Principal Financial Group® (NYSE: PFG) today announced
results for fourth quarter and full year 2016.
"I'm very pleased with our results for fourth quarter and the full year.
Reflecting strong sales and client retention, we generated $19.4 billion
in net cash flows in 2016. We also increased assets under management by
more than $64 billion or 12 percent during the year, creating solid
earnings momentum going into 2017," said Dan Houston, chairman,
president and CEO. "Throughout 2016, we continued to deliver strong
investment performance, to expand our solution set, and to strengthen
relationships with customers and distributors. Our diversified business
model is a differentiator and will continue to serve us well moving into
"For 2016 we had both record net income and record operating earnings of
$1.3 billion. Excluding the impact of our annual assumption reviews this
is an 11 percent and 15 percent, respectively, increase over 2015,"
added Terry Lillis, chief financial officer. "We achieved these results
through growth in revenue and, equally as important, disciplined expense
management. In addition, we continue to have a balanced approach to
capital deployment with a focus on creating long-term shareholder value.
We deployed over 65 percent of net income including over $720 million to
shareholders in the form of common stock dividends and share buybacks
and a successful $94 million debt reduction with our fourth quarter 2016
Retirement and Income Solutions - Fee
(in millions except percentages or otherwise noted)
Pre-tax operating earnings6
Pre-tax return on net revenue8
Retirement and Income Solutions - Spread
Principal Global Investors
Operating revenues less pass-through commissions10
Pre-tax return on operating revenues less pass-through commissions11
Combined12 net revenue (at PFG share)
Specialty Benefits Insurance
Pre-tax return on premium and fees13
Individual Life Insurance
Forward looking and cautionary statementsCertain statements
made by the company which are not historical facts may be considered
forward-looking statements, including, without limitation, statements as
to operating earnings, net income available to common stockholders, net
cash flows, realized and unrealized gains and losses, capital and
liquidity positions, sales and earnings trends, and management's
beliefs, expectations, goals and opinions. The company does not
undertake to update these statements, which are based on a number of
assumptions concerning future conditions that may ultimately prove to be
inaccurate. Future events and their effects on the company may not be
those anticipated, and actual results may differ materially from the
results anticipated in these forward-looking statements. The risks,
uncertainties and factors that could cause or contribute to such
material differences are discussed in the company's annual report on
Form 10-K for the year ended Dec. 31, 2015, and in the company's
quarterly report on Form 10-Q for the quarter ended Sept. 30, 2016,
filed by the company with the U.S. Securities and Exchange Commission,
as updated or supplemented from time to time in subsequent filings.
These risks and uncertainties include, without limitation: adverse
capital and credit market conditions may significantly affect the
company's ability to meet liquidity needs, access to capital and cost of
capital; conditions in the global capital markets and the economy
generally; volatility or declines in the equity, bond or real estate
markets; changes in interest rates or credit spreads or a sustained low
interest rate environment; the company's investment portfolio is subject
to several risks that may diminish the value of its invested assets and
the investment returns credited to customers; the company's valuation of
investments and the determination of the amount of allowances and
impairments taken on such investments may include methodologies,
estimations and assumptions that are subject to differing
interpretations; any impairments of or valuation allowances against the
company's deferred tax assets; the company's actual experience could
differ significantly from its pricing and reserving assumptions; the
pattern of amortizing the company's DAC and other actuarial balances on
its universal life-type insurance contracts, participating life
insurance policies and certain investment contracts may change; the
company may not be able to protect its intellectual property and may be
subject to infringement claims; the company's ability to pay stockholder
dividends and meet its obligations may be constrained by the limitations
on dividends or distributions Iowa insurance laws impose on Principal
Life; changes in laws, regulations or accounting standards; results of
litigation and regulatory investigations; from time to time the company
may become subject to tax audits, tax litigation or similar proceedings,
and as a result it may owe additional taxes, interest and penalties in
amounts that may be material; applicable laws and the company's
certificate of incorporation and by-laws may discourage takeovers and
business combinations that some stockholders might consider in their
best interests; competition from companies that may have greater
financial resources, broader arrays of products, higher ratings and
stronger financial performance; a downgrade in the company's financial
strength or credit ratings; changes in investor preferences; inability
to attract and retain qualified employees and sales representatives and
develop new distribution sources; international business risks;
fluctuations in foreign currency exchange rates; the company may need to
fund deficiencies in its "Closed Block" assets that support
participating ordinary life insurance policies that had a dividend scale
in force at the time of Principal Life's 1998 conversion into a stock
life insurance company; the company's reinsurers could default on their
obligations or increase their rates; risks arising from acquisitions of
businesses; and a computer system failure or security breach could
disrupt the company's business and damage its reputation.
Use of Non-GAAP financial measuresThe company uses a number
of non-GAAP financial measures that management believes are useful to
investors because they illustrate the performance of normal, ongoing
operations, which is important in understanding and evaluating the
company's financial condition and results of operations. They are not,
however, a substitute for U.S. GAAP financial measures. Therefore, the
company has provided reconciliations of the non-GAAP measures to the
most directly comparable U.S. GAAP measure at the end of the release.
The company adjusts U.S. GAAP measures for items not directly related to
ongoing operations. However, it is possible these adjusting items
have occurred in the past and could recur in future reporting periods.
Management also uses non-GAAP measures for goal setting, as a basis for
determining employee and senior management awards and compensation, and
evaluating performance on a basis comparable to that used by investors
and securities analysts.
Earnings conference callOn Tuesday, Jan. 31, 2017, at 10:00
a.m. (ET), Chairman, President and Chief Executive Officer Dan Houston
and Executive Vice President and Chief Financial Officer Terry Lillis
will lead a discussion of results and the impacts on future prospects,
asset quality and capital adequacy during a live conference call, which
can be accessed as follows:
The company's financial supplement is currently available at principal.com/investor,
and may be referred to during the call. Other slides that will be
referenced during the call will be available at principal.com/investor
approximately one-half hour prior to call start time.
Principal helps people and companies around the world build, protect and
advance their financial well-being through retirement, insurance and
asset management solutions that fit their lives. Our employees are
passionate about helping clients of all income and portfolio sizes
achieve their goals - offering innovative ideas, investment expertise
and real-life solutions to make financial progress possible. To find out
more, visit us at principal.com.
Summary of Segment and Principal Financial Group, Inc.
Segment Pre-Tax Operating Earnings (Losses):
*Operating earnings versus U.S. GAAP (GAAP) net income available to
Management uses operating earnings, which is a non-GAAP financial
measure that excludes the effect of net realized capital gains and
losses, as adjusted, and other after-tax adjustments the company
believes are not indicative of overall operating trends, for goal
setting, as a basis for determining employee and senior management
awards and compensation, and evaluating performance on a basis
comparable to that used by investors and securities analysts. Note: it
is possible these adjusting items have occurred in the past and could
recur in future reporting periods. While these items may be significant
components in understanding and assessing our consolidated financial
performance, management believes the presentation of operating earnings
enhances the understanding of results of operations by highlighting
earnings attributable to the normal, ongoing operations of the company's
Principal Financial Group, Inc.
Principal Global Investors Operating Revenues Less Pass-Through
Principal International Combined Net Revenue (at PFG Share)
1 Use of non-GAAP financial measures is discussed in this
release after segment results. Operating earnings for total company is
2 Retirement and Income Solutions (RIS) - Fee includes Full
Service Accumulation and Individual Variable Annuities.
3 Constant currency basis = prior period results translated
using foreign exchange rates from the current period.
4 Premium and fees = premiums and other considerations plus
fees and other revenues.
5 Represents the percentage of Principal mutual funds,
separate accounts and collective investment trusts (CITs) in the top two
6 Pre-tax operating earnings = operating earnings before
income taxes and after noncontrolling interest.
7 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.
8 Pre-tax return on net revenue = pre-tax operating earnings
divided by net revenue.
9 Variable investment income includes certain types of
investment returns such as prepayment fees and income (loss) from
certain elements of our alternative asset classes, including results of
value-add real estate sales activity.
10 The company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measure at the end of
the release. The company has determined this measure is more
representative of underlying operating revenues growth for PGI as it
removes commissions that are collected through fee revenue and passed
through expenses with no impact to pre-tax operating earnings.
11 Pre-tax return on operating revenues less pass-through
commissions = pre-tax operating earnings, adjusted for noncontrolling
interest divided by operating revenues less pass-through commissions.
12 Combined basis = all Principal International companies at
100 percent. The company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measure at the end of
the release. The company has determined combined net revenue (at PFG
share) is more representative of underlying net revenue growth for
Principal International as it reflects our proportionate share of
consolidated and equity method subsidiaries. In addition, using this net
revenue metric provides a more meaningful representation of our profit
13 Pre-tax return on premium and fees = pre-tax operating
earnings divided by premium and fees.
14 Principal, Principal and symbol design and Principal
Financial Group are trademarks and service marks of Principal Financial
Services, Inc., a member of the Principal Financial Group.
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