Principal Financial Group Inc

Good morning and welcome to the Principal Financial Group second quarter 2024 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 second quarter 2024 earnings conference call. As always, materials related to today's calls are available on our website at investors.principal.com. Following a reading of the Safe Harbor provision, CEO Dan Houston and CFO Diana Srebo will deliver some prepared remarks. We will then open up the call for questions. Other members of senior management will also be available for Q&A. 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. As a reminder, we are hosting our 2024 Investor Day on Monday, November 18th in New York. We look forward to seeing many of you at this event. Dan?

Thanks, Humphrey, and welcome to everyone on the call. This morning, I will discuss key milestones and highlights from the second quarter as we continue executing our strategy with discipline and focus to deliver strong results for our customers and shareholders. Deanna will follow with additional details on our results and our capital position. Starting with the results for the second quarter, we reported $386 million of non-GAAP operating earnings, or $1.63 per diluted share, a 7% increase in EPS over the second quarter of 2023. The year-over-year growth in earnings was driven by a 6% increase in net revenue due to business growth and favorable markets compared to a year ago. Having said this, we are in a very bifurcated market environment. While performance of the S&P 500 has been very strong this year, performance has been heavily concentrated in a handful of large technology stocks. Meanwhile, mid-cap, small-cap, and international equities have lagged the market-weighted S&P 500 throughout the first half of 2024. and were mostly negative in the second quarter. This has impacted diversified active asset managers like Principal. Market performance for our total managed AUM was 0.4% in the second quarter and 8% on a trailing 12-month basis. Despite this mixed market performance, we have confidence in the second half of the year, and we expect our full-year results to be aligned with our 2024 outlook. We returned $415 million of capital to shareholders in the second quarter, including $250 million of share repurchases. We also raised our common stock dividend for the fifth consecutive quarter, aligning with our targeted 40% dividend payout ratio. We ended the quarter with total company managed AUM of $699 billion, foreign currency translation headwinds of $9 billion in the quarter, and $20 billion over the last 12 months impacted AUM. Now turning to the businesses. In retirement, we continue to experience positive fundamentals. Reoccurring deposits increased by more than 7% compared to a year ago quarter. This was driven by 10% growth in reoccurring deposits for small and mid-sized businesses, as well as strong growth in average participant deferrals and employer matches across the entire block. While year-over-year plan sales have been impacted by fewer large plans in motion, we continue to generate strong growth in transfer deposits. which were up 13% in the quarter. This was again driven by the growth in the SMB market. Contract retention has improved significantly and is helping to offset elevated participant withdrawals in the second quarter. Withdrawals are higher in the quarter primarily due to impact of favorable markets on account values along with a slight increase in withdrawal rates. We generated another strong quarter of pension risk transfer sales. With nearly $1 billion in the second quarter, Year-to-date sales have surpassed $1.7 billion at attractive returns. Importantly, our defined benefits business continues to be a valuable source of PRT new business, with nearly 25% of our year-to-date contracts coming from existing defined benefit customer relationships. We remain an industry leader in PRT, ranking third in both premium and contracts according to Limerick's first quarter report. We also strengthened our leadership position in ESOP in the second quarter, announcing the acquisition of Ascensus' employee stock ownership plan business. This acquisition closed on July 1st, solidifying our position as the number one ESOP provider in the U.S. with a 30% market share. We added 800 more employer customers and over 165,000 new ESOP participants. This acquisition is aligned with our focus on small to medium-sized businesses and and expands our current ESOP offering, a critical piece of our full suite of workplace retirement offerings. It also adds talent to our workforce and provides greater value and enhanced products and services for our customers. Turning to principal asset management, PGI continues to build on the sales momentum from the first quarter. We are seeing continued strong retail demand for our suite of mutual funds and ETF offerings. On the institutional side, private real estate and specially fixed income capabilities remain in demand. We had approximately $500 million of net cash flow into private real estate. This level of net cash flow is consistent with the average over the past six quarters. Despite the second quarter momentum, we reported negative net cash flow of just over $2 billion. The net outflows was driven by a large, lower fee fixed income redemption from a corporate client as well as stable value products outflows. We expect the second half of the year to improve as investors are increasingly looking to move money out of cash and into risk-based assets across both public and private markets. We continue to look for opportunities to invest for our clients and remain optimistic about this growing momentum. During the quarter, we launched the principal private credit fund, offering exposure to middle market loans with enhanced yield and return to retail investors. We are also seeing increased institutional interest in the team, resulting in $150 million of sales in the quarter. We also announced the launch of our new private infrastructure debt capability and the hiring of an industry veteran to lead this venture. These actions add to our expertise in public listed infrastructure, real estate debt, and alternative credit. Finally, we have enhanced our investment performance disclosure to include both equal-weighted and asset-weighted performance against the Morningstar peer group and composite benchmarks. We continue to be focused on providing strong, long-term performance across our investment lineup. Principal International ended the quarter with $171 billion of total reported AUM. Favorable market performance was more than offset by foreign currency headwinds, primarily in Brazil. Net cash flow was slightly positive in the second quarter, with contributions from Southeast Asia and Hong Kong. offsetting small outflows in Latin America. As a reminder, flows are strongest in the first and third quarter for Principal International, primarily due to the seasonality of sales in Brazil. We expect to have a strong net cash flow in the second half of the year. In benefits and protection, we generated above-market premium and fee growth in specialty benefits. This growth is being driven by record year-to-date sales and strong retention, along with employment and wage growth. Once again, more than half of our growth came from our net new business, demonstrating our competitive advantage and leadership position in the underserved small to mid-sized market. We continue to grow faster than the industry by deepening relationships with key distribution partners and with our customers. To highlight this, the average number of coverages per enforced customer continues to increase and now exceeds three coverage per group benefits customer for the first time. I'm excited about the opportunities across Principal and remain confident our focus on higher growth markets combined with our integrated product portfolio and important distribution partnerships will continue to create value and drive growth. Before turning it over to Deanna, I'd like to highlight that Principal celebrated its 145th anniversary earlier this month. I'm incredibly proud of the way our company and our 20,000 employees continue to meet the changing needs of approximately 64 million customers. We remain focused on providing access to financial security for more people, businesses, and communities around the globe. Deanna?