And obviously, you know, that's that does provide some resilience to our overall results. And there's many different aspects of what drives that spread, including even aspects from our 401k business.

Point, you back to looking at our persistency. So our persistency is exactly in line with where we hoped it would be for this first quarter experience and I'm really proud of that.

Speaker Change: Is that when I look at its impact on loss ratio, we are going to see a loss ratio in full year 'twenty five that is better than we saw in full year 'twenty for the other thing I would add is keep in mind, we function and sell and service on an in force basis with a bundle of products.

Wes Carmichael: <unk> I think that really speaks to our renewal formula It speaks to the things we do within the bundle and it speaks to the fact that when we have to move up on one product, we're often able to treat the whole case in a really competitive way. So hopefully that gives a little bit more color of how we think about it and what we're expecting for 'twenty five.

Group benefits really hit an all time high this quarter in terms of in terms of our bundles. So that's the total coverage as we have with a customer so within that bundle. We are doing things that are not only taking action on those coverages like dental that need some corrective action, but we're also taking action.

Chris: So Chris, maybe give a little bit more of a flavor there. Yeah, sure. Good morning, Wilma. When I think about spread based growth, overall, we're seeing really strong performance in our spread based businesses, we saw strong registered index linked annuity sales up, you know, over 500 million, we had a strong PRT quarter, over 800 million. And we're also as part of our overall strategy, continuing to drive additional utilization of our guaranteed fixed rate products into our retirement plans. And so we're seeing nice WSRS GA growth as well. So, you know, really, really strong. And that's really part of the strategy is we continue to drive profitable growth, profitable plan dynamics, and using spread where it makes sense to serve our customers needs.

Wes Carmichael: Yeah. It does thank you.

Speaker Change: And just switching gears, but on variable investment income it was a little bit of a headwind this quarter I know, it's called out insignificant variances. So it's excluded from your EPS guide, but when you think about the balance of the year, particularly in light of some equity market volatility in April how are you now thinking about VII I think some peers were kind of expecting nor.

Speaker Change: <unk> on products that were seeing good experience flows through so we're putting things back into the rates that are very positive for us on life and disability. So I'd point you back to looking at our persistency. So our persistency is exactly in line with where we hoped it would be for this first quarter experience and I'm really proud of that result.

Wes Carmichael: Yes for 2025, but I wonder if that view has not changed.

Speaker Change: Yeah. Thanks West for the question I'll have Joe I'll address that one yes. Thanks for the question West as you mentioned VII performance during the quarter is very much in line with fourth quarter 24, as well as first quarter 'twenty four and on that front. Despite historically strong performance. We actually did have lower run rate hedge fund returns, which is a small part of our portfolio, but it did marginally press.

I think that really speaks to our renewal formula It speaks to the things we do within the bundle and it speaks to the fact that when we have to move up on one product, we're often able to treat the whole case in a really competitive way. So hopefully that gives a little bit more color of how we think about it and what we're expecting for 'twenty five.

Chris: And so so we are seeing positive there. If you look at sort of where we see a little bit of pressure on the spread based, it would be in the investment only. So if you think about investment only, that's an opportunistic business for us, we dial it up or down, depending on what other opportunities we have to deploy capital. And given the fact that we've been able to deploy capital and nice returns, and whether it's RILA, PRT, or WSRS, WSRS GA products, we have sort of dialed down investment only, and that contributed a drag of minus 500 million in the current quarter, given IO maturities and, and the issuance that we lower issuance that we did in Q1 this year versus last year.

Wes Carmichael: <unk> first quarter 2025 results.

So as a reminder, regarding our alts portfolio, 50% of our portfolio is invested in real estate.

Speaker Change: Yes. It does thank you.

Wes Carmichael: This results in a lower concentration in private equity and hedge funds.

Wes Carmichael: So since the majority of our real estate is not mark to market each quarter, we're sitting in a portfolio of highly appreciated assets that arent recognized until the time of sale.

Wes Carmichael: So as we expected coming into the year, we did have minimal transaction activity in the quarter and continue to expect the majority of real estate transactions to occur in the latter half of the year.

Speaker Change: Normal for.

Speaker Change: For 2025, but I wonder if that view has not changed.

Wes Carmichael: Yeah. Thanks for the question I'll have Joe I'll address that one yes. Thanks for the question West as you mentioned VII performance during the quarter is very much in line with fourth quarter 24, as well as first quarter 'twenty four.

Wes Carmichael: So the outlook for the remainder of the year and it is certainly dependent on again, the severity and longevity of the market disruption because that could impact our alts returns as well as the timing of our planned real estate sales.

Wes Carmichael: So as we've always done we'll be sure to make sure. We highlight this activity has emerged over the course of the year. So you have good visibility as far as what the differences between long term expected run rate.

Speaker Change: And on that front. Despite historically strong performance, we actually did have lower run rate hedge fund returns.

Chris: So again, really, really seeing positive dynamics on spread. And it is part of our, our overall strategy in RIS to drive overall total revenue and profitable revenue growth. Thanks, William. Wilma, I hope that helped.

Wes Carmichael: Which is a small part of our alts portfolio, but it did marginally pressure first quarter 2025 results.

Wes Carmichael: Thanks for the questions.

Wes Carmichael: So as a reminder, regarding our alts portfolio, 50% of our portfolio is invested in real estate.

Wes Carmichael: Thank you.

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

Operator: Thank you.

Wes Carmichael: This results in lower concentration in private equity and hedge funds.

Suneet Kamath: Next question. Thank you.

Wes Carmichael: So since the majority of our real estate is not mark to market each quarter, we're sitting in a portfolio of highly depreciated assets that arent recognized until the time of sale.

Wes Carmichael: Tom.

Deanna Strable: Our next question comes from Wes Carmichael with Autonomous Research. Your line is open. Good morning, Deanna. On specialty benefits, I was hoping you could talk a little bit about your approach to new business in the quarter. I think you mentioned dental price earning in there. Are you done with actions on dental and any other products where you're taking price? Because I think sales are down across most lines. And, you know, I'm asking this in recognition of a very good underwriting results.

Tom Gallagher: Good morning. First question is can you can you try and help us disaggregate, what's going on in your 401K business by plan size maybe.

Speaker Change: Referencing large case mid small.

Wes Carmichael: So the outlook for the remainder of the year and it's certainly dependent on again, the severity and longevity of the market disruption because that could impact our <unk> returns as well as the timing of our planned real estate sales.

Speaker Change: There are different dynamics driving those and then also maybe touch it touch a bit on.

Speaker Change: Yes.

Speaker Change: Just the fee rate seem to go down a bit.

Amy Friedrich: Yeah, I'll ask Amy to expand upon that. Obviously, you know, we have a very competitive SPD product portfolio, there were some dynamics that impacted that growth rate year over year, including the PSML volatility. But I'll ask Amy to give some more color on sales, what we're seeing and how it leads into our overall results.

Speaker Change: When I look at fees relative to average AUM. Thanks.

Speaker Change: Yeah. If you look at slide four we did give some some color there that highlights both the strong fundamentals that we're seeing for the overall block as well as.

Speaker Change: Thanks, Wes for the questions.

Wes Carmichael: Thank you.

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

Speaker Change: Even stronger results regarding transfer deposits recurring deposits and net cash flow that we saw for F. N. B. Obviously the biggest difference is the volatility that we can see inflows from large case, both on the ins and outs.

Wes Carmichael: Tom.

Amy Friedrich: Yeah, thanks. So Deanna and Joel both caught this in their earlier prepared remarks, but new sales quarter over quarter is a difficult comparison. So we've mentioned that, keeping in mind that paid family medical leave does come through that group disability line. So specifically, we had a state come online last year, first quarter, and so it makes those comparisons since third quarter of last year, we've, we've experienced increased dental competition, I think we've talked about it a few times, we're seeing some mutual companies, medical carriers, and to a lesser extent, probably other public company peers be really competitive in that space.

Tom Gallagher: Good morning. First question is can you can you try and help us disaggregate, what's going on in your 401K business by plan size maybe.

Speaker Change: But I'll ask Chris to add some more color there around just the overall dynamics.

Wes Carmichael: Referencing large case mid small.

Chris: Yes, Thanks, Tom and I think Dennis obviously spot rate spot on I mean, I think when we look at the dynamics, we continue to see very healthy consistent patterns with our SMB business.

Wes Carmichael: There are different dynamics driving those and then also maybe touch it touch a bit on.

Wes Carmichael: Alan.

Wes Carmichael: Just the fee rate seemed to go down a bit.

Chris: If I look at transfer deposits for Smbs were up nearly 30% in the quarter.

Wes Carmichael: When I look at fees relative to average AUM. Thanks.

Chris: We see really strong recurring deposit better than the overall average.

Wes Carmichael: Yeah. If you look at slide four we did give some some color there that highlights both the strong fundamentals that we're seeing for the overall block as well as the.

Chris: That's really been the core engine for for principal and continues to be a really core engine.

Wes Carmichael: Even stronger results regarding transfer deposits recurring deposits and net cash flow that we saw for Smbs. Obviously the biggest difference is the volatility that we can see inflows from large case, both on the ins and outs.

Chris: For us on Laurence it just tends to be a little more lumpy theres fewer plans that trade.

Amy Friedrich: So what we're doing there is staying really disciplined, we know that new sale pricing on all of our products, including dental benefits from staying disciplined, when we've got a customer pricing impact, particularly for SMBs, that moves around a lot, that really means that their ability to plan for cash flow just isn't there. So we do everything we can to keep those consistent, predictable renewals happening. And that starts with keeping that discipline on new sale, you had specifically asked about dental pricing, we had taken a series of actions on dental pricing throughout 24. And even in early 25.

Chris: And the timing of when they come in and when they go out has a fairly significant impact on flows just because of the size.

Chris: But overall.

Wes Carmichael: But I'll ask Chris to add some more color there around just the overall dynamics.

Chris: That's what I would say, it's a bit more lumpy and volatile on the large end.

Chris: Yeah. Thanks, Thanks, Tom and I think Dennis and obviously spot rate spot on I mean, I think when we look at the dynamics, we continue to see very healthy consistent patterns with our SMB business and.

Chris: But the core SMB is a bit more consistent and showing signs of strength on our new sales basis, we're seeing strength across all segments and so we do see a really nice pipeline across all of the segments.

Chris: If I look at transfer deposits for Smbs were up nearly 30% in the quarter.

Chris: Across our 401K business, so see really positive dynamics, there and I would say the other thing that we see on the benefit from the large segment as we are seeing nice growth in participants.

Chris: We see really strong recurring deposit better than the overall average.

Amy Friedrich: And the thing to keep in mind there is that when we take those actions, they hit first on new sale. So when we we adjust that, we see that immediately in our new sale. And I would say that is what we're seeing in the result. quarter over quarter, what what is a little bit harder to keep the bead on is that those pricing actions are going to be aligned with policy anniversaries for the enforced block of business. So it's going to blend in through the next 12 months to come in through the rest of the portfolio.

Chris: That's really been the core engine for principal and continues to be a really core engine.

Chris: And those participants give us opportunities to serve those individuals both within the plan as well as upon rollover and if we look at just retail customers we disclosed.

Speaker Change: For us on Laurence it just tends to be a little more lumpy theres fewer plans the trade.

Speaker Change: And the timing of when they come in and when they go out has a fairly significant impact on flows just because of the size.

Chris: For you on slide four that number is up about 10% over the past year and so the large is bringing us some real benefits as well. Despite the fact that it does have a bit more volatile flow pattern.

Speaker Change: But overall.

Speaker Change: That's what I would say, it's a bit more lumpy and volatile on the large end.

Speaker Change: But the core SMB is a bit more consistent and showing signs of strength on our new sales basis, we're seeing strength across all segments and so we do see a really nice pipeline across all of the segments.

Chris: On your fee rate question.

Chris: We did see some of the same pressures that we've seen in the past if we look at fee revenue right.

Amy Friedrich: What I feel really comfortable about is that when I look at its impact on loss ratio, we are going to see a loss ratio in full year 25. That is better than we saw in full year 24. The other thing I would add is keep in mind, we function and sell and service on an enforced basis with a bundle of products, group benefits really hit an all time high this quarter in terms of in terms of our bundle. So that's the total coverages we have with a customer. So within that bundle, we are doing things that are not only taking action on those coverages, like dental that need some corrective action, but we're also taking action on products that we're seeing good experience flow through.

Chris: It's down a little bit more than three bps on a 12 month compare which we think is the best way to look at it but as we talked about in past quarters, we attribute.

Speaker Change: Across our 401K business, so see really positive dynamics, there and I would say the other thing that we see on the benefit from the large segment as we are seeing nice growth in participants.

Chris: At least a bit of that to the market outperformance that is creating pressure.

Speaker Change: And those participants give us opportunities to serve those individuals both within the plan as well as upon rollover and if we look at just retail customers we disclosed.

Chris: When you have that.

Chris: Periods of market outperformance and we continue to see market outperformance of Q in Q1, this year of 40% higher than Q1 last year. So that one bps pressure is not what was expected when we talk about sort of our overall two to three bps of <unk>.

Speaker Change: For you on slide four that number is up about 10% over the past year and so the large is bringing us some real benefits as well. Despite the fact that it does have a bit more volatile flow pattern.

Speaker Change: Compression expected in normal markets. The other thing thats happening that maybe haven't gotten as much visibility as we do see pressure from.

Amy Friedrich: So we're putting things back into the rate that are very positive for us on life and disability. So I'd point you back to looking at our persistency. So our persistency is exactly in line with where we hoped it would be for this first quarter experience. And I'm really proud of that result. I think that really speaks to our renewal formula, it speaks to the things we do within the bundle. And it speaks to the fact that when we have to move up on one product, we're often able to treat the whole case in a really competitive way.

Speaker Change: On your fee rate question.

Speaker Change: Variable annuity lapses and so what we are seeing in our block is our traditional VA block is seeing some lapses.

Speaker Change: We did see some of the same pressures that we've seen in the past if we look at fee revenue right.

Speaker Change: It's down a little bit more than three bps on a 12 month compare which we think is the best way to look at it but as we talked about in past quarters, we attribute.

Speaker Change: And we're capturing a lot of those lapses into our spread based product <unk> and so while you see that overall variable annuity line staying relatively constant there is a mix shift that's happening there between fee and spread and that's also putting a little bit pressure on the fee revenue rate hope that's helpful. Tom.

Speaker Change: At least a bit of that to the market outperformance that is creating pressure.

Speaker Change: When you have that.

Amy Friedrich: So hopefully that gives a little bit more color of how we think about it and what we're expecting for 25.

Speaker Change: Periods of market outperformance and we continue to see market outperformance of Q in Q1, this year of 40% higher than Q1 last year. So that one bps pressure is not what was expected when we talk about sort of our overall two to three bps of <unk>.

Tom Gallagher: That is yes.

Tom Gallagher: Good color I appreciate it and just quick follow up on the spec benefits side.

Wes: Um, in just switching gears, but on variable investment income, it was a little bit of a headwind this quarter. I know it's called out in significant variances, so it's excluded from your EPS guide. But when you think about the balance of the year, particularly in light of some equity market volatility in April, how are you now thinking about VII? I think some peers were kind of expecting normal VII for 2025. But I wonder if that view is Yeah, thanks, Wes, for the question. I'll have Joel address that one. Yeah, thanks for the question, Wes. As you mentioned, BII performance during the quarter is very much in line with fourth quarter 24, as well as first quarter 24.

Tom Gallagher: I heard what you said about topline and the comments around dental.

Speaker Change: Fee compression expected in normal markets. The other thing thats happening that maybe haven't gotten as much visibility as we do see pressure from.

Tom Gallagher: Mental health seem to slow pretty significantly on earned premium any any color on what was driving that.

Speaker Change: Variable annuity lapses and so what we are seeing in our block is our traditional VA block is seeing some lapses.

Amy: Now I'll turn it over to Amy to address that yes.

Amy: So I think that is much more of a function of kind of that prior year quarter over quarter comparison.

Speaker Change: In first quarter of 'twenty four there was some one time accounting adjustments, where we shifted some premium.

Amy: From the group disability over into <unk>.

Joel Pitz: And on that front, despite historically strong performance, we actually did have lower run rate hedge fund return, which is a small part of our all support follow, but it did marginally pressure first quarter 2025 results. So as a reminder regarding our ALTS portfolio, 50% of our portfolio is invested in real estate. So this results in lower concentration in private equity and hedge funds. So since the majority of our real estate is not marked to market each quarter, we're sitting in a portfolio of highly appreciated assets that aren't recognized until the time of sale. So as we expected, coming into the year, we did have minimal transaction activity in the quarter and continue to expect the majority of real estate transactions to occur in the latter half of the year.

Amy: That line. We are also then seeing that play through so so it's a comparative issue what I would say is when you strip that one time readjustments, we did out that block is actually growing in excess of the rest of our block. So we're seeing actual true higher growth rate and I would expect.

Speaker Change: That is yes.

Speaker Change: Good color appreciate it and just a quick follow up on the spec benefits side.

I heard what you said about topline in the comments there on dental.

Speaker Change: <unk> health seem to slow pretty significantly on earned premium any any color on what was driving that.

Amy: That said more clearly emerge through the rest of the year, while we don't have that noise in the first quarter to first quarter comparison.

Amy: Now I'll turn it over to Amy to address that yes.

Speaker Change: And Amy I think that noise, obviously impacted premium as just discussed but also had some impact on the loss ratio in both the group disability line and the supplemental health line as well and so.

Amy: So I think that is much more of a function of kind of that prior year quarter over quarter comparison.

Joel Pitz: So the VI Outlook for the remainder of the year is certainly dependent on, again, the severity and longevity of the market disruption, because that could impact our alts returns, as well as the timing of our planned real estate sales. So as we've always done, we'll be sure to make sure we highlight this activity as it emerges over the course of the year, so you have good visibility as far as what the difference is between long-term expected run rate. Thanks, Wes, for the questions.

Speaker Change: In first quarter of 'twenty four there was some one time accounting adjustments, where we shifted some premium.

Amy: Again it was.

Amy: Just a reclassification of some of the premium within our specialty benefit business I agree I think the fundamental question is are we seeing some sort of slowdown in attractiveness in the supplemental health and my answer is no. We are not it is actually growing at probably doubled the rate as the other product in our portfolio.

Amy: From the group disability over into <unk>.

Amy: That line. We're also then seeing that play through so it's.

Amy: It's a comparative issue what I would say is when you strip that one time readjustments, we did out that block is actually growing in excess of the rest of our block. So we're seeing actual true higher growth rate and I would expect that to more clearly emerge through the rest of the year, while we don't have that noise in there.

Amy: Got you that's good color. Thank you.

Operator: Thank you.

Tom Gallagher: Our next question comes from Tom Gallagher with Evercore ISI. Your line is Good morning. First question is, can you can you try and help us disaggregate what's going on in your 401k business by plan size? Maybe, you know, referencing large case, mid, small? You know, are there different dynamics driving those? And then also maybe touch it, touch a bit on, on just the fee rate seemed to go down a bit. When I look at fees, relative to average AUM. Thanks.

Tom Gallagher: Thanks, Tom for the questions.

Speaker Change: Thank you. Our next question comes from Sydney.

Speaker Change: With Jefferies. Your line is open.

Speaker Change: Great. Thanks.

Speaker Change: I wanted to focus on the small medium sized business market clearly the first quarter I think things are kind of business as usual, but I'm just wondering given everything that's happened so far in April and maybe it's just too early to tell but are you getting a sense.

Speaker Change: First quarter to first quarter comparison.

Speaker Change: Again it was.

Speaker Change: Any sort of changes in terms of how people are thinking just given the volatility that we're seeing in employment trends and all that kind of stuff. I mean, you guys have a pretty good view.

Speaker Change: Just a reclassification of some of the premium within our specialty benefit business I agree I think the fundamental question is are we seeing some sort of slowdown in attractiveness in the supplemental health and my answer is no. We are not it is actually growing at probably double the rate.

Speaker Change: <unk> of that market. So I'm just curious if anything is changing and the more recent term.

Chris: Yeah, you know, if you look at slide four, we did give some some color there that highlights both the strong fundamentals that we're seeing for the overall block as well as the, you know, the even stronger results regarding transfer deposits, recurring deposits and net cash flow that we saw for SMBs. Obviously, the biggest difference is the volatility that we can see in flows from large case, both on the ins and outs. But I'll ask Chris to add some more color there around just the overall dynamic. Yeah, thanks, Tom. And, you know, I think Deanna's, you know, obviously spot right spot on.

Speaker Change: The Great news is we've been able to watch the dynamics of the SMB market through many many different cycles and through every cycle that I've lived through it has been more resilient than the overall block of business of our large cases and.

Speaker Change: As the other product in our portfolio.

Speaker Change: Got you that's good color. Thank you.

Speaker Change: Thanks, Tom for the questions.

Speaker Change: Thank you. Our next question comes from Sydney.

Speaker Change: And it continues to be a source of strength and differentiation I'll, maybe ask Amy just to share a little bit more about what we're hearing from our customers.

Speaker Change: Thomas with Jefferies. Your line is open.

Sydney Thomas: Great. Thanks.

Amy: How we're thinking about impacts, but I think bottom line sitting here today, we haven't seen meaningful impacts.

Amy: But ultimately we will continue to monitor that as we go forward. So Amy yes, I think they are both right. It is a little early to make a call on this but we would be.

Chris: I mean, I think when we look at the dynamics, we continue to see very healthy, consistent patterns with our SMB business. And, you know, if I look at transfer deposits for SMBs were up nearly 30%. In the quarter, you know, we see really strong recurring deposit better than the overall average. So that's really been the core engine for us for principal and continues to be a really core engine. For us on large, it just tends to be a little more lumpy. There's fewer plans that trade and the timing of when they come in and when they go out has fairly significant impact on flows just because of the size.

Amy: A decent amount of data in April to kind of make sense.

Dan: Assessments and what I would say as Dan is exactly right.

Speaker Change: More recent term.

Dan: We arent seeing deterioration in some of the key metrics that we look at I don't want to start with a reminder, I'm going to take us back to something we shared at Investor Day last November and that is that principles block of small and mid sized companies really have been in business. A long time. So that's an average of 30 years across our group benefits.

Speaker Change: And it continues to be a source of strength and differentiation I'll, maybe ask Amy just to share a little bit more about what we're hearing from our customers.

Dan: <unk> portfolios. So that means they have seen several economic cycles, so they've gone through GSE and the pandemic and it means they've used those experiences to plan for some level of uncertainty with respect to those factors. So when I look at working capital staffing lending sources, and where relevant things like production.

Chris: But overall, you know that that's what I would say it's a bit more lumpy and volatile on the large end. But the core SMB is a bit more consistent and showing signs of strength. On a new sales basis, we're seeing strength across all segments. And so we do see a really nice pipeline across all of the segments across our 401k business. So see really positive dynamics there. And I would say the other thing that we see on the benefit from the large segment is we are seeing nice growth in participants. And those participants give us opportunities to serve those individuals, both within the plan as well as upon rollover.

Speaker Change: How we're thinking about impacts, but I think bottom line sitting here today, we haven't seen meaningful impacts.

Speaker Change: But ultimately we will continue to monitor that as we go forward. So Amy yes, I think they are both right. It is a little early to make a call on this but we would be we have a decent amount of data in April to kind of make sense.

Dan: Capacity.

Dan: They have thought ahead on all of those things. So when we talk about resiliency again companies that have been in business for three decades tend to have the ability to plan with in a little more informed way than people, who are really young companies. So our block tends to have good planning in place.

Speaker Change: Assessments and what I would say as Dan is exactly right.

Speaker Change: We arent seeing deterioration in some of the key metrics that we look at I don't want to start with a reminder, I'm going to take us back to something we shared at Investor Day last November and that is that principles block of small and mid sized companies really have been in business. A long time. So that's an average of 30 years across our group benefits.

Dan: Specific to this latest.

Dan: Economic uncertainty and again some of that is related to the tariff uncertainty we did actually field. A quick survey that Deanna mentioned, we feel that that to over 250 of our own SMB customers in early April to get a sense of kind of where their sentiment is and and one of the most interesting things that came out of that with it although <unk>.

Chris: And if we look at just retail customers, we disclosed for you on slide four, that number is up about 10% over the past year. And so the large is bringing us some real benefits as well, despite the fact that it does have a bit more volatile flow pattern. But as we talked about in past quarters, we attribute at least a BIP of that to the market outperformance. That is creating pressure when you have, you know, those periods of market outperformance. And we continue to see market outperformance in Q1 this year of 14% higher than Q1 last year.

Speaker Change: And <unk> portfolios. So that means they have seen several economic cycles, so they've gone through GSE and the pandemic and it means they've used as experiences to plan for some level of uncertainty with respect to those factors. So when I look at working capital staffing lending sources, and where relevant things like production.

Dan: <unk> are definitely saying, we think it'll have an impact we think it could impact growth theyre targeting actions towards things like supply chain adjustments customer pricing changes or even bracing for some sort of temporary margin contraction, but very few were planning to take action on things like benefits or staffing or wages and.

Speaker Change: Capacity.

Speaker Change: They have thought ahead on all of those things. So when we talk about resiliency again companies that had been in business for three decades tend to have the ability to plan with in a little more informed way than people, who are really young company. So our block tends to have good planning in place.

Dan: Qualitatively when we asked them a little bit more about that what they tell us is that they couldnt get to full staffing after 2020, and 2021 and they remember that and so right now, they're saying we'll take some.

Speaker Change: Specific to this latest economic uncertainty and again some of that is related to the tariff uncertainty. We did actually field. A quick survey that Deanna mentioned, we feel that that to over 250 of our own SMB customers in early April to get a sense of kind of where their sentiment is and and one of the most interest.

Dan: Short term changes, meaning we won't have to impact our own.

Dan: Workforce, so we take that as a really insightful.

Dan: For this marketplace and we know that this macro conditions are weighing on them. We know what's on their mind, but we really feel like our block is well positioned in this environment.

Speaker Change: <unk> things that came out of that with it although businesses are definitely saying, we think it will have an impact we think it could impact growth theyre targeting actions towards things like supply chain adjustments customer pricing changes or even bracing for some sort of temporary margin contraction, but very few were planning to take action on <unk>.

Chris: And so what we are seeing in our block is our traditional VA block is seeing some lapses, and we're capturing a lot of those lapses into our spread-based product, RYLA. And so while you see that overall variable annuity line staying relatively constant, there is a mixed shift that's happening there between fee and spread, and that's also putting a little bit of pressure on the fee revenue rate. Hope that's helpful. That that is Yeah, no, those good color. Appreciate it.

Dan: Hope that helps really helpful. Yes. It does thats very helpful. So the second question I just wanted to go back to Chris on the participant withdrawals. So on these calls you and others have kind of conditioned us to think that dollar amount of withdrawals will go up as markets go up and I think we kind of understand the reasons for that so if markets remain kind of choppy here.

Speaker Change: Like benefits or staffing or wages and.

Speaker Change: Qualitatively when we asked them a little bit more about that what they tell us is that they couldnt get to full staffing after 2020, and 2021 and they remember that and so right now, they're saying we'll take some.

Dan: Should we be expecting to see the opposite of that in other words those nominal withdrawals will decline because markets are down or just wanted to get a sense of how youre thinking about that.

Amy Friedrich: And just quick follow up on the spec benefit side. The I heard what you said about top line and the comments there on dental supplemental health seem to slow pretty significantly on earned premium any any color on what was driving that? I'll turn it over to Amy to address that. Yeah, the so so I think that is much more of a function of kind of that prior year quarter over quarter comparison. In first quarter of 24, there was some one time accounting adjustments where we shifted some premium from the group disability over into that line.

Speaker Change: Short term changes mean.

Dan: Chris Yes, Thanks, Amit I think it works both ways I mean, obviously as the market values drop the overall level of an amount of withdrawals reduces as well so.

Speaker Change: Meaning we won't have to impact our own.

Speaker Change: Workforce, so we take that as a really insightful point.

Speaker Change: 0.4, this marketplace and we know that this macro conditions are weighing on them. We know what's on their mind, but we really feel like our block is well positioned in this environment.

Dan: Would expect to see we would expect to see the Congress also play out there who need as well.

Speaker Change: Thank you.

Dan: Flows.

Speaker Change: Okay. That's very helpful. Yes. It does thats very helpful. So the second question I just wanted to go back to Chris on the participant withdrawals. So on these calls you and others have kind of conditioned us to think the dollar amount of withdrawals will go up as markets go up and I think we kind of understand the reasons for that so if markets remain kind of choppy here.

Dan: Again as you know we've said on prior quarters.

Dan: Clothes, we do monitor flows, but we don't we don't run the business for clothes, we run the business for revenue and profit.

Dan: And so when we think about sort of this year net revenue is going to be highly dependent.

Dan: On what happens in the market, but when we look at margin, we think we're going to be able to deliver margins in the top half regardless of the marketing conditions, which really focuses on sort of that profitable growth being able to withstand what's ever happening in the participant dynamics or the contract lapse dynamics and really driving as much profitable growth as we can and right.

Amy Friedrich: We're also then seeing that play through so so that it's a comparative issue. What I would say is when you strip that one time readjustments we did out, that block is actually growing in excess of the rest of our block. So we're seeing actual a true higher growth rate. And I would expect that to more clearly emerge through the rest of the year while we don't have that noise in the first quarter to first quarter comparison. And Amy, I think that noise obviously impacted premium as just discussed, but also had some impact on the loss ratio of both the group disability line and the supplemental health line as well.

Speaker Change: Should we be expecting to see the opposite of that in other words those nominal withdrawals will decline because markets are down or just wanted to get a sense of how youre thinking about that.

Speaker Change: Chris Yes. Thanks.

Chris: It works both ways I mean, obviously as the market values drop the overall level of an amount of withdrawals reduces as well. So we would expect to see we would expect to see the Comverse also play out there who need as well and I think.

Dan: Yes.

Speaker Change: Got it. Thank you. Thanks. Thank you.

Dan: Yes.

Speaker Change: Thank you. Our next question comes from Jack Morton with BMO capital markets. Your line is open.

Speaker Change: Flows.

Jack Morton: Good morning, Jack.

Speaker Change: Again as you know we've said on prior quarters close we do monitor flows, but we don't we don't run the business for clothes, we run the business for revenue and profit and so when we think about sort of this year net revenue is going to be highly dependent on what happens in the market, but when we look at margin, we think we're going to be.

Jack Morton: Hi, good morning.

Amy Friedrich: And so, again, it was, you know, just a reclassification of some of the premium within our specialty benefit business. I agree. I think the fundamental question is, are we seeing some sort of slowdown attractiveness in the supplemental health? And my answer is, no, we are not. It is actually growing at probably double the rate as the other products in our portfolio. Gotcha, that's a good caller, thank you. Thanks, Tom, for the questions. Thank you.

Jack Morton: Just firstly a follow up question on the <unk>.

Speaker Change: RIS fee rate drivers I know you talked about the impact of market outperformance in VA lapses definitely on a forward looking basis would you expect less of an impact from those drivers and is there any impact on fee rates with participants are shifting their allocations into more of a risk off products, but I guess just any other color on how you see fee rates evolving of moving forward.

Speaker Change: To deliver margin in the top half regardless of the market conditions, which really focuses on sort of that profitable growth being able to withstand what's ever happening in the participant dynamics or the contract lapse dynamics and really driving as much profitable growth as we can.

Speaker Change: Yes, Jack I'll ask Chris to address that yeah. Thanks, Jack No I mean, I think I think we expect our ongoing guidance to hold true in normal markets. We can continue to expect two to three bps of compression and thats coming from movements in or out of proprietary solutions movements from active to passive that's all captured in as well as the pricing.

Suneet Kamath: Our next question comes from Suneet Kamath with Jefferies. Your line is open. Great, thanks. I wanted to focus on the small, medium-sized business market. Clearly, the first quarter, I think things are kind of business as usual, but I'm just wondering, given everything that's happened so far in April, and maybe it's just too early to tell, but are you getting a sense of any sort of changes in terms of how people are thinking, just given the volatility that we're seeing and employment trends and all that kind of stuff? I mean, you guys have a pretty good view of that market, so I'm just curious if anything is changing in the more recent...

Speaker Change: Yes.

Speaker Change: Got it. Thank you. Thank you. Thank you.

Speaker Change: Thank you. Our next question comes from Jack Morton with BMO capital markets. Your line is open.

Speaker Change: <unk>, both on new sales and retention basis, So that's where that is coming from when we think about the movement too.

Speaker Change: Good morning, Jack.

Jack Morton: Hi, good morning.

Speaker Change: Just firstly a follow up question on the <unk>.

Speaker Change: Thank you said spread base that really wouldn't impact the fee revenue rate. If we look at our total revenue right, but it wouldn't impact fee revenue right. So it really is market outperformance that is driving a little bit escalated and than that.

Speaker Change: That's the right drivers I know you talked about the impact of market outperformance in VA lapses definitely on a forward looking basis would you expect lots of impact from those drivers.

Speaker Change: Any impact on fee rates with participants are shifting allocations into more of a risk off products I guess, just any other color on how you see fee rates evolving of moving forward.

Speaker Change: <unk> labs, that's creating the additional pressure on fee revenue rate over and above what we would normally expect.

Deanna Strable: You know, the great news is we've been able to watch the dynamics of the SMB market through many, many different cycles. And through every cycle that I've lived through, it has been more resilient than the overall block of business of all large cases. And it continues to be a source of strength and differentiation.

Speaker Change: Does that answer your question.

Speaker Change: It does yes. Thank you.

Speaker Change: The follow up on the pension risk transfer market outlook.

Speaker Change: Good start to the year for principal in terms of new business and I think you referenced positive momentum earlier I'm. Just wondering if you expect any any near term kind of headwinds from market volatility and any other color on the outlook for that market.

Amy Friedrich: I'll maybe ask Amy just to share a little bit more about what we're hearing from our customers, how we're thinking about impacts, but I think bottom line sitting here today, we haven't seen meaningful impacts. But ultimately, we'll continue to monitor that as we go forward.

Speaker Change: Both on new sales and retention basis, So that's where that is coming from when we think about the movement to I think you said spread base that really wouldn't impact the fee revenue rate. If we look at our total revenue right, but it wouldn't impact fee revenue right. So it really is market outperformance that is driving a little bit escalated and then.

Speaker Change: Yes, yes.

Speaker Change: Thanks Jack.

Speaker Change: We don't I mean, I would think it's expected the industry estimates expect another strong year for PRT transactions. When you look at the funding levels of defined benefit plans, while their funding levels have come down there is still over 100% and we still have a good pipeline of opportunities. So good start to the year, we're still focused on our <unk>.

Amy Friedrich: So, Amy? Yeah, I think you're both right. It is a little early to make a call on this. But we would be, you know, we have a decent amount of data in April to kind of make some assessments. And what I would say is Deanna is exactly right. We aren't seeing deterioration in some of the key metrics that we look at.

Speaker Change: VA labs, that's creating the additional pressure on fee revenue rate over and above what we would normally expect.

Amy Friedrich: I do want to start with a reminder. I'm going to take us back to something we shared at Investor Day last November. And that is that principles block of small and midsize companies really have been in business a long time. So, that's an average of 30 years across our group benefits and WSRS portfolios. So, that means they've seen several economic cycles. So, they've gone through GFC and the pandemic. And it means they've used those experiences to plan for some level of uncertainty with respect to those factors. So, when I look at working capital, staffing, lending sources, and where relevant things like production capacity, they have thought ahead on all of those things.

Jack Morton: Sure that we get the right return level for the sales that we're putting on and for the capital that we're investing in that business, but we expect full year 25 at least right now to be about the same ballpark as it was in 24 on PRT sales, yes. The other thing Jack I would mention there is if you know if that employers thinking of moving into a PRT they've DRAM.

Does that answer your question.

Speaker Change: It does yes. Thank you.

Speaker Change: The follow up on the pension risk transfer market outlook.

Speaker Change: Good starts to the year for principal in terms of new business and I think you referenced positive momentum earlier I'm. Just wondering if you expect any any near term kind of headwinds from market volatility.

Speaker Change: Risk in their portfolio.

Speaker Change: To be much more based on you know less riskier assets, which then it does.

Speaker Change: The color on the outlook for that market.

Speaker Change: Yes, yes.

Speaker Change: Thanks Jack.

Speaker Change: The the equity movements less impactful to how people think about transacting in that business.

Speaker Change: We don't I mean, I think it's expected the industry estimates expect another strong year for PRT transactions. When you look at the funding levels of defined benefit plans, while their funding levels have come down there is still over 100% and we still have a good pipeline of opportunities. So good start to the year, we're still focused on our <unk>.

Speaker Change: Thank you.

Speaker Change: Yeah.

Speaker Change: Thank you.

Amy Friedrich: So, when we talk about resiliency, again, companies that have been in business for three decades tend to have the ability to plan in a little more informed way than people who are really young companies. So, our block tends to have good planning in place.

Speaker Change: Our next question comes from Mike Ward with UBS. Your line is now open.

Speaker Change: Thank you good morning.

Speaker Change: Sure that we get the right return level for the sales that we're putting on and for the capital that we're investing in that business, but we expect full year 25 at least right now to be about the same ballpark as it was in 24 on PRT sales, yes. The other thing Jack I would mention there is if you know if that employers thinking of moving into a PRT they've de <unk>.

Mike Ward: I recognize there's a lot of uncertainty out there, but I was just wondering if you could comment on how you are approaching the buyback and this volatility.

Amy Friedrich: Specific to this latest economic uncertainty, and again, some of that is related to the tariff uncertainty, we did actually field a quick survey that Deanna mentioned. We fielded that to over 250 of our own SMB customers in early April to get a sense of kind of where their sentiment is. And one of the most interesting things that came out of that was that although businesses are definitely saying we think it will have an impact, we think it could impact growth, they are targeting actions towards things like supply chain adjustments, customer pricing changes, or even bracing for some sort of temporary margin contraction, but very few were planning to take action on things like benefits or staffing or wages.

Speaker Change: Yeah, Great question Mike.

Speaker Change: What I would say there is we're in a strong capital position, we had strong deployment in the in the quarter and if I think about our capital deployment strategy. It remains grounded in long term discipline and flexibility. We haven't made any changes to our strategy and we will continue to be prudent and returning excess capital to shareholders, but I will say if Joe has any.

Speaker Change: Risk in their portfolio.

Speaker Change: To be much more based on you know.

Speaker Change: Less riskier assets, which then it does.

Speaker Change: It makes us the equity movements less impactful to how people think about transacting in that business.

Joe: Thing to add there Mike just to cover our capital deployment plans that we communicated outlook are very much intact.

Speaker Change: Thank you.

Speaker Change: Our next question comes from Mike Ward with UBS. Your line is now open.

Joe: It has demonstrated the $200 million of share buybacks. We did during the first quarter. So we have an active share buyback program in place during the second quarter. So on that front, we're well on our way to delivering on the $700 million to $1 billion a share back like guidance on 2025.

Speaker Change: Thank you good morning.

Speaker Change: I recognize there's a lot of uncertainty out there, but I was just wondering if you could comment on how you are approaching the buyback and this volatility.

Suneet Kamath: And qualitatively, when we asked them a little bit more about that, what they tell us is that they couldn't get to full staffing after 2020 and 2021, and they remember that. And so, right now, they're saying we'll take some short-term changes, meaning we won't have to impact our own workforce. So, we take that as a really insightful point for this marketplace, and we know that this macro conditions are weighing on them. We know it's on their mind, but we really feel like our block is well-positioned in this environment. That helps me. Yeah, it does. That's very helpful.

Joe: And also an indication of our capital strength of the ones that dividend increase.

Joe: We're committed to that 40% dividend payout ratio of 9% trailing 12 month increase over the prior period and so again, we feel really good about our ability to deliver on our capital deployment plans and as Deanna said, we will continue to be disciplined and balanced our deployment.

Speaker Change: Yeah, Great question Mike.

Joe: Okay. Thank you.

Joe: So in front of me.

Joe: Yes.

Joe: Maybe I was thinking maybe for Kabul.

Speaker Change: Thing to add there Mike just to cover our capital deployment plans that we communicated outlook are very much intact.

Speaker Change: From your viewpoint, you guys touch a lot of different asset classes I was just wondering if if.

Chris: So the second question, I just wanted to go back to Chris on the participant withdrawals. So, you know, on these calls, you and others have kind of conditioned us to think that dollar amount of withdrawals will go up as markets go up. And I think we kind of understand the reasons for that. So if markets remain kind of choppy here, should we be expecting to see the opposite of that? In other words, those nominal withdrawals will decline, because markets are down or just want to get a sense of how you're thinking about Yeah, thanks, Suneet.

Speaker Change: It has demonstrated the $200 million of share buybacks. We did during the first quarter. So we have an active share buyback program in place during the second quarter. So on that front, we're well on our way to delivering on the $700 million to $1 billion a share back like guidance on 2025.

Joe: If you've seen any pockets of weakness.

Joe: Or is it is everything kind of like in a holding pattern across credit. Thank you.

Yeah.

Joe: I think you know come already reiterated that we're seeing some really good wins coming through.

Speaker Change: And also an indication of our capital strength of the ones that dividend increase.

Speaker Change: Committed that 40% dividend payout ratio of 9% trailing 12 month increase over the prior period and so again, we feel really good about our ability to deliver on our capital deployment plans and as Deanna said, we will continue to be disciplined and balanced our deployment.

Speaker Change: And ultimately some of that is even funding as we sit here in April during extreme volatility, but maybe you can talk about some of those asset classes, where we're seeing strength, yes, absolutely Mike. So I think it's a great question because I do thing post April credit spreads have widened across across everything.

Chris: You know, I think it works both ways. I mean, obviously, as the market values drop, the overall level of an amount of withdrawals reduces as well. So we would expect to see, we would expect to see the converse also play out there, Suneet, as well. I mean, I think, you know, flows, again, as you know, we've said on prior quarters, flows, we do monitor flows, but we don't, we don't run the business for flows, we run the business for revenue and profit. And so when we think about sort of this year, you know, net revenue is going to be highly dependent on what happens in the market.

Speaker Change: Okay. Thank you.

Speaker Change: So what do I do think is happening is there is activity picking up in how you access credit from clients perspective.

Speaker Change: So in front of me.

Speaker Change: Yes.

Speaker Change: Maybe I was thinking maybe for a combo.

Speaker Change: From your viewpoint, you guys touch a lot of different asset classes I was just wondering if if.

Speaker Change: You heard us mention that we are seeing increased activity in places like high yield and even preferred securities and one of the reasons. We are seeing that is over the last few years. Many clients chose riskier credit managers, particularly given the environment, we're in and the strength of the economy and as the <unk>.

Speaker Change: If you've seen any pockets of weakness.

Speaker Change: Or is it is everything kind of like in a holding pattern across credit. Thank you.

Speaker Change: Yeah.

Speaker Change: I think com already reiterated that we're seeing some really good wins coming through.

Suneet Kamath: But when we look at margin, we think we're going to be able to deliver margin in the top half, regardless of the marketing conditions, which really focuses on sort of that profitable growth, being able to withstand what's ever happening in the participant dynamics or the contract last dynamics, and really driving as much profitable growth as we can in RIS. Got it. Thank you.

Speaker Change: Volatility of the economy increases.

Speaker Change: See a lot of investors are starting to not relocate to a different kind of a credit manager and we're seeing the benefit of that across our fixed income business. In fact over time, you'll probably see that benefit even come through our real estate debt business. One of the things. We started a few years ago, which is scaling up quite quite well is that infrastructure of that business.

So what do I do think is happening is there is activity picking up in how you access credit from clients perspective.

Jack Matten: Our next question comes from Jack Motten with BMO Capital Markets.

Which primarily access as long duration sort of investment in grid infrastructure growth and access space, where no credit.

Jack Matten: Your line Good morning, Jack. Hi, good morning.

Chris: This is firstly a follow-up question on the RAS fee rate drivers. I know you talked about the impact of market outperformance and VA lapses. I guess on a forward-looking basis, would you expect less of an impact from those drivers? Is there any impact on fee rates as participants are shifting their allocations into more risk-off products? I guess just any other color how you see fee rates evolving moving forward.

Speaker Change: Interest is substantially going up so he is the markets have become more volatile, but I think theres a flight to.

Speaker Change: Better more conservative credit manager would certainly plays to our strength right now.

Speaker Change: Thank you.

Speaker Change: The next question.

Speaker Change: Volatility of the economy increases.

Speaker Change: Our final question comes from Jimmy <unk> with J.

Speaker Change: See a lot of investors trying to not relocate to a different kind of a credit manager and we're seeing the benefit of that across our fixed income business. In fact over time, we will probably see that benefit even come through our real estate debt business. One of the things. We started a few years ago, which is scaling up quite quite well is that infrastructure of that business.

Speaker Change: P. Morgan Securities Your line is open.

Chris: Yeah, Jack, I'll ask Chris to address that. Yeah, thanks, Jack. No, I mean, I think I think we expect our ongoing guidance to hold true in normal markets, we can continue to expect two to three bits of compression. And that's coming from movements in or out of proprietary solutions, movements from active to passive, that's all captured and as well as the pricing, both on new sales and retention basis. So that's where that fee is coming from. When we think about the movement to, I think you said a spread base that really wouldn't impact the fee revenue rate, it would look at our total revenue rate, but it wouldn't impact fee revenue rate.

Speaker Change: Good morning, Good morning, Hi, I had a question just on your flows.

Speaker Change: Across the three main businesses.

Speaker Change: <unk> asset management and international pension your comments on the pipeline have been generally constructive but flows are weak across.

Speaker Change: Which primarily access as long duration sort of investment in grid infrastructure growth and that's a space where now crowded.

Speaker Change: All of those businesses and I think you did outline of the loss of a couple of large mandates in both of them but.

Speaker Change: Maybe just give us a little bit more insight into what's going on in terms of flows.

Speaker Change: Interest is substantially going up so as the markets have become more volatile, but I think there is a flight to.

Speaker Change: Yes, maybe I'll talk I'll.

Speaker Change: I'll have Tom I'll start with investment management and international pension.

Speaker Change: Better more conservative credit manager, which certainly plays to our strength right now.

Chris: So it really is market outperformance that is driving a little bit escalated. And then that VA lapse that's creating the additional pressure on fee revenue rate over and above what we would normally expect. Thank you. It does.

Speaker Change: I think the dynamics that we've continued to talk to you about.

Speaker Change: Thank you.

Speaker Change: Really resonate in all of those businesses, which is all flows are not created equally and even with the significant outflows that we saw in investment management.

Speaker Change: Thanks next question.

Speaker Change: Our final question comes from Jimmy <unk> with JP.

Jimmy: P. Morgan Securities Your line is open.

Speaker Change: Good morning, Good morning, Hi, I had a question just on your flows.

Jack Matten: Yes, thank you.

Speaker Change: In the first quarter the actual run rate revenue on those negative flows were actually positive.

Jack Matten: And to follow up on the pension risk transfer market outlook, the good start to the year for principal in terms of new business, and I think you referenced positive momentum earlier.

Jimmy: Across the three main businesses.

Speaker Change: And so again I know, it's a important metric. It's one we focus on but ultimately we're here to drive revenue and earnings growth for our shareholders, but ultimately maybe some additional color and then we didn't talk about international pension and Brazil was probably a little more pressured this quarter that we would typically see in the first quarter absolutely.

Jimmy: Asset management and international pension your comments on the pipeline have been generally constructive but flows are weak across.

Jack Matten: I'm just wondering if you expect any near-term kind of headwinds from market volatility and any other color on the outlook for that market? Yeah, yeah, thanks, Jack. We don't I mean, I think it's expected the industry estimates expect another strong year for PRT transactions. When you look at the funding levels of the defined benefit plans, while the funding levels have come down, there's still over 100%. And we still have a good pipeline of opportunities. So, you know, good start to the year, we're still focused on making sure that we get the right return level for the sales that we're putting on and for the capital that we're investing in that business.

Jimmy: All of those businesses and I think you did outline of the loss of a couple of large mandates in both of them but.

Jimmy: Maybe just give us a little bit more insight into what's going on in terms of flows.

Speaker Change: Jimmy Good morning.

Jimmy: Yes, maybe I'll talk I'll.

Speaker Change: I'll touch upon quickly with Deanna mentioned in our international pension businesses. There is generally seasonality in that flow, so a little bit more muted in Brazil.

Jimmy: I'll have Ken I'll start with investment management and international pension.

Jimmy: And I think the dynamics that we've continued to talk to you about.

Speaker Change: We believe that it's going to actually improve as the year goes by we are actually taking some management actions in that direction and one of the reasons. It was pressured in Brazil was really macro related the very very high rates in Brazil has certainly caused a little bit of pressure on those pension flows, but we do we do we are working.

Jimmy: Really resonate in all of those businesses, which is all flows are not created equally and even with the significant outflows that we saw in investment management in.

Jack Matten: But we expect for your 25, at least right now to be about the same ballpark as it was in 24 on PRT sales.

Jimmy: In the first quarter the actual run rate revenue on those negative flows were actually positive.

Jack Matten: Yeah, the other thing, Jack, I'd mentioned there is if you know, if an employer is thinking of moving into a PRT, they've de-risked their portfolio to be much more based on, you know, less riskier assets, which then does make the equity movements less impactful to how people think about transacting in that business. Thank you. Thanks.

Jimmy: So again I know, it's a important metric it's one we focus on but ultimately we're here to drive revenue and earnings growth for our shareholders, but ultimately maybe some additional color and then we didn't talk about international pension and Brazil was probably a little more pressured this quarter that we would typically see in the first quarter.

Speaker Change: And actually newer products that will work well in that environment. The other thing I would highlight for you. When you think about cash flow. It is given we are such a large private market manager for us. While we can continue to capital raise Mcf is dependent on deployment and one of the things. We are focused on is increasing the rate of deployment.

Jimmy: Jimmy Good morning.

Jimmy: I'll touch upon quickly with Deanna mentioned in an international pension businesses. There is generally seasonality and that flows so a little bit more muted in Brazil.

Speaker Change: And I'll give you a couple of figures.

Speaker Change: Give me give me great comfort as we think about our deployment, we have certainly increase how we deploy capital certainly the market gives us more opportunities at times as well.

Mike Ward: Our next question comes from Mike Ward with UBS. Your line is now open. Thank you. Good morning.

Jimmy: We believe that it's going to actually improve as the year goes by we are actually taking some management actions in that direction and one of the reasons. It was pressured in Brazil was really macro related the very very high rates in Brazil has certainly caused a little bit of pressure on those pension flows, but we do we do we are working on.

Speaker Change: We deployed almost 135 billion on behalf of third party clients in <unk>. This will not only generate fees, but over time and generate performance fees for us that is up almost 200 million more for <unk> and I expect that pace of deployment to pick up in fact, if I include affiliated revenue accretive deployments because.

Deanna Strable: I recognize there's a lot of uncertainty out there, but I was just wondering if you could comment on how you're approaching the buyback in this volatility. Yeah, great question, Mike. You know, I think what I would say there is we're in a strong capital position. We had strong deployment in the in the quarter. And if I think about our capital deployment strategy, it remains grounded in long term discipline and flexibility. We haven't made any changes to our strategy, and we'll continue to be prudent and returning excess capital to shareholders.

Jimmy: Actually newer products that will work well in that environment. The other thing I would highlight for you. When you think about cash flow. It is given we are such a large private market manager for us. While we can continue to capital raise Mcf is dependent on deployment and one of the things. We are focused on is increasing the rate of deployment.

Speaker Change: Are you kind of think about these things in terms of how your mix of business is improving and your revenue is accretive to the book of business. It would be close to $2 billion. This quarter. So I think you wanted to think about revenue as well as the pace of deployment rehabbing generates and grows our book of business overall.

Joel Pitz: But I'll see if Joel has anything to add there. Yeah, Mike, just to complement that, you know, our capital deployment plans that we communicate in Outlook are very much intact. And that's demonstrating the $200 million of shared buybacks we did during the first quarter. So we have an active shared buyback program in place during the second quarter. So on that front, we're well on our way to delivering on the $700 million to $1 billion of shared buyback guidance on 2025. And also an indication of our capital strength is the one cent dividend increase. You know, we're committed to that 40% dividend payout ratio, a 9% trailing 12 month increase over the prior period.

Jimmy: And I'll give you a couple of figures.

Speaker Change: Chris do you have anything else on flow dynamics, yes, I mean, I think for me I think I think.

Jimmy: Give me give me great comfort as we think about our deployment.

Jimmy: You have certainly increase how we deploy capital certainly the market gives us more opportunities at times as well.

Speaker Change: We continue to expect.

Speaker Change: Net cash flow to be pressured due to the same trends in flow patterns and seasonality that we've experienced in prior quarters, but again, we continue to deliver 5% net revenue growth. This quarter, we delivered margins at the top end at 41% and that's kind of how we're thinking about the business. We did have one large contract labs.

Jimmy: We deployed almost $1 35 billion on behalf of third party clients in <unk>. This will not only generate fees, but over time generate performance fees for us that is up almost 200 million more for <unk> and I expect that pace of deployment to pick up in fact, if I include affiliated revenue accretive deployments because.

Speaker Change: So we mentioned last quarter that was a contract that we terminated its not that the customer left us, but with our focus on profitable business. We did decide that the customer would be better somewhere else and.

Mike Ward: And so again, we feel really good about our ability to deliver on our capital deployment plans. And as Deanna said, we'll continue to be disciplined and balance our deployment. Okay, thank you.

Jimmy: You kind of think about these things in terms of how your mix of business is improving and your revenue was accretive to the book of business. It would be close to 2 billion. This quarter. So I think you wanted to think about revenue as well as the pace of deployment rehabbing generates and grows our book of business overall.

Speaker Change: And that was $2 three.

Speaker Change: Fee outflow for us in the quarter that certainly impacted flows I previously talked about the participant withdrawal rates in our loans and hardships again loans and hardships.

Mike Ward: Thank you, it was a pleasure.

Mike Ward: Yeah, maybe I was thinking maybe for Kamal, from your viewpoint, you know, you guys touch a lot of different asset classes. I was just wondering if, if you see any pockets of weakness? Or is it is everything kind of like in a holding pattern across credit?

Jimmy: Chris do you have anything else on flow dynamics, yes, I mean, I think for me I think I think.

Speaker Change: Up modestly in the rate largely in line, but they are up modestly, but it's less than 10% of overall impact on flows. So that's not going to be a big driver of the flow dynamics.

Jimmy: We continue to expect.

Jimmy: Net cash flow to be pressured due to the same trends in flow patterns and seasonality that we've experienced in prior quarters, but again, we continue to deliver 5% net revenue growth. This quarter, we delivered margins at the top end at 41% and that's kind of how we're thinking about the business. We did have one large contract labs.

Speaker Change: So hopefully hopefully that helps Jimmy.

Additional dynamic Chris and you can correct me, if I'm wrong, but an extreme periods of volatility you do see plan activity may be impacted obviously that benefit us on the lapse side.

Kamal Bhatia: Thank Yeah, you know, I think, you know, Kamal already reiterated that we're seeing some really good wins coming through. And ultimately, some of that is even funding as we sit here in April during extreme volatility. But maybe you can talk about some of those asset classes where we're seeing strength. Yeah, absolutely, Mike. So I think it's a great question, because I do think post April, credit spreads have widened across everything. And so what I do think is happening is there is activity now picking up in how you access credit from client's perspective. You know, you heard us mention that we are seeing increased activity in places like high yield, and even preferred securities.

Speaker Change: But it could impact the timing of some of the transfer deposits, but again some of that will play out is as we go forward I agree with that here's a volatility plan sponsors are less reluctant to go into a blackout period with their plans.

Jimmy: So we mentioned last quarter that was a contract that we terminated its not that the customer left us, but with our focus on profitable business. We did decide that the customer would be better somewhere else and.

Jimmy: And that was $2 three.

Speaker Change: And so you could see lower transfer deposits throughout the year, but on the opposite side, we would see higher retention, which is a positive for us.

Jimmy: Fee outflow for us in the quarter that certainly impacted flows I previously talked about the participant withdrawal rates in our loans and hardships again loans and hardships.

Speaker Change: Thanks, Jeremy.

Speaker Change: Just on your comments on the loss of lower fee business in D. C. And then also in asset management has there been a change in your view on how you approach the business end and versus this before just trying to get a sense of how the low fee business got on your platform to begin with is it all acquisition related.

Jimmy: Up modestly in the rate largely in line, but they are up modestly, but it's less than 10% of overall impact on flows. So that's not going to be a big driver of the flow dynamics.

Kamal Bhatia: And one of the reasons we are seeing that is over the last few years, many clients chose riskier credit managers, particularly given the environment we were in and the strength of the economy. And as the volatility of the economy increases, we see a lot of investors trying to now reallocate to a different kind of a credit manager. And we're seeing the benefit of that across our fixed income business. In fact, over time, we'll probably see that benefit even come through our real estate debt business. One of the things we started a few years ago, which is scaling up quite, quite well is our infrastructure debt business, which primarily accesses long duration sort of investment grade infrastructure growth.

Speaker Change: So hopefully hopefully that helps Jimmy.

Speaker Change: Additional dynamic Chris and you can correct me, if I'm wrong, but an extreme periods of volatility you do see plan activity may be impacted obviously that benefit us on the lapse side.

Speaker Change: Or there's just been a view or a shift in your view on how you're managing the business and being more selective than maybe a few years ago.

But it could impact the timing of some of the transfer deposits, but again some of that will play out is as we go forward I agree with that here's a volatility plan sponsors are less reluctant to go into a blackout period with their plans.

Speaker Change: Yeah, I think Chris most of those have been where part of the IRT transaction that has impacted us more over the last but maybe talk just to how we are approaching new sales as well, yes, I mean, I think as we think about the role of the large players in retirement, it's really important component of that.

Speaker Change: And so you could see lower transfer deposits throughout the year, but on the opposite side, we would see higher retention, which is a positive for us.

Speaker Change: It brings scale it gives us opportunity to spread those fixed costs across more participants and it gives us more participants to serve and to serve them individually as they look to manage both the qualified and nonqualified money when.

Speaker Change: Thanks, Jeremy.

Speaker Change: Just just on your comments on the loss of lower fee business in D. C. And then also in asset management has there been a change in your view on how you approach the business end and versus this before just trying to get a sense of how the low fee business cut on your platform to begin with is it all acquisition related.

Kamal Bhatia: And that's a space where now credit interest is substantially going up. So yes, the markets have become more volatile, but I think there's a flight to a better, more conservative credit manager, which certainly pays to our strengths right now. Thank you.

Speaker Change: When they look to rollout the money or do something else with those funds. So large plays an extremely important role, but it's not an area, where we generally get a lot of proprietary asset capture for instance in likes and we have to think about those plans.

Speaker Change: Or there's just been a view or a shift in your view on how you're managing the business and being more selective than maybe a few years ago.

Jimmy Buhler: Our final question comes from Jimmy Buhler with JPMorgan Securities.

Speaker Change: Thoughtfully as we as we put them on but a large percentage of them came from the acquisition, but we've been very successful in gaining some momentum in the large market to particularly with the consultant channel.

Deanna Strable: Good morning. Hi, I had a question just on your flows across the three main businesses, RIS, asset management and international pension. Your comments on the pipeline have been generally constructive, but flows were weak across all of those businesses. And I think you did outline the loss of a couple of large mandates in both of them, but maybe just give us a little bit more insight into what's going on in terms of flows.

And you can comment from your perspective, no Jamie the only thing I can.

Speaker Change: I'll give you two data points, which is a lot of this is legacy business and I think there are probably two things to keep in mind as you think about us ones one odd incentives on growing the book is heavily focused on revenue right rather than just growth sales and that's definitely a modernization. The other piece is as we have integrated <unk>.

Speaker Change: It brings scale that gives us opportunity to spread those fixed cross costs across more participants and it gives us more participants to serve and to serve them individually as they look to manage both the qualified and nonqualified money.

Speaker Change: <unk>, we are naturally benefiting from the fact that the international clients when they buy global product are willing to pay a premium, particularly in the asset classes. We are in so as the book becomes more global and we actually execute really well on our strategy of growing sales in Asia, and Latin America back for a while.

Deanna Strable: Yeah, maybe I'll talk to, I'll have Kamal start with investment management and international tension. And I think the dynamics that we've continued to talk to you about, really resonate in all of those businesses, which is all flows are not created equally. And even with the significant outflows that we saw in investment management, in the first quarter, the actual run rate revenue on those negative flows were actually positive. And so again, I know it's an important metric, it's one we focus on, but ultimately, we're here to drive revenue and earnings growth for our shareholders. But ultimately, maybe some additional color.

Speaker Change: Not fully as we as we put them on but a large percentage of them came from the acquisition, but we've been very successful in gaining some momentum in the large market to checking with the consultant channel.

Speaker Change: It does higher revenues higher quality assets, which will certainly benefit the business over the long period of time.

Jamie: And you can comment from your perspective, no Jamie the only thing I can.

Speaker Change: Thanks, Jimmy Thank you. Thank you.

Jamie: I'll give you two data points, which is a lot of this is legacy business and I think there are probably two things to keep in mind as you think about us once one odd incentives on growing the book is heavily focused on revenue right rather than just growth sales and that's definitely a modernization. The other piece is as we have integrated <unk>.

Speaker Change: Thank you we have reached the end of our Q&A.

Speaker Change: Mr. <unk> your closing comments please.

Kamal Bhatia: And then we didn't talk about international pension and Brazil was probably a little more pressured this quarter than we would typically see in the first quarter.

Yes. Thank you as we close out today's call I do want to thank you all for joining us and for your thoughtful questions. Our first quarter results are a testament to the strength of our diversified business. The proactive steps, we're taking to mitigate risks our disciplined execution and the clarity and the strength of our strategy amid market volatility and economic uncertainty.

Kamal Bhatia: Absolutely.

Kamal Bhatia: Deanna, Jimmy, good morning. I'll touch upon quickly what Deanna mentioned in our international pension businesses. There is generally seasonality in that flow. So a little bit more muted in Brazil, we believe that it's going to actually improve as the year goes by, we are actually taking some management actions in that direction. And one of the reasons it was pressured in Brazil was really macro related, the very, very high rates in Brazil have certainly caused a little bit of pressure on those pension flows. But we do we do we are working on actually newer products that will work well in that environment.

Jamie: And we are naturally benefiting from the fact that the international clients when they buy global product are willing to pay a premium, particularly in the asset classes. We are in so as the book becomes more global and we actually execute really well on our strategy of growing sales in Asia, and Latin America back for a while.

Speaker Change: We remain confident in our ability to deliver through cycles and create long term value for our customers and our shareholders. We're investing in our future, we're staying close to them being there for our customers and we're operating with the same resilience and purpose that has defined us for the last 145 years. Thank you for your time today. Thank you for your continued.

Jamie: Does higher revenue higher quality assets, which will certainly benefit the business over the long period of time.

Jimmy: Thanks, Jimmy Thank you. Thank you.

Speaker Change: Support we look forward to connecting with many of you in the near future have a great day.

Jamie: Thank you we have reached the end of our Q&A.

Kamal Bhatia: The other thing I would highlight for you when you think about cash flows is given we are such a large private market manager, for us, while we can continue to capital raise, NCF is dependent on deployment. And one of the things we are focused on is increasing the rate of deployment. And I'll give you a couple of figures that give me give me great comfort as we think about our deployment, we have certainly increased how we deploy capital, certainly the market gives us more opportunities at times as well. This, we deployed on almost 1.35 billion on behalf of third party clients.

Speaker Change: Thank you. This concludes today's conference call you.

Mr. <unk> your closing comments please.

Jamie: Yeah. Thank you as we close out today's call I do want to thank you all for joining us and for your thoughtful questions. Our first quarter results are a testament to the strength of our diversified business. The proactive steps, we're taking to mitigate risks our disciplined execution and the clarity and the strength of our strategy amid market volatility and economic uncertainty.

Speaker Change: You may disconnect your lines at this time.

Speaker Change: And we thank you for your participation.

We remain confident in our ability to deliver through cycles and create long term value for our customers and our shareholders. We're investing in our future, we're staying close to them being there for our customers and we're operating with the same resilience and purpose that has defined us for the last 145 years. Thank you for your time today. Thank you for your continued.

Kamal Bhatia: In one cue, this will not only generate fees, but over time generate performance fees for us. That is up almost 200 million more from 4Q. And I expect that pace of deployment to pick up. In fact, if I include affiliated revenue accretive deployments, because you kind of think about these things in terms of how your mix of business is improving, and your revenue is accreting to the book of business, it would be close to 2 billion this quarter. So I think you want to think about revenue as well as the pace of deployment we have with generates and grows our book of business overall.

Jamie: Support we look forward to connecting with many of you in the near future have a great day.

Jamie: Thank you. This concludes today's conference call you.

Jamie: You may disconnect your lines at this time and we thank you for your participation.

Jamie: Okay.

Jamie: [music].

Jamie: Hmm.

Jamie: <unk>.

Jamie: Okay.

Deanna Strable: I think, you know, we continue to expect A-V net cash flow to be pressured due to the same trends and flow patterns and seasonality that we've experienced in prior quarters. But again, we continue to deliver 5% net revenue growth this quarter. We delivered margins at the top end at 41%. And that's kind of how we're thinking about the business.

Jamie: [music].

Jamie: Okay.

Jamie:

Jamie: Okay.

Jamie: Hum.

Jamie: Okay.

Jamie: [music].

Jamie: No.

Jamie: Yeah.

Jamie: Yes.

Chris: We did have one large contract lapse that we mentioned last quarter. That was a contract that we terminated. It's not that the customer left us. But with our focus on profitable business, we did decide that that customer would be better somewhere else. And that was, you know, 2.3 low fee outflow for us in the quarter. That certainly impacted flows. I previously talked about the participant withdrawal rates and the loans and hardships. Again, loans and hardships up modestly and the rate largely in line, but they're up modestly. But it's less than 10% of overall impact on flow.

Jamie: Hmm.

Jamie: [music].

Jamie: Okay.

Okay.

Jamie: Okay.

Jamie: Sure.

Jamie: Yes.

Yeah.

Jamie: Okay.

Jamie: Yeah.

Chris: So, that's not going to be a big driver of the flow dynamics. So, hopefully that helps, Jimmy. Yeah, the only additional dynamic, Chris, and you can correct me if I'm wrong. But in extreme periods of volatility, you do see plan activity may be impacted. Obviously, that'd benefit us on the lapse side, but could impact the timing of some of the transfer deposits. But again, some of that will play out as we go forward.

Chris: Yeah, I agree with that. Periods of volatility, plan sponsors are less reluctant to go into a blackout period with their plans. And so, you could see lower transfer deposits throughout the year. But on the opposite side, we'd see higher retention, which is a positive for us.

Chris: Thanks, Jimmy. Just on your comments on the loss of lower fee business in DC and then also in asset management, has there been a change in your view on how you approach the business versus before, just trying to get a sense of how the low fee business got on your platform to begin with? Is it all acquisition related or there's just been a shift in your view on how you're managing the business and being more selective than maybe a few years ago? Yeah, I think Chris, most of those have been were part of the IRT transaction that has impacted us more over the last but maybe talk just to how we're approaching new sales as well.

Chris: Yeah, I mean, I think as we think about the role that large plays in retirement, it's really important component of it brings scale, it gives us opportunity to spread those six cross costs across more participants, and it gives us more participants to serve and to serve them individually as they look to manage both their qualified and non-qualified money when they look to roll out the money or do something else with those funds. So, large plays an extremely important role, but it's not an area where we generally get a lot of proprietary asset capture, for instance, and we have to think about those plans thoughtfully as we as we put them on, but the large percentage of them came from the acquisition, but we've been very successful in gaining some momentum in the large market too, particularly with the consultant channel.

Jamie: [music].

Kamal Bhatia: Anything, Kamal, from your perspective? No, Jimmy, the only thing, I'll give you two data points, which is a lot of this is legacy business. And I think there are probably two things to keep in mind as you think about us. One, our incentives on growing the book is heavily focused on revenue rate rather than just growth sales. And that's definitely a modernization. The other piece is, as we have integrated PGI and PI, we are naturally benefiting from the fact that international clients, when they buy global products, are willing to pay a premium, particularly in the asset classes we are in.

Kamal Bhatia: So as the book becomes more global, and we actually execute very well on our strategy of growing sales in Asia and Latin America, that provides us higher revenue, higher quality assets, which will certainly benefit the business over the long period of time.

Jimmy Buhler: Thanks, Jimmy.

Deanna Strable: Thank you.

Deanna Strable: We have reached the end of our Q&A.

Deanna Strable: Ms. Strable, your closing comments. Yeah, thank you. As we close out today's call, I do want to thank you all for joining us and for your thoughtful questions. Our first quarter results are a testament to the strength of our diversified business, the proactive steps we're taking to mitigate risk, our disciplined execution and the clarity and the strength of our strategy. Amid market volatility and economic uncertainty, we remain confident in our ability to deliver through cycles and create long term value for our customers and our shareholders. We're investing in our future. We're staying close to and being there for our customers.

Deanna Strable: And we're operating with the same resilience and purpose that has defined us for the last 145 years. Thank you for your time today. Thank you for your continued support.

Operator: We look forward to connecting with many of you in the near future. Have a great day. Thank you.

Operator: This concludes today's conference. Disconnect your lines at this time and we thank you for your participation.

Q1 2025 Principal Financial Group Inc Earnings Call

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