2Q 2023: Solid results, healthy growth

Last week we shared second quarter results for Principal Financial Group , and I was pleased to highlight again how our strategy is driving success for our stakeholders.

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Our integrated business model and leading position in the small to midsize business (SMB) segment contributed to healthy growth across our Benefits and Protection and U.S. Retirement businesses as well as solid second quarter results.

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• We reported $376 million of non-GAAP operating earnings, or $1.53 per diluted share in the second quarter. Excluding significant variances, earnings per share increased 4 percent over the second quarter of 2022.

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• We ended the quarter with nearly $675 billion of total company managed AUM, a 2 percent increase from the first quarter.

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• We reported Principal-managed AUM net cash flows of negative $3.9 billion, with flows pressured across our businesses. Industry wide, asset managers saw negative retail flows in the second quarter. We’re pleased to see positive momentum building heading into the second half of the year.

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• We also returned over $250 million to our shareholders during the quarter and remain confident in our full-year guidance.

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• We continue to balance investing for growth in our businesses while managing expenses with pressured fee revenue across the enterprise.?

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Looking at the growth drivers for our business (asset management, retirement, and benefits and protection):

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In asset management we’re seeing positive momentum and improved investment performance. We feel well positioned to capture net cash flow as investor appetite returns and markets recover.

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Across U.S. retirement and Benefits and Protection, revenue is benefiting from a continued strong employment market within the SMB segment. Though we are seeing moderation in employment growth from record highs, wage growth has accelerated.

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These employment trends, coupled with strong sales and retention, are contributing to our continued above market premium and fee growth in Specialty Benefits, which increased 8 percent over the second quarter of 2022.

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In Retirement, net cash flow was pressured in the second quarter due to an uptick in large plan lapses. Large plan sales and lapses fluctuate quarter to quarter and can have a significant impact on net cash flow, but they generally have a lower overall impact on revenue for our retirement business.

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Looking at the SMB segment within U.S. retirement, net cash flow was a positive $265 million, driven by a 16 percent increase in transfer deposits and a 9 percent increase in recurring deposits—stronger results than the overall block compared to the year ago quarter.

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We expect retirement sales to pick up in the second half of the year, with strong full year growth across the SMB and large plan segments.

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We’re excited about the growth opportunities across the company. I’m confident our focus on high growth markets combined with our differentiated product suite and distinct set of distribution partnerships will continue to drive value for our customers and our shareholders.

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This is all in the capable hands of our 19,000 employees around the world, who work each day to increase access to financial security in all the areas where we do business. Thanks to each of them for delivering these results and positioning us for a successful second half of the year.