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Principal Financial Group (PFG) Provides Updated 2019 Outlook & Long-Term Guidance

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December 3, 2018 9:05 AM EST

Principal Financial Group, Inc. (NASDAQ: PFG) today announced certain business unit outlook metrics and capital deployment plans for 2019 and updated long-term guidance. These metrics provide greater clarity around the key drivers of earnings growth for each of the business units. Company senior leaders will provide additional detail on guidance, discuss potential impacts from recent market volatility on fourth quarter 2018 results, and answer questions during a 60-minute conference call at 10:00 a.m. EST today, Dec. 3, 2018. Slides related to the 2019 outlook are available now at principal.com/investor.

Effective January 1, 2019, we will be making changes to the allocation of certain compensation and other expenses and net investment income among the business units. These allocation changes are being made as a result of a global financial process improvement project, with no impact to total company financial results.

Our 2019 and long-term guidance ranges reflect these allocation changes and should be applied to recast 3Q 2018 trailing twelve month financial metrics, which can found in the conference call slides available on principal.com/investor.

Below are the 2019 and long-term guidance ranges for each business, reflecting the allocation changes, market performance through November 28, 2018, and updated expectations:

2019
guidance

Long-term
guidance

Retirement & Income Solutions – Fee

Net revenue1 growth

 (2)-2% 1-5%

Pre-tax return on net revenue2

 26-30% 28-32%
Retirement & Income Solutions – Spread
Net revenue growth 5-10% 5-10%
Pre-tax return on net revenue 65-70% 65-70%
Principal Global Investors

Operating revenues less pass-through commissions3 growth

 1-5% 4-7%

Pre-tax return on operating revenues less pass-through commissions4

 34-38% 34-38%
Principal International (in reported USD)

Combined net revenue (at PFG share)5 growth

 5-9% 11-14%

Pre-tax return on combined net revenue (at PFG share)6

 35-39% 38-43%
Specialty Benefits

Premium and fees7 growth

 7-9% 7-9%

Pre-tax return on premium and fees8

12-14%

11-14%

Loss ratio

60-66%

60-66%

Individual Life
Premium and fees growth 4-8% 4-8%
Pre-tax return on premium and fees 16-20% 17-21%

Corporate

Pre-tax operating losses $(300)M - $(320)M N/A

The outlook for 2019 incorporates certain assumptions including:

  • Average S&P 500 index in 2019 between 2,830 and 2,850, assuming a 2 percent quarterly total return on levels as of November 28, 2018;
  • 10-year treasury rate approximately 3.25-3.50 percent at year-end 2019;
  • Future foreign exchange rates follow external9 consensus as of November 2018;
  • U.S. GAAP total company net income effective tax rate of 12-16 percent; total company non-GAAP operating earnings effective tax rate10 of 16-20 percent;
  • $1.0 billion to $1.4 billion of total capital deployed for common stock dividends, strategic acquisitions, share repurchases, and to provide financial flexibility; and
  • Weighted average diluted shares outstanding ranging from 280-282 million.


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