Principal Financial Group Inc

Good morning and welcome to the Principal Financial Group Third Quarter Financial Results Conference Call. There will be a question and answer period after the speakers have completed their prepared remarks. If you would like to ask a question at that time, simply press star and the number one on your telephone keypad. We would ask that you be respectful of others and limit your questions to one and a follow-up so that we can get to everyone in the queue. I would now like to turn the conference over to John Egan, Vice President of Investor Relations.

Thank you and good morning. Welcome to Principal Financial Group's third quarter 2021 conference call. As always, materials related to today's call are available on our website at principal.com backslash investor. Following the reading of the Safe Harbor provision, CEO Dan Houston and CFO Deanna Strabel will deliver some prepared remarks. Then we will open up the call for questions. Others available for the Q&A session include Rene Schaaf, Retirement Income Solutions, Pat Halter, Global Asset Management, and Amy Frederick, U.S. Insurance Solutions. Some of the comments made during this conference call may contain forward-looking statements within the meaning of the Private Securities Legation Reform Act. The company does not revise or update them to reflect new information, subsequent events, or changes in strategy. Risk 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. 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 on our earnings release, financial supplement, and slide presentation. Dan? Thanks, John, and welcome to everyone on the call.

This morning, I will discuss the progress we are making towards our strategic and financial targets, and the key performance highlights for the third quarter. Deanna will follow with additional details of our third quarter results, as well as our current capital and financial position. Last week, Principal celebrated 20 years as a public company. Our evolution from a mutual insurance company to a global financial services provider has been remarkable. Since our IPO in 2001, we've increased our AUM by more than eight times, from $120 billion to nearly $1 trillion. and the number of customers we serve has increased nearly four times from 13 million to 49 million today. Over the last two decades, we have weathered through a global financial crisis, volatile financial markets and geopolitical conditions, and the complexity of a global pandemic. We've deliberately evolved our portfolio, product offering, and go-to-market approach to grow the business and meet the changing needs of our customers. At the same time, we've stepped up, and work to act in a way that benefits society and the planet, guided by a robust ESG strategy that's focused on reducing our carbon footprint, strengthening our communities, and advancing access to financial security for more people and businesses. At our Investor Day in June, we shared how our long-term strategy puts the customer at the center of what we do and leans into our competitive advantages, which are differentiated and integrated solutions, our leadership position in higher growth markets, and our deep and established customer reach. We emphasized how our focus on a higher growth, more capital-efficient enterprise through our growth drivers, retirement in the U.S. and select emerging markets, global asset management, and U.S. benefits and protection positions us to win, grow, and create shareholder value today and long into the future. As shown on slide four, we're committed to achieving near-term financial targets Excluding significant variances, we've delivered a 12% increase in earnings per share on a trailing 12-month basis, the high end of our 9% to 12% target range. And at nearly 14%, we're making great progress towards reaching our targeted 15% return on equity. We're executing on our strengthened capital management strategy and on our way to return $3 billion of excess capital to shareholders by the end of 2022. With our prior announcement to exit the U.S. retail fixed annuity business and the retail segment of our U.S. life insurance business, we've ceased sales as of the end of the third quarter. We're actively engaged in conversations with the counterparties of transactions for the U.S. retail fixed annuity and universal life with secondary guarantee blocks and are confident we'll have more to share in the coming months. In our U.S. individual life insurance business, our focus is now solely on business market through business owner executive solutions and non-qualified deferred compensation offerings. In fact, IBIS and Associates recently ranked Principal the top life insurance provider in small case business market in terms of both premium and case count, underscoring the strength of our go-forward strategy. With this intense focus on executing on our strategy and serving our customers, we're already beginning to see benefits in the third quarter. Turning to slide five, we reported $458 million of non-GAAP operating earnings in the third quarter. Excluding significant variances, earnings increased 7% over the third quarter of 2020, driven by growth in the business and improvement in the macroeconomic conditions, including a robust U.S. labor market across many of our businesses. We closed the third quarter with a total AUM of $981 billion, including $688 billion of AUM managed by principal. Total AUM increased 34% compared to the third quarter of 2020, reflecting $17 billion of net cash flow over the trailing 12 months, strong investment performance, and the migration of institutional retirement and trust retirement assets. Total company net cash flow was a positive $4.6 billion in the third quarter, more than double the prior year quarter with positive net cash flow across all of our business units. Third quarter results are a testament to our focus on delivering outcomes for our customers through our integrated solution and differentiated capabilities. In global asset management, third quarter PGI managed net cash flow was a positive $2.2 billion with positive net cash flow across institutional mutual fund platforms and general account. PGI generated record managed AUM of $535 billion and record sourced AUM of $265 billion in the quarter. As shown on slide six, we continue to deliver strong long-term investment performance as 69% of the principal mutual funds, ETFs, separate accounts, and collective investment trust were above median for the three-year period, 72% for the five-year, and 86% for the 10-year. For our Morningstar-rated funds, 73% of fund-level AUM had a four- or five-star rating. Longer-term performance continues to position us well to attract and retain assets. Our flagship real estate products and yield-oriented products, including preferred securities, high yield, and private assets, continues to be in demand. We are expanding our direct lending capabilities and looking for opportunities to deliver ESG capabilities across a variety of product categories and investment vehicles to meet evolving client demands. A U.S. Retirement and Principal Super Saver study shows that despite market volatility during the pandemic, over half of these retirement participants said they have saved more in their retirement plans over the last 18 months, and only 3% said they saved less. These trends are contributing to the 67% growth in reoccurring deposits and RIS fee compared to third quarter of 2020. This reflects a 20 percent increase in reoccurring deposits on our legacy block, deposits from the migrated IRT retirement participants, as well as the strong increase employer matches. Combined with strong transfer deposits and record contract retention, RIS fee reported positive debt cash flow of approximately $1 billion in the third quarter. Additionally, we had $2.2 billion of RIS spread sales in the third quarter, including $1.4 billion of MTN and GIC issuances and nearly $500 million of pension risk transfer sales. These strong sales generated more than $800 million of positive net cash flow. Outside of the U.S., Principal International reported $400 million of net cash flow and $156 billion of AUM in the third quarter, a 5% increase in AUM on a constant currency basis compared to a year ago. Despite negative cash flow in Brazil during the quarter, we continue to see growth in our multi-mercado funds, now which account for almost 30% of AUM and Brazil PREV. With 53 billion Brazilian RIA of net cash flow year-to-date, we've captured 69% of the market through these value-added solutions for our customers that are higher-revenue, diversified funds. China AUM, which is not included in the reported AUM, was $158 billion in the third quarter. Benefiting from positive net cash flow across all asset classes, we continue to see growth in equity net cash flow and AUM as retail investors look for higher value ad products. In U.S. benefits and protection, we're seeing increased demand for benefits, robust hiring, and favorable wage trends. Notably, group benefits trailing 12-month in-group growth was a record 2.7% for the total block and nearly 5% in businesses with under 200 employees. Turning to slide seven, we continue to make progress on our ESG efforts. We issued our first sustainability bond during the quarter. The bond's $600 million proceeds will be used to support green and social initiatives that reinforce our ESG commitments. We also launched a municipal bond impact strategy during the quarter, our first in the US, which is primarily offered to high net worth clients as a separately managed account. We're focused on developing new ESG products and strategies while enhancing existing products to meet the growing client demand for these products around the world. We're very optimistic about the opportunities that lie ahead as momentum continues to build in many of our businesses. We are evolving our portfolio to bring greater focus to our growth drivers and create greater value for our shareholders. I'll now turn it over to Deanna, who will go further into how this translates into our results. Deanna?