Principal Financial Group Inc

Good morning and welcome to the Principal Financial Group First Quarter 2022 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 then 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 we can get to everyone in the queue. I would now like to turn the conference call over to Humphrey Lee, Vice President of Investor Relations.

Thank you and good morning. Welcome to Principal Financial Group's first quarter 2022 conference call. As always, materials related to today's call are available on our website at investors.principal.com. Following a reading of the Safe Harbor provision, CEO Dan Houston and CFO Diana Strabo will deliver some prepared remarks. Then we will open the call for questions. Other available for the Q&A session include Chris Littlefield, 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 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. Additionally, some of the comments made during this conference call may refer to non-GAAP financial measures. Reconciliation 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. Dan?

Thanks, Humphrey, and welcome to everyone on the call. This morning, I will share the progress we're making against our financial targets and touch on key performance highlights for the quarter. Deanna will follow with additional detail around our first quarter results, as well as our current financial and capital position. Before we dive in, I have a few important business updates to share. We continue to work towards a second quarter close of the transactions to reinsure our U.S. retail fixed annuities and ULSG blocks. As shared previously, we expect approximately $800 million of deployable proceeds upon closing and through additional capital management actions. In China, CCB Pension Management, a subsidiary of China Construction Bank, recently announced they are in the final stages of seeking regulatory approval for principal to acquire a minority stake of more than 17% in the pension company. CCB is the second largest bank in the world, and we've had a strong relationship with them for over 17 years through our asset management joint venture. We look forward to receiving final approval and expanding our relationship to leverage our global retirement and asset management expertise through our partnership. We plan to share more details once the transaction closes. Lastly, the integration of the institutional retirement and trust business is now complete as the final piece, the trust and custody business, successfully migrated to principal during the first quarter. The IRT acquisition added scale and elevated our position to a top retirement provider, including number three provider of defined contribution plans based on the number of participants and the number one position for defined benefit, non-qualified deferred compensation, and ESOP based on the number of plans. It gave us new capabilities, including an industry-leading depth and breadth of retirement offerings through total retirement solutions. It's providing new revenue opportunities, including IRA rollovers, managed accounts, and proprietary asset management. And as a result of the acquisition, we've benefited from growth in the sales pipeline driven by our new consultant relationships. Turning to our financial highlights on slide four, amid market volatility, ongoing impacts from the pandemic, and geopolitical events and uncertainties, our first quarter results highlight the focus, strength, and resiliency of our diversified business strategy. In the first quarter, we reported $429 million of non-GAAP earnings, or $1.63 per diluted share. Excluding significant variances, earnings increased 8% over the first quarter of 2021. We continue to deliver on our strengthened capital deployment strategy to return excess capital to shareholders. In the first quarter, we returned nearly $900 million through share repurchases and common stock dividends. We closed the first quarter with $714 billion of total company AUM, a 7% increase over the first quarter of 2021. Now turning to our business highlights, focused execution on our growth drivers of retirement, asset management, and benefits and protection continue to fuel growth across the businesses. In U.S. Insurance Solutions, we delivered tremendous growth in the first quarter after a strong 2021. The demand for benefits, robust hiring, and favorable wage trends continue to increase across our target market of small to medium-sized businesses. Specialty benefits premium and fees increased 10% compared to the first quarter of 2021, driven by record sales, strong retention, and employment growth. Trailing 12-month employment growth was a record 4.7% for the total block. In individual life, our focus on business market is resonating with distributors as we produce record non-qualified Coley sales and robust business owner sales. Over 50% of the Coley sales were part of a total retirement solution plan with RIS, highlighting the opportunity to build long-term, multi-product relationships with customers through integrated solutions. Our pipeline of new business continues to grow as employers focus on benefits as one effective strategy to help them attract as well as retain talent. In our U.S. retirement business, RIS fee reoccurring deposits were strong and increased nearly 60 percent compared to a year-ago quarter. This includes a 17% increase in our legacy block, in addition to deposits from the IRT retirement participants. As the economic recovery continues, participants are saving more for retirement. Compared to a year ago, the average dollars of deferrals per participant has increased 5%, and the average dollars of employer match per participant has increased 6%, both of which are fueling growth and reoccurring deposits. Additionally, the number of participants deferring across the block has increased more than $2.2 million over the same period, reflecting the full integration of the IRT retirement participants. The increase in deposits, strong sales and retention, as well as a benefit from fewer dollars of withdrawals due to lower equity market performance, drove $3 billion of positive account value net cash flow in the first quarter for RISV. In global asset management, PGI managed AUM of $537 billion, benefited from positive net cash flow and the addition of certain migrated IRT trust and custody assets. This was mostly offset by macroeconomic market conditions, which negatively impacted equity and fixed income markets during the quarter. PGI delivered more than $3 billion of positive net cash flow across both institutional and retail platforms. driven by our differentiated solutions within real estate, specialized income capabilities, and alpha performing equity strategies. Turning to investment performance on slide six, market volatility combined with a rotation from quality and growth to value investing impacted our short-term investment performance during the quarter. Our longer-term investment performance, as well as real estate returns, positions us to drive positive net cash flow and to attract and retain assets going forward. Outside the U.S., our focus remains on growing our diversified fee-based revenue across our asset management and retirement business amid near-term macro and regulatory headwinds. Reported AUM for Principal International was $164 billion at the end of the quarter, driven by favorable foreign currency movements since the beginning of the year. AUM in China, which is not included in our reported AUM, grew by 10% from the end of the year to $193 billion this with strong growth coming from retail clients. Before I turn it over to Deanna, I want to highlight a notable recognition we recently received. Pensions and Investments once again included Principal on its list of best places to work in money management. We're proud to be one of only five companies that have been included every year in the award's 10-year history. This is just one example of how our employees and leaders continue to build a culture that makes people proud to work at Principal and deliver every day for our customers. Deanna?