01—Abstract
Summary
Summary of the 10-K filed February 11, 2022. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $1,622.6 billiona in assets under administration (AUA), including $713.9 billion in assets under management (AUM), as of December 31, 2021.
The company is a global investment management and retirement, asset management and insurance provider, organized into four reportable segments: Retirement and Income Solutions, Principal Global Investors, Principal International and U.S. Insurance Solutions, plus a Corporate segment. Net income attributable to Principal Financial Group, Inc. rose to $1,710.6 millionb in 2021 from $1,395.8 million in 2020, and total revenues were $14,262.7 million compared with $14,741.7 million. Diluted earnings per common share were $6.27, versus $5.05 in 2020.
The most significant development disclosed is the January 31, 2022 Master Transaction Agreement with Sutton Cayman, Ltd., an affiliate of Talcott Resolution Life, Inc., under which PFG will cede 100% of its in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee blocks through 100% coinsurance with funds withheld. The transaction is expected to close in the second quarter of 2022, subject to regulatory approval, with economics effective January 1, 2022. The company states that deployable proceeds, along with additional capital-efficiency transactions, will be returned to shareholders through share repurchases, and the Board approved a $1.6 billionc increase to the share repurchase authorization, which had $1.1 billion remaining as of December 31, 2021.
The filing also highlights a strategic shift that followed a 2021 Strategic Review: discontinuing sales of U.S. retail fixed annuities and retail U.S. life insurance, and focusing investment on fee-based businesses. Balance sheet metrics included total stockholders' equity attributable to PFG of $16,069.4 milliond and total debt of $4,360.0 million at year-end.
Net cash provided by operating activities was $3,218.8 million. Stockholder dividends paid totaled $654.1 million and share repurchases totaled $937.2 million during 2021.
02—Key points
Key Highlights
- Assets under administration of $1,622.6 billion and assets under management of $713.9 billion as of December 31, 2021.
- Net income attributable to Principal Financial Group, Inc. of $1,710.6 million in 2021, up from $1,395.8 million in 2020; diluted EPS of $6.27 versus $5.05.
- Total revenues declined to $14,262.7 million from $14,741.7 million, driven by lower premiums and other considerations ($4,841.5 million vs. $6,037.4 million), partly offset by higher fees and other revenues ($5,012.6 million vs. $4,511.1 million).
- January 31, 2022 agreement to reinsure 100% of in-force U.S. retail fixed annuity and universal life with secondary guarantee blocks to Sutton Cayman, Ltd., expected to close in Q2 2022 subject to regulatory approval.
- Board approved a $1.6 billion increase to the share repurchase authorization, on top of $1.1 billion remaining at December 31, 2021; proceeds from the Reinsurance Transaction are to be returned to shareholders through repurchases.
- Total cash returned to common stockholders was $1,591.3 million in 2021 ($654.1 million in dividends and $937.2 million in repurchases), compared with $921.5 million in 2020.
- Financial strength ratings were affirmed or revised to stable outlooks by A.M. Best, Fitch, Moody's and S&P during 2021; Moody's in January 2022 changed the outlook to stable from positive, citing counterparty risk and uncertainty in Chile.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2021filed February 11, 2022Financial Statements
FY2021 against FY2020
| Line item | FY2021FY2020 | Change |
|---|---|---|
| Revenue | $14.43B$14.74B | −2.1% |
| Net Income | $1.76B$1.40B | +25.9% |
| EPS (Basic) | $5.87$5.08 | +15.6% |
| EPS (Diluted) | $5.79$5.05 | +14.7% |
| Shares Outstanding (Basic) | 269.00M274.70M | −2.1% |
| Shares Outstanding (Diluted) | 272.90M276.60M | −1.3% |
05—Questions
Frequently Asked Questions
What is the Reinsurance Transaction and why is it significant?
On January 31, 2022, PFG entered into a Master Transaction Agreement with Sutton Cayman, Ltd., an affiliate of Talcott Resolution Life, Inc., to cede 100% of its in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee blocks, structured as 100% coinsurance with funds withheld. PFG will retain administration of the ceded business, and Principal Global Investors will manage the transferred commercial mortgage loans and private credit assets. The transaction is expected to close in the second quarter of 2022, subject to regulatory approval, and the company intends to return the deployable proceeds to shareholders through share repurchases.
How did profitability change in 2021?
Net income attributable to Principal Financial Group, Inc. increased to $1,710.6 million from $1,395.8 million. The filing attributes the increase primarily to a $274.9 million after-tax increase in variable investment income and a $104.0 million smaller unfavorable impact from actuarial assumption updates. Diluted earnings per share were $6.27, compared with $5.05 in 2020. The effective income tax rate was 16% in both years.
What did the company return to shareholders?
In 2021, PFG returned $1,591.3 million to common stockholders, consisting of $654.1 million in dividends and $937.2 million in share repurchases, compared with $921.5 million in 2020. The company repurchased 14.6 million shares. At year-end, $1.1 billion remained under the existing repurchase authorization before the January 2022 $1.6 billion increase.
How much debt and equity does the company carry?
As of December 31, 2021, total debt was $4,360.0 million, including $79.8 million of short-term debt and $4,280.2 million of long-term debt. Total stockholders' equity attributable to PFG was $16,069.4 million, down from $16,558.9 million a year earlier. Debt to capitalization was 21%, and debt to equity was 27%.
What are the main risks flagged in the filing?
The filing highlights risks including capital and credit market volatility, interest rate and credit spread changes, a low interest rate environment, declines in equity and real estate markets that reduce AUM and fee revenue, and the potential for ratings downgrades to increase surrenders and raise capital costs. It also cites risks from the COVID-19 pandemic, regulatory and tax changes, international operations (including possible pension reform in Chile), and the possibility that the Reinsurance Transaction is not completed on the expected terms or timing.
06—Continue