Principal Financial Group Inc

Good morning, and welcome to the Principal Financial Group First Quarter 2023 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. A confirmation tone will indicate your line is in the question queue. 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 2023 conference call. As always, material related to today's calls are available on our website at investors.principal.com. In addition to our earnings call materials, we included additional details of our commercial real estate exposure in our slide presentation. As a reminder, financial results are now reported under the Long Duration Targeted Improvement Accounting Guidance, or LDTI. Historical results have been recast and are also available on our website. Following a reading of the Safe Harbor provision, CEO Dan Houston and CFO Deanna Schrabel will deliver some prepared remarks We will then open up the call for questions. Others available for Q&A include Chris Littlefield, Retirement and Income Solutions, Pat Halter, Asset Management, and Amy Fedrick, Benefits and Protection. 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. 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. Dan?

Thanks, Humphrey, and welcome to everyone on the call. This morning I will share highlights of our financial results and key performance highlights for the quarter. Deanna will follow with additional details on our first quarter results, our current financial and capital position, as well as some details on our investment portfolio. Our integrated business model remains resilient during periods of macroeconomic volatility, as shown on our strong first quarter results. While we are not immune to credit and market pressures, we are well positioned for a variety of economic conditions. Starting on slide three, we reported $367 million of non-GAAP operating earnings, or $1.48 per diluted share in the first quarter. We returned more than $300 million of capital to shareholders during the quarter through share repurchase and common stock dividends. We're delivering on our capital deployment strategy by investing for growth in our business and returning excess capital to shareholders. We ended the quarter with $660 billion of total company managed AUM, an increase of 4% from year-end 2022, reflecting favorable equity and fixed income markets, positive net cash flow, as well as positive impacts from foreign currency. We generated $600 million of positive total company net cash flow, a strong result during a period of outflows across much of the industry. This highlights one of the benefits of having a diversified and integrated business model across asset management, retirement, and benefits and protection. Turning to investment performance on slide four, market volatility is underscoring the value of our diversified offering. Our fixed income strategies are delivering strong results, managing through a challenging credit environment. While our asset allocation and U.S. equity strategies have been impacted in their short-term performance, our international equity strategies are delivering strong alpha so far this year, boosting one-year performance. Our approach to invest in high-quality, high-growth companies continues to resonate with our clients, winning additional mandates. We have also received gold and silver ratings from Morningstar for several of our key equity funds. Turning to slide five, I'd like to spend a moment on our investment portfolio. As there has recently been increased market focus on credit and commercial real estate exposures, we're confident in our high quality diversified investment portfolio, which is well aligned with our liability profile. We actively manage our investment risk and have been intentional about further improving credit quality of our portfolio since the global financial crisis. The reinsurance transaction we completed in 2022 decreased our general account by 25%. This reduced our credit exposure and lowered our investment asset leverage well below the industry average. We are a global real estate leader with more than seven decades of experience managing nearly $100 billion of assets, including more than $70 billion for third parties. Today, we have over 300 real estate investment professionals, 55 of which have more than three decades of real estate experience through many different market cycles. Over the last decade, we have reduced office exposure in our commercial mortgage portfolio as we saw signs of stress coming in this segment, a move which has proven to be appropriate as the recent stress on the banking sector has raised financing concerns for office properties in particular. We've also enhanced our underwriting standards since the global financial crisis, producing a high-quality portfolio with substantial cushion to withstand severe downturns. Our investment and risk management teams have been diligent in transforming the portfolio, delivering a track record of strong financial performance, and positioning us to weather a variety of economic conditions and market cycles. Turning to our growth drivers and some additional highlights for the quarter, we continue to benefit from strong employment and wage growth in the U.S., particularly in the small to mid-sized segment with our retirement benefits and protection business. In retirement, we generated strong sales across all segments, growth in net participant activity, and positive net cash flow with reoccurring deposits up 11% on a trailing 12-month basis. While large market sales and lapses can fluctuate quarter to quarter, we have good momentum and our pipeline is strong for the rest of the year. Our S&B segment is holding up very well with strong reoccurring deposit growth and low contract lapses contributing to a 33% increase in net cash flow compared to the first quarter of 2022. And in benefits and protection, our focus on the durable small to mid-sized business market continues to drive growth. Over the last 12 months, the small to mid-sized employer market has experienced record sales, strong retention, and demonstrated continued strong employment growth, all of which are contributing to our above-industry growth in premium and fees for specialty benefits. In asset management, our broad distribution and geographic footprint continues to produce benefits. PGI managed net cash flow was a positive $400 million in the first quarter. While flows for many active managers were negative in the quarter, we continue to benefit from our integrated business model and differentiated investment capabilities, including hybrid target date, stable value, and guaranteed income products. We are winning business from both new and existing retirement customers while generating flows from our general account. As we look forward, we continue to see active engagement with global institutional clients involving investment strategies in private debt and credit, specialized investment income capabilities, and opportunistic investing in real estate. We also drove strong quarterly net cash flow of $800 million in Principal International. These flows were well diversified across Southeast Asia, Brazil, Mexico, and Hong Kong as we continue to execute on our strategy, building upon our market leadership and key joint venture relationships. Specific to Brazil, we remain a market leader in pension AUM, deposits, as well as net cash flow. Bottom line, we are very excited about the growth opportunities which lie ahead. I'm confident we have the right product mix, the right market focus, and the right distribution channels to drive value for our customers and our shareholders. Deanna?