Principal Announces 2020 Outlook and Long-term Guidance
Release includes estimated full year 2019 business unit revenues
Total company long-term targets:
- 9-12% annual growth in non-GAAP operating earnings and non-GAAP operating earnings per diluted share;
- 15-17% long-term targeted return on equity, excluding accumulated other comprehensive income (AOCI) other than foreign currency translation; and
- Targeted free cash flow of 70-80% of net income each year, in excess of capital used to fund organic growth.
The 2020 and long-term guidance ranges should be applied to the estimated full year 2019 revenue ranges as shown in the table below; the estimated full year 2019 revenue ranges exclude the impact of the significant variances in Exhibit 1. The 2020 and long-term guidance ranges for each business, reflect macroeconomic assumptions as of the end of
|
Estimated |
2020 |
Long-term |
|
Retirement & Income Solutions – Fee (RIS-Fee) |
|
|
|
|
|
Estimated 2019 net revenue2 |
|
|
|
|
Net revenue growth |
|
10-15% |
1-5% |
|
Pre-tax return on net revenue, excluding integration costs3 |
|
23-26% |
28-32% |
Retirement & Income Solutions – Spread (RIS- Spread) |
|
|
|
|
|
Estimated 2019 net revenue |
|
|
|
|
Net revenue growth |
|
5-15% |
5-15% |
|
Pre-tax return on net revenue |
|
65-70% |
65-70% |
|
|
|
|
|
|
Estimated 2019 operating revenues less pass-through expenses4 |
|
|
|
|
Operating revenues less pass-through expenses growth |
|
4-10% |
4-7% |
|
Pre-tax return on operating revenues less pass-through expenses |
|
34-38% |
34-37% |
|
|
|
|
|
|
Estimated 2019 combined net revenue (at PFG share)5 |
|
|
|
|
Combined net revenue (at PFG share) growth |
|
3-7% |
9-12% |
|
Pre-tax return on combined net revenue (at PFG share) |
|
35-39% |
38-43% |
Specialty Benefits |
|
|
|
|
|
Estimated 2019 premium and fees6 |
|
|
|
|
Premium and fees growth |
|
6-9% |
7-9% |
|
Pre-tax return on premium and fees7 |
|
12-14% |
11-14% |
Incurred loss ratio |
|
60-66% |
60-66% |
|
Individual Life |
|
|
|
|
|
Estimated 2019 premium and fees |
|
|
|
|
Premium and fees growth |
|
4-8% |
4-8% |
|
Pre-tax return on premium and fees |
|
15-20% |
16-20% |
Corporate |
Pre-tax operating losses |
N/A |
|
N/A |
The outlook for 2020 incorporates certain assumptions including:
- S&P 500 daily average in 2020 between 3,240 and 3,260, assuming 6% price appreciation from levels as of
November 29, 2019 ; - 10-year treasury rate approximately 1.75-2.25% at year-end 2020;
- Future foreign exchange rates follow external8 consensus as of
November 2019 ; -
U.S. GAAP total company net income effective tax rate of 12-15%; total company non-GAAP operating earnings effective tax rate9 of 16-19%; -
$1.2 billion to$1.7 billion of external capital deployments including common stock dividends, strategic acquisitions, and share repurchases; and - Weighted average diluted shares outstanding ranging from 275-280 million.
Conference call information
You can access the
- Connect to principal.com/investor to listen to a live Internet webcast.
- Please go to the website at least 10-15 minutes prior to the start of the call to register, and to download/install any necessary audio software.
- Via telephone by dialing in 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 is 9389439
- 866-427-0175 (
- An audio replay will be available approximately two hours after the live outlook call via:
- Online at principal.com/investor
- Telephone:
- 855-859-2056 (
U.S. and Canadian callers) - 404-537-3406 (International callers)
- Access code: 9389439
- The replay will be available through
December 17, 2019
- 855-859-2056 (
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 non-GAAP operating earnings, net income attributable to PFG, net cash flow, 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
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
About Principal®10
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.
Exhibit 1
The table below provides the revenue impacts by business unit of the significant variances called out on the first quarter, second quarter, and third quarter 2019 earnings calls.
Business unit |
Revenue metric |
Impacts of the 1Q-3Q 2019 significant variances |
||
Actuarial |
Variable |
Encaje and |
||
RIS-Fee |
Net revenue |
|
|
- |
RIS-Spread |
Net revenue |
|
|
- |
|
Operating revenues less pass-through expenses |
- |
- |
- |
|
Combined net revenue (at PFG share) |
|
- |
|
Specialty Benefits |
Premium and fees |
- |
- |
- |
Individual Life |
Premium and fees |
|
- |
- |
|
|
|
Estimated full |
Principal Global Investors Operating Revenues Less Pass-Through Expenses: |
|
Operating revenues |
|
Commissions and other expenses |
(135) - (160) |
Operating revenues less pass-through expenses |
|
|
|
|
|
Principal International Combined Net Revenue (at PFG Share) |
|
Pre-tax operating earnings |
|
Combined operating expenses other than pass-through commissions (at PFG share) |
570 - 630 |
Combined net revenue (at PFG share) |
|
1 Estimated full year 2019 revenue by business unit includes the first three quarters of 2019 reported excluding the impact of significant variances, as shown in Exhibit 1, plus fourth quarter estimate.
2 Net revenue = operating revenues less benefits, claims and settlement expenses less dividends to policyholders.
3 Pre-tax return on net revenue = pre-tax operating earnings divided by net revenue. Excludes integration costs related to the
4 The company has provided reconciliations of the non-GAAP measures to the most directly comparable
5 Combined net revenue: net revenue for all PI companies at 100 percent less pass-through commissions. The company has determined combined net revenue (at PFG share) is more representative of underlying net revenue growth for PI 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.
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
9 The operating earnings effective tax rate is a non-GAAP financial measure and differs from the
10 Principal, Principal and symbol design and
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