Principal Financial Group, Inc. (NYSE:PFG) today announced certain business unit outlook metrics and an update on capital deployment plans for 2018. These metrics provide greater clarity around the key drivers of earnings growth for each of the business units. Company senior leaders will provide additional detail and answer questions during a 30-minute conference call at 10:00 a.m. EST today, Dec. 12, 2017. Slides related to the 2018 outlook are now available at principal.com/investor.
Below are the 2018 outlook metrics for each business:
Principal Financial Group 2018 Outlook Metrics | ||||
Retirement & Income Solutions – Fee | ||||
Net revenue1 growth | 2-5% | |||
Pre-tax return on net revenue2 | 30-34% | |||
Retirement & Income Solutions – Spread | ||||
Net revenue growth | 5-10% | |||
Pre-tax return on net revenue | 60-65% | |||
Principal Global Investors | ||||
Operating revenues less pass-through commissions3 growth | 4-8% | |||
Pre-tax return on operating revenues less pass-through commissions4 | 34-38% | |||
Principal International (at PFG share, in reported USD) | ||||
Combined5 net revenue growth | 11-14% | |||
Combined pre-tax return on net revenue6 | 38-42% | |||
Specialty Benefits | ||||
Premium and fees7 growth | 7-9% | |||
Pre-tax return on premium and fees(8) | 10-13% | |||
Loss ratio | 62-68% | |||
Individual Life | ||||
Premium and fees growth | 3-6% | |||
Pre-tax return on premium and fees | 14-18% | |||
Corporate | ||||
Pre-tax operating losses | $190-$210 million | |||
The outlook for 2018 incorporates certain assumptions including:
- Average S&P 500 index in 2018 between 2,730 and 2,750, assuming a 2 percent quarterly total return on levels as of the end of November 2017;
- 10-year treasury rate approximately 2.50-3.00 percent at year-end 2018;
- Future foreign exchange rates follow external9 consensus as of November 2017;
-
U.S. GAAP total company net income effective tax rate of 16-18
percent; total company operating earnings effective tax rate10
of 21-23 percent. These tax rates are based on the current tax
regulations.
- Fee effective tax rate10 of 18-20 percent
- Spread effective tax rate10 of 28-32 percent
- Risk effective tax rate10 of 31-35 percent
- Corporate effective tax rate at 40 percent;
- $900 million to $1.3 billion of total capital deployed for common stock dividends, strategic acquisitions, share repurchases, and to provide financial flexibility; and
- Diluted weighted average number of common shares outstanding ranging from 290 – 292 million.
Conference call information
The outlook call can be accessed
the following ways:
- Via live Internet webcast. Please go to principal.com/investor at least 10-15 minutes prior to the start of the call to register, and to download and install any necessary audio software.
- Via telephone by dialing 866-427-0175 (U.S. and Canadian callers) or 706-643-7701 (International callers) approximately 10 minutes prior to the start of the call. The access code is 4295809.
- A replay of the outlook call via telephone is available by dialing 855-859-2056 (U.S. and Canadian callers) or 404-537-3406 (International callers). The access code is 4295809.
- A replay of the outlook call via webcast as well as a transcript of the call will be available after the call at principal.com/investor.
Forward looking and cautionary statements
Certain statements
made by the company which are not historical facts may be considered
forward-looking statements, including, without limitation, statements as
to operating earnings, net income available to common stockholders, net
cash flows, realized and unrealized gains and losses, capital and
liquidity positions, sales and earnings trends, and management’s
beliefs, expectations, goals and opinions. The company does not
undertake to update these statements, which are based on a number of
assumptions concerning future conditions that may ultimately prove to be
inaccurate. Future events and their effects on the company may not be
those anticipated, and actual results may differ materially from the
results anticipated in these forward-looking statements. The risks,
uncertainties and factors that could cause or contribute to such
material differences are discussed in the company’s annual report on
Form 10-K for the year ended Dec. 31, 2016, and in the company’s
quarterly report on Form 10-Q for the quarter ended Sept. 30, 2017,
filed by the company with the U.S. Securities and Exchange Commission,
as updated or supplemented from time to time in subsequent filings.
These risks and uncertainties include, without limitation: adverse
capital and credit market conditions may significantly affect the
company’s ability to meet liquidity needs, access to capital and cost of
capital; conditions in the global capital markets and the economy
generally; volatility or declines in the equity, bond or real estate
markets; changes in interest rates or credit spreads or a sustained low
interest rate environment; the company’s investment portfolio is subject
to several risks that may diminish the value of its invested assets and
the investment returns credited to customers; the company’s valuation of
investments and the determination of the amount of allowances and
impairments taken on such investments may include methodologies,
estimations and assumptions that are subject to differing
interpretations; any impairments of or valuation allowances against the
company’s deferred tax assets; the company’s actual experience could
differ significantly from its pricing and reserving assumptions; the
pattern of amortizing the company’s DAC and other actuarial balances on
its universal life-type insurance contracts, participating life
insurance policies and certain investment contracts may change; the
company may not be able to protect its intellectual property and may be
subject to infringement claims; the company’s ability to pay stockholder
dividends and meet its obligations may be constrained by the limitations
on dividends or distributions Iowa insurance laws impose on Principal
Life; changes in laws, regulations or accounting standards; results of
litigation and regulatory investigations; from time to time the company
may become subject to tax audits, tax litigation or similar proceedings,
and as a result it may owe additional taxes, interest and penalties in
amounts that may be material; applicable laws and the company’s
certificate of incorporation and by-laws may discourage takeovers and
business combinations that some stockholders might consider in their
best interests; competition from companies that may have greater
financial resources, broader arrays of products, higher ratings and
stronger financial performance; a downgrade in the company’s financial
strength or credit ratings; changes in investor preferences; inability
to attract and retain qualified employees and sales representatives and
develop new distribution sources; international business risks;
fluctuations in foreign currency exchange rates; the company may need to
fund deficiencies in its “Closed Block” assets that support
participating ordinary life insurance policies that had a dividend scale
in force at the time of Principal Life’s 1998 conversion into a stock
life insurance company; the company’s reinsurers could default on their
obligations or increase their rates; risks arising from acquisitions of
businesses; and a computer system failure or security breach could
disrupt the company’s business and damage its reputation.
Use of Non-GAAP Financial Measures
A non-GAAP financial
measure is a numerical measure of performance, financial position, or
cash flows that includes adjustments from a comparable financial measure
presented in accordance with U.S. GAAP. In this press release, the
company provides outlook on certain metrics that impact operating
earnings (losses) and earnings growth. Operating earnings is a non-GAAP
financial measure that management believes is useful to investors
because it illustrates the performance of normal, ongoing operations.
Operating earnings are determined by adjusting GAAP net income available
to common stockholders for net realized capital gains and losses, as
adjusted, and other after-tax adjustments the company believes are not
indicative of overall operating trends. However, it is possible these
adjusting items have occurred in the past and could recur in future
reporting periods. Management uses non-GAAP measures for goal setting,
as a basis for determining employee compensation, and evaluating
performance on a basis comparable to that used by investors and
securities analysts.
About
Principal®11
Principal helps people and
companies around the world build, protect and advance their financial
well-being through retirement, insurance and asset management solutions
that fit their lives. Our employees are passionate about helping clients
of all income and portfolio sizes achieve their goals – offering
innovative ideas, investment expertise and real-life solutions to make
financial progress possible. To find out more, visit us at principal.com.
1 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.
2 Pre-tax
return on net revenue = pre-tax operating earnings divided by net
revenue.
3 Operating revenues less pass-through
commissions is a non-GAAP measure. The company has determined this
measure is more representative of underlying operating revenues growth
for Principal Global Investors. In addition, using this metric provides
a more meaningful representation of our profit margins.
4 Pre-tax
return on operating revenues less pass-through commissions = pre-tax
operating earnings, adjusted for noncontrolling interest divided by
operating revenues less pass-through commissions.
5 PI
Combined net revenue is a non-GAAP financial measure. Combined basis =
all Principal International companies at 100 percent. The company has
determined combined net revenue (at PFG share) is more representative of
underlying net revenue growth for Principal International as it reflects
our proportionate share of consolidated and equity method subsidiaries.
In addition, using this net revenue metric provides a more meaningful
representation of our profit margins. The difference between combined
net revenue (at PFG share) and pre-tax operating earnings is combined
operating expenses (at PFG share).
6 Combined pre-tax
return on net revenue = pre-tax operating earnings divided by combined
net revenue (at PFG share).
7 Premium and fees =
premiums and other considerations plus fees and other revenues.
8
Pre-tax return on premium and fees = pre-tax operating earnings
divided by premium and fees.
9 Latin America utilizes
Central Bank estimates, while Asia uses Bloomberg.
10
The operating earnings effective tax rate is a non-GAAP measure and
differs from the U.S. GAAP net income effective tax rate primarily due
to net realized capital gains and losses (NRCG).
11 Principal,
Principal and symbol design and Principal Financial Group are trademarks
and service marks of Principal Financial Services, Inc., a member of the
Principal Financial Group.
View source version on businesswire.com: http://www.businesswire.com/news/home/20171212005197/en/
Contacts:
Media Contact:
Erica Jensen,
515-362-0049
jensen.erica@principal.com
or
Investor
Contact:
John Egan, 515-235-9500
egan.john@principal.com