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Principal Financial Group’s largest revenue business helps U.S. employers run retirement plans and helps individuals turn savings into retirement income. Employers hire it to maintain plan records, administer accounts and provide investment services, for which it charges fixed or asset-based fees. It also accepts premiums from employers transferring pension obligations, then invests the money and guarantees payments to retirees. On guaranteed retirement contracts, it earns the difference between investment income and the interest credited to customers.
Principal Asset Management manages investments for institutions, retirement plans and individual investors, generally charging fees based on the assets it manages. The group also operates pension savings businesses in Latin America and Asia. Administering a retirement account does not necessarily mean managing its investments: most investments in its U.S. workplace retirement accounts are managed by third parties.
Insurance is another substantial revenue source. Principal sells workplace benefits, such as dental, life and disability coverage, mainly to small and midsized businesses and their employees. Employers or employees pay premiums; Principal pays covered claims and seeks to retain a margin after benefits and expenses. Its individual life insurance sales now focus on business owners, executives and key employees rather than retail consumers.
Fee income depends on the value of client assets and whether clients keep their money with Principal. Insurance and guaranteed retirement income depend on investment returns and the cost of promised benefits. The parent company relies on distributions from Principal Life, whose ability to send money upstream is limited by Iowa insurance law; distributions above statutory limits require regulatory approval.
The risk section is the longest, dullest part of the filing. This keeps only what can really hurt you: where it hits, how hard, when it plays out.
Every company claims an edge. Each one is checked against hard numbers like margins and returns: which hold, and which line gives way first.
Voya Financial competes with Principal for employers’ retirement-plan administration, investment management and employee benefits business. Watch Voya’s participant net deposits and retention of retirement assets: these help drive the asset- and participant-based fees in the business Principal also pursues.
Prudential Financial competes with Principal for institutions’ investment mandates, employers’ pension obligations and group insurance, and individuals’ retirement annuities and life insurance. Watch its pricing and execution on large deals to take over employers’ pension payments—pension risk transfers—because Principal’s premiums in this business can fluctuate with a few large transactions.
Lincoln National competes with Principal to administer employers’ retirement plans and sell annuities, life insurance and group protection. Its retirement-plan business focuses on employer-sponsored defined-contribution plans, making that customer base a closer comparison for Principal than Lincoln’s more limited defined-benefit and individual retirement-account business.
MetLife competes with Principal to provide employers with employee benefits, customers with retirement income products and institutions with investment management. MetLife now reports Investment Management as a separate segment, giving Principal investors a distinct business to compare with Principal’s asset-management operation.
Equitable Holdings and Principal both sell retirement and protection products and manage investments for institutions and individual investors. Watch Equitable’s retirement-product sales and net flows: its advice, asset-management and distribution businesses work together to bring money into those products.
Ameriprise Financial competes with Principal for clients’ investment assets and retirement savings, but centers more on financial advice for individual clients. Its managed-account fees depend on account assets, offering a comparison for Principal’s asset-based investment-management fees rather than its employer retirement-plan administration.
Unum Group competes with Principal for employers’ and employees’ spending on workplace disability, life, dental and supplemental insurance. Watch Unum’s policy renewals: it says customers can switch insurers rather than renew, a concrete sign of competition in the employee-benefits market Principal serves.
Jackson Financial competes with Principal for individuals’ variable and registered index-linked annuity purchases and institutions’ guaranteed investment contracts and funding agreements, which promise specified returns. Watch Jackson’s annuity risk management and investment income: Principal also bears risk on optional withdrawal guarantees and earns a spread between investment returns and interest credited to institutional customers.
The Hartford competes with Principal for employers’ group benefits business and customers’ investment-fund assets, but its larger property-and-casualty insurance business is distinct. Compare its employee benefits and mutual-fund or exchange-traded-fund business with Principal, rather than treating its overall insurance results as a close match.
Aflac’s U.S. business competes with Principal for voluntary supplemental health, life, dental and vision benefits paid for by employees, while Aflac also has a substantial Japan business. Watch its U.S. voluntary-benefits business rather than Japan: Principal is increasing its focus on benefits whose funding is shifting from employers to employees.
Principal Financial Group, Inc. earningsThis company
Principal Financial Group’s report will show whether client assets support fees from retirement plans and asset management, and whether insurance revenue covers claims and operating costs.
Read average account values in Retirement and Income Solutions alongside that segment’s pre-tax operating earnings, then compare operating earnings in Asset Management and Benefits and Protection. Rising account values with firmer earnings would show client assets and insurance results supporting the business; falling values or weaker earnings would point to pressure from markets, withdrawals, claims or costs.
Fed Interest Rate Decision
For Principal, Fed rate decisions shape interest income on investments versus the interest credited to policyholders, affecting the spread it earns and the cost of guarantees.
Expected4.0%Last release4.0%
If it comes in above expectations
If rates rise more than expected, investment income may take time to catch up with higher credited rates, squeezing the spread; some policyholders may also surrender or withdraw funds sooner.
If it comes in below expectations
If rates fall more than expected, yields on new investments may weaken while existing policy guarantees limit cuts to credited rates, also narrowing the spread.
VOYA FINANCIAL, INC. earningsVOYA
Voya Financial’s report will show whether employers and participants are keeping retirement savings in plans, the same assets Principal Financial Group seeks to administer and manage.
Watch participant net deposits and retirement-asset retention at Voya. Stronger net inflows and steady retention would suggest employers and participants are still building retirement assets, supporting the asset base for Principal’s comparable plan business; weaker inflows or rising outflows would put more pressure on related management and administration fees.
Prudential Financial, Inc. earningsPRU
Prudential Financial’s report will show whether employers are still transferring pension-payment obligations to insurers, and what deal pricing may mean for Principal Financial Group.
Watch Prudential’s volume and pricing on large pension risk-transfer deals, in which insurers take over employers’ pension payments. More deals at pricing that leaves room for returns would point to demand for the service and an opportunity for Principal; fewer deals or tighter pricing would make this premium business harder to grow profitably.
Unum Group earningsUNM
Unum Group’s report will show whether employers renew workplace coverage, a signal about competition for the group-insurance customers Principal Financial Group also serves.
Watch Unum’s policy renewals. Steady renewals would suggest employers and employees are staying with existing group coverage, a steadier setting for Principal’s comparable business; weaker renewals and more switching would signal fiercer competition for employer groups and premium revenue.
Non Farm Payrolls (Oct)
The monthly payrolls report tracks jobs added or lost, which can change how many employees Principal’s employer-group benefits cover and the premiums it receives.
A stronger payrolls reading points to more hiring and income, which may support employer-group coverage and premiums; a weaker reading points to less hiring, putting covered employee numbers and premium income at risk.
