The paragraph is from a conference call for Principal Financial Group's Fourth Quarter 2024 Financial Results and 2025 Outlook. The call is hosted by Humphrey Lee, Vice President of Investor Relations, and features comments from CEO Deanna Strable and Interim CFO Joel Pitz, who will give prepared remarks followed by a Q&A session with senior management. The call includes cautionary notes about forward-looking statements and non-GAAP financial measures, with additional information available on the company's website. Deanna Strable acknowledges Dan Houston's leadership as CEO over the past decade and his role in driving the company's growth and transformation.

The paragraph highlights the strong performance and growth prospects of Principal under Dan's leadership. The company achieved its financial targets for 2024, including an 11% growth in adjusted non-GAAP earnings per share and a strong free capital flow conversion ratio. Principal also improved its return on equity (ROE) and significantly returned capital to shareholders through share buybacks and increased dividends. The Board has authorized a new share repurchase program, demonstrating confidence in continued growth.

The paragraph outlines the company's strategic focus areas presented during Investor Day, emphasizing growth in retirement ecosystems, small and midsized businesses (SMBs), and global asset management. Key achievements include the expansion of target date offerings and winning a $1 billion retirement investment mandate. The company is leveraging its differentiated capabilities to capitalize on opportunities across its business sectors. In the SMB segment, they report significant growth, with recurring deposit growth outpacing larger segments and increased product engagement among Specialty Benefits customers. The Asset Management sector is expanding in private and multi-asset solutions, especially in real estate and credit strategies, raising significant capital globally. New institutional clients account for a significant portion of the commitments to their largest real estate fund.

In 2024, the company achieved strong growth across its real estate, private credit, and infrastructure debt platforms, despite market volatility. With total company-managed assets under management (AUM) reaching $712 billion, there was a 3% increase from 2023. Positive institutional and retail cash flows helped improve net cash flow, particularly in the typically weak fourth quarter due to U.S. retirement sales seasonality. The Retirement segment saw significant revenue and earnings growth, fueled by favorable market conditions and increased demand for the company's integrated retirement solutions. Recurring deposits rose by 7%, and participation in employer-sponsored retirement plans grew, highlighting the appeal of the company's comprehensive retirement offerings for employers, sponsors, and participants.

The paragraph discusses the company's financial performance and strategic initiatives in 2024. Despite increased withdrawal amounts due to higher account values, participant withdrawal rates stabilized. Contact retention rates and the sales pipeline improved, leading to strong business momentum. Pension risk transfer (PRT) sales reached $900 million in Q4, totaling over $3 billion for the year, with a robust PRT market supported by existing defined benefit relationships. Asset Management was realigned into investment management and international pension, ending the year with $683 billion in assets under management (AUM), despite a $28 billion FX impact. Net flows improved from 2023, and the company is evolving its asset management to focus on growth opportunities and client outcomes. Strategic changes include streamlining the business portfolio, notably in Hong Kong, to adapt to regulatory changes and focus on retirement asset management while establishing a new partnership in pension services.

The transaction with Bank Consortium Trust (BCT) is set to enhance the company's role as an investment manager by integrating MPF schemes. The company anticipates a 7% growth in Specialty Benefits in 2024 due to new business while maintaining pricing discipline. Life insurance premiums and fees grew over 16% in 2024, driven by a focus on business owners. The company aims to penetrate the SMB market further, expand within the retirement ecosystem, and enhance global asset management. Recently, the company received recognition as one of America's Most Just Companies and a Best Place to Work in Money Management, highlighting its industry leadership and strong corporate culture. The year concluded with positive momentum, attributed to the dedication of its 20,000 employees, supporting future growth.

The paragraph provides an overview of a company's financial performance for the fourth quarter and full year. It reports a full year non-GAAP operating earnings increase to $1.8 billion or $7.65 per diluted share, an 11% rise in EPS over 2023, aligning with their guidance. Quarterly non-GAAP earnings also rose by 16% to $485 million or $2.10 per share. Full year net income, excluding exited businesses, hit $1.5 billion with better-than-expected credit losses and drift. The non-GAAP operating ROE improved to 13.7% for 2024, nearing their 2025 target of 14% to 16%. The S&P 500's 25% gain contributed favorable market tailwinds, although foreign exchange rates negatively impacted AUM by $28 billion for the year. However, overall equity performance offset the negative FX impact.

The company's 2024 financial results show strong performance across various segments, driven by integrated operations. They achieved a 5% top-line growth and 9% to 12% EPS growth, supported by disciplined expense management, resulting in a non-GAAP margin expansion of 60 basis points. RIS saw a 9% increase in pretax operating earnings, with a net revenue growth exceeding targets. Principal Asset Management reported a 6% increase in pretax operating earnings due to higher management fees and market performance, with operating margins improving by 100 basis points despite limited performance fees. International pensions were flat due to FX impacts but showed a 9% earnings increase on a constant currency basis, with improved margins. Specialty Benefits achieved a 7% growth in premiums and fees, though comparisons were affected by a large one-time sale in late 2023.

The paragraph highlights the strong financial performance of Specialty Benefits, which reported record earnings for the fourth quarter and full year 2024. The unit achieved a favorable loss ratio of 60.4% and an operating margin of 15%. In the Life business, while legacy blocks reduced, business market premiums and fees grew 16% year-over-year, with a 1% overall increase. A reinsurance transaction was executed to reduce risk, slightly decreasing premiums and fees. Excluding this, growth was 3% in 2024. The company's investment portfolio is diverse and high-quality, with commercial mortgage loans maintaining a low average loan-to-value ratio of 50% and a high debt service coverage ratio of 2.3x. After addressing 2024 office loan maturities, 2025 begins with optimism and lower maturities, with $75 million already paid off. The business ended the year with $1.6 billion in excess capital, emphasizing strong capital and liquidity positions. Additional details are available on their website.

The paragraph provides a financial overview of a company's capital management and shareholder returns. It mentions that they have a total of $830 million at the holding company, $300 million in subsidiaries, and an excess of $430 million over their targeted risk-based capital ratio, which is 404% at year-end. The company achieved an 80% free capital flow conversion, within their target range of 75% to 85%. In 2024, they returned $1.7 billion to shareholders via $1 billion in share repurchases and $660 million in dividends, exceeding their guidance midpoint. They announced a $0.75 per share dividend for the first quarter, marking a $0.02 increase and aligning with a 40% dividend payout ratio. Looking ahead to 2025, the company aims for 9% to 12% EPS growth, maintains a free capital flow target of 75% to 85%, and expects a 14% to 16% return on equity, excluding significant variances. They plan $1.4 billion to $1.7 billion in capital deployment, including $700 million to $1 billion in share repurchases, continuing their approach to balance value creation and financial flexibility.

The paragraph discusses the company's financial outlook and guidance for different business units into 2025 and beyond. It anticipates an improvement in VII compared to 2024 and outlines the 2025 enterprise outlook and business expectations up to 2027. For RIS, margin guidance is revised upward while net revenue guidance remains steady. Investment management anticipates revenue and margin growth. The international pension forecast is adjusted due to resegmentation and currency effects, expecting mid-range net revenue on a constant currency basis but below on a reported basis. Specialty Benefits revises premium fees growth to 6%-9%, expecting growth near the low end in 2025 with improvements throughout the year.

The paragraph discusses the company's strong business fundamentals, highlighting the improvement in underwriting discipline, loss ratios, and margin targets. It mentions anticipated premium fees growth in the Life segment, offset by the legacy block runoff. Revised margin guidance improves for 2024. The first quarter in Investment Management typically has lower earnings due to deferred compensation and elevated payroll taxes, with about $40 million in seasonal expenses. Specialty Benefits experience higher dental claims in the year's first half, making earnings higher in the second half of 2025. The company is confident in its 2025 capital position and long-term financial targets, focusing on growth through the retirement ecosystem, small and midsized businesses, and global asset management. After these remarks, the operator opens the call for questions. Ryan Krueger asks about the impact of Chile's pension reform on Principal, to which Deanna Strable begins to respond.

In the article paragraph, Deanna and Kamal discuss ongoing reforms in Chile, expressing optimism about the clarity and efficiency these changes will bring to the marketplace, particularly regarding the defined contribution system and target data investment vehicles. They are confident in navigating these changes and positive about their business outlook in Chile. Ryan Krueger then shifts the discussion to the potential for increased use of private assets in 401(k) plans, prompting Christopher Littlefield to acknowledge significant industry opportunities in this area.

The paragraph discusses the challenges and opportunities in the retirement sector, particularly with regulatory hurdles and liquidity buffer issues. There's potential for private involvement in retirement, but more work is needed to align regulatory environments and create suitable products for retirement customers. Innovation in target date funds and managed account offerings is expected in the next couple of years. Deanna Strable thanks Ryan for the questions, and Joel Hurwitz of Dowling & Partners inquires about RIS flows, participant withdrawal stabilization, contract lapses, and the forecast for 2025. Deanna emphasizes that RIS's primary focus is on revenue growth, margin, and earnings, with flows being secondary. Christopher Littlefield reiterates the focus on profitable revenue growth over flows, highlighting the achievement of exceeding net revenue guidance and reaching the top end of the margin in 2024.

The paragraph discusses the financial performance and outlook of the company, highlighting that rising equity markets positively impact fee-based businesses but also create challenges in net flows and fee revenue rates. In the fourth quarter, there was improved fee-based flow due to a 6% increase in recurring deposits and strong transfer deposits, alongside a record retention rate in WSRS, attributed to lower participant withdrawals and contract lapses. However, there is a pressure from VA lapses expected in 2024, with many converting to RILA, shifting from fee-based to spread-based flows. The company is also seeing strong performance in SMB flows with positive net cash flow. Looking ahead to 2025, the company anticipates stable participant withdrawal rates and continued health in recurring and transfer deposits, though flows may be impacted by market performance and the effects of strong equity markets from 2024. Overall, the company feels positive about its position in SMB.

The paragraph discusses the expectation of continued net outflows from the VA traditional block, aligning with an industry trend. A significant market outflow of $2.3 billion is anticipated in the first quarter, with minimal impact on fee revenue due to a strategic termination of a client relationship. A slightly lower contract retention rate is expected compared to 2024. The focus remains on disciplined pricing and profitable revenue growth for 2025. Real estate is highlighted as a core competency, both for unaffiliated clients and within their general account. Kamal Bhatia mentions that the commercial real estate market is entering a volatile recovery phase.

The paragraph discusses the increase in real estate transactional activity, noting significant growth in available CRE credit and equity transaction activity, which aids market expansion and price discovery. The CMBS market is robust, with over $100 billion in new issuance in 2024. The speaker mentions their company's success in deploying private capital, nearly doubling from earlier in the year. Joel Pitz anticipates improved returns in 2025, especially in real estate, which is a significant part of their portfolio. Their direct real estate investments show meaningful unrealized gains, unlike assets in a fund structure that are valued quarterly.

The paragraph discusses potential volatility in the VII metric due to the timing of sales, with improvements expected in 2025, primarily in the latter half of the year. Wilma Burdis from Raymond James asks about litigation in the PRT market potentially impacting smaller markets. Deanna Strable and Christopher Littlefield respond, stating their company has longstanding experience in the PRT business and noting that the current litigation hasn’t affected their operations. They emphasize that their business remains trusted and reliable, and have not observed significant activity affecting small to midsize businesses.

The paragraph discusses the success and future outlook of Specialty Benefits, focusing on underwriting discipline for 2025. Wilma Jackson Burdis asks about the approach to underwriting in Specialty Benefits, and Amy Friedrich explains that they are tightening loss ratio and margin ranges, raising the margin to 13% and lowering the loss ratio to 64%. Competition, especially in the dental sector, has increased, leading to repricing in 2024, which affects sales into 2025. However, they emphasize selling their products as a bundle to navigate these challenges.

The paragraph discusses the importance of dental products in a bundled insurance offering and emphasizes the need for disciplined underwriting across all products to ensure profitable growth and stable renewals. It highlights the importance of maintaining predictable cash flow for small and midsized customers, sometimes prioritizing stability over aggressive growth to achieve desired margins and loss ratios. The company aims to leverage its expertise in the small and midsize business market, strong broker relationships, technology, and service to grow above industry averages. The speaker expresses confidence in their strategy for 2025. Additionally, there is mention of a positive outlook for capital return and strong free cash flow compared to previous guidance, with a question about further drawdown of excess capital.

The paragraph discusses the company's current capital position and plans for capital deployment. Deanna Strable and Joel Pitz address questions about their strong free cash flow conversion and capital deployment strategies. Joel highlights that they have $1.6 billion in excess capital entering 2025, allowing for an aggressive share buyback plan. The planned buybacks are significant, targeted between $700 million to $1 billion, translating to a payout ratio higher than their long-term guidance. Although their RBC ratio has decreased from 427% in 2024 to 404% currently, they still maintain excess capital. Taylor Scott follows up with a question about expected fees on RIS, indicating a shift in the conversation to another topic.

The paragraph discusses the strong profit margins in the competitive retirement business market. Deanna Strable and Christopher Littlefield from the company explain that despite the competition, their margins are strong and expected to improve in 2024. They acknowledge fee compression as a consistent challenge but don't see any unusually high competition. They emphasize the cost and complexity of managing a retirement business and the need for a reasonable return on services. The industry is consolidating, with the company playing a significant role in this organic shift, and they express confidence in continuing to succeed as a major player in the market.

In the paragraph, Deanna Strable and Christopher Littlefield address questions from Jimmy Bhullar about the Retirement and Income Solutions Practice (RISP) business. Chris acknowledges that while there are negative flows due to demographic pressures, particularly as people retire, there's no expected major shift in flows turning positive in the near future. However, he notes positive long-term trends with younger generations saving more. Deanna adds that despite negative flows, account values have significantly increased, boosting revenue and earnings.

The paragraph discusses the repricing of dental insurance within a company's employee benefits offerings. Amy Friedrich explains that most of the repricing actions are currently being implemented, with results expected in the first half of the year. She anticipates that dental margins will normalize by 2025, with loss ratios returning to historical patterns and positive production outcomes. However, she emphasizes that dental insurance is rarely sold on its own, as it is typically part of a bundle of products. Deanna Strable adds that their focus on small and medium-sized businesses (SMBs) allows for yearly rate adjustments and highlights the positive underwriting results in life and disability insurance, which can offset increases in dental rates.

In this section of the article, various executives discuss the growth outlook for international pensions. Despite facing foreign exchange (FX) pressures and changes in Hong Kong, the overall growth outlook remains consistent with the previous year. They report 4% revenue growth and 9% earnings growth in 2024 on a constant currency basis, and expect similar performance in 2025. The company anticipates continued margin expansion in the international pension business, highlighting its strong positioning and growth potential in targeted markets.

The paragraph discusses the trends in investment management net cash flows, highlighting improvements despite continuing elevated withdrawals. Deanna Strable points out an overall negative net cash flow for the enterprise, but notes significant improvement for both the quarter and the full year, with specific insights from Kamal Bhatia. Bhatia mentions positive net cash flow in the international pension business, with $600 million in growth for 2024, indicating successful management and new investments. The investment management segment reported strong results, with $500 million in positive net cash flow from nonaffiliated flows across various distribution channels and international geographies. Notable successes include a $2 billion mandate win in international institutional credit and nearly $1 billion in U.S. retirement solutions.

The company experienced a $2.7 billion positive net cash flow from local regional clients in 2024, marking a significant milestone. Nonaffiliated cash flow increased by $6.5 billion year-over-year. They are exceeding targets in their largest real estate fundraise to date, expanding their business by adding over 50 new relationships globally, including foreign insurance companies, U.S. endowments, and regional asset managers in Asia. They anticipate continued momentum in private markets and were recognized as the top-performing U.S. investment-grade bond fund in 2024, attracting more active management flows. Deanna Strable addresses a question about further derisking in international markets and the life insurance business.

The paragraph discusses a company's recent strategic review that resulted in significant changes to its business portfolio, aimed at aligning with strategic and financial goals. The company is committed to ongoing assessment and potential adjustments to its portfolio to manage risk and adapt to regulatory changes. The focus is on servicing small to medium-sized customers and it has limited involvement in the government marketplace. An executive, Christopher Littlefield, notes the company isn't a major player in the governmental sector, offering to provide more detailed information if needed, while Amy Friedrich also contributes to the conversation.

In the paragraph, Deanna Strable discusses the company's approach to mergers and acquisitions (M&A) now that she is the CEO. While the company has a low capital allocation target for M&A, they remain open to opportunities that align with their growth areas, as mentioned during Investor Day. Strable emphasizes that any potential deal must meet their criteria of cultural, financial, and strategic fit. Although they are cautious and have a high bar for such deals, their low leverage ratio allows them the flexibility to pursue larger opportunities if they arise and align with their standards.

The paragraph discusses the company's confidence in meeting financial targets without the need for mergers and acquisitions, relying instead on organic growth. Christopher Littlefield expresses optimism about the potential of in-plan annuity products for target date funds, though current participant utilization is low. He anticipates increased activity in this area over the next couple of years, seeing an opportunity to convert 401(k) savings into guaranteed retirement income. Deanna Strable concludes by emphasizing that 2024 was a strong year for the company.

The paragraph discusses the company's successful achievement of its enterprise objectives and its strong position for continued success in 2025. It highlights their ability to access key market areas and maintain a disciplined approach, guided by the strategy outlined at Investor Day. The company expresses gratitude for the ongoing support and participation and looks forward to future engagements. The call concludes with the operator thanking participants.

This summary was generated with AI and may contain some inaccuracies.