Principal Financial Group, Inc. PFG today announced certain business unit outlook metrics and an update on capital deployment plans for 2017. These metrics provide greater clarity of key drivers of earnings growth for each of the business units. There is a 30-minute conference call at 10:00 a.m. EST today, Dec. 6, 2016. Company senior leaders will provide additional detail and answer questions. Slides related to the 2017 outlook are now available at www.principal.com/investor.
Below are the 2017 outlook metrics for each business:
Principal Financial Group 2017 Outlook Metrics | |||
Retirement & Income Solutions – Fee | |||
Net revenue1 growth |
2-5% | ||
Pre-tax return on net revenue2 |
29-33% | ||
Retirement & Income Solutions – Spread | |||
Net revenue growth | 5-10% | ||
Pre-tax return on net revenue | 55-60% | ||
Principal Global Investors | |||
Adjusted revenue3 growth |
4-8% | ||
Pre-tax return on adjusted revenue4 |
34-37% | ||
Principal International (at PFG share, in reported USD) | |||
Combined5 net revenue growth |
11-14% | ||
Combined pre-tax return on net revenue | 38-42% | ||
Specialty Benefits | |||
Premium and fees6 growth |
7-9% | ||
Pre-tax return on premium and fees7 |
10-13% | ||
Loss ratio | 62-68% | ||
Individual Life | |||
Premium and fees growth | 3-6% | ||
Pre-tax return on premium and fees | 14-18% | ||
Corporate | |||
Pre-tax operating losses | $200-$225 million | ||
The outlook for 2017 incorporates certain assumptions including:
- Average S&P 500 index in 2017 between 2,265 and 2,285, assuming a 2 percent quarterly total return on levels as of the end of November 2016;
- 10-year treasury rate approximately 2.50-3.00 percent at year-end 2017;
- Future foreign exchange rates follow external8 consensus as of November 2016; reflects marginal weakening of the U.S. dollar in 2017 relative to 2016;
-
US GAAP total company net income effective tax rate of 16-18 percent;
total company operating earnings effective tax rate of 21-23 percent9
- Fee effective tax rate of 19-21 percent9
- Spread effective tax rate of 28-32 percent9
- Risk effective tax rate of 30-34 percent9
- Corporate effective tax rate at 40 percent;
- $800 million to $1.1 billion of total capital deployed for common stock dividends, strategic acquisitions, share repurchases, and to provide financial flexibility; and
- Diluted weighted average number of common shares outstanding ranging from 288 – 292 million.
Conference call information
The
30-minute call at 10:00 a.m. EST today can be accessed the
following ways:
- Via live Internet webcast. Please go to www.principal.com/investor at least 10-15 minutes prior to the start of the call to register, and to download and install any necessary audio software.
- Via telephone by dialing the following numbers approximately 10 minutes prior to the start of the call.
866-427-0175 (U.S. and Canadian callers)
706-643-7701
(International callers)
Access code 12949703
- An audio replay will be available via:
www.principal.com/investor
855-859-2056
(U.S. and Canadian callers)
404-537-3406 (International callers)
Access
code 12949703
Replay will be available approximately two hours
after the completion of the live outlook call through the end of day
Dec. 13, 2016.
Forward looking and cautionary statements
Certain 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 Measures
A non-GAAP financial
measure is a numerical measure of performance, financial position, or
cash flows that includes adjustments from a comparable financial measure
presented in accordance with U.S. GAAP. In this press release, the
company provides outlook on certain metrics that impact operating
earnings (losses) and earnings growth. Operating earnings is a non-GAAP
financial measure that management believes is useful to investors
because it illustrates the performance of normal, ongoing operations.
Operating earnings are determined by adjusting GAAP net income available
to common stockholders for net realized capital gains and losses, as
adjusted, and other after-tax adjustments the company believes are not
indicative of overall operating trends. However, it is possible these
adjusting items have occurred in the past and could recur in future
reporting periods. Management uses non-GAAP measures for goal setting,
as a basis for determining employee compensation, and evaluating
performance on a basis comparable to that used by investors and
securities analysts.
About Principal®
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.
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.
1 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.
2 Pre-tax
return on net revenue = pre-tax operating earnings divided by net
revenue.
3 Adjusted revenue = operating revenues less
commission expense.
4 Pre-tax return on adjusted revenue
= pre-tax operating earnings, adjusted for noncontrolling interest
divided by adjusted revenue.
5 PI Combined net revenue
is a non-GAAP financial measure. Combined basis = all Principal
International companies at 100 percent. 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 margins. The difference between combined
net revenue (at PFG share) and pre-tax operating earnings is combined
operating expenses (at PFG share).
6 Premium and fees =
premiums and other considerations plus fees and other revenues.
7
Pre-tax return on premium and fees = pre-tax operating earnings
divided by premium and fees.
8 Latin America utilizes
Central Bank estimates, while Asia uses Bloomberg.
9 The
operating earnings effective tax rate is a non-GAAP measure and differs
from US GAAP net income effective tax rate primarily due to net realized
capital gains and losses (NRCG).
View source version on businesswire.com: http://www.businesswire.com/news/home/20161206005160/en/
Principal Financial Group, Inc.
Media Contact:
Erica
Jensen, 515-362-0049
jensen.erica@principal.com
or
Investor
Relations Contact:
John Egan, 515-235-9500
egan.john@principal.com
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