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F500 2021-206- Principal Financial

The Des Moines-based financial services company helps clients with retirement planning and asset management and offers varied insurance coverage plans worldwide.

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Principal Financial (PFG): Company Profile, Stock Price, News, Rankings

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Principal Financial

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Good morning, and welcome to the Principal Financial Group First Quarter twenty twenty five Financial Results Conference Call. There will be a question and answer period after the speakers have completed their prepared remarks. To ask a question during the session, you will need to press 11 on your telephone. To withdraw your question, please press 11 again. We would ask that you be respectful of others and limit your questions to one and a follow-up, so we can get to everyone in the queue.

I would now like to turn the conference over to Humphrey Lee, Vice President of Investor Relations.

Thank you, and good morning. Welcome to Principal Financial Group's first quarter twenty twenty five earnings conference call. As always, materials related to today's call are available on our website at investors.principal.com. Following a reading of the Safe Harbor provision, CEO, Deanna Schrabow and Interim CFO, Joe Pitt, will deliver some prepared remarks. We will then open the call for questions.

Members of senior management are also available for Q and A. Some of the comments made during this conference call may contain forward looking statements within the meaning of the Private Securities Litigation Reform Act. The company does not revise or update them to reflect new information, subsequent events or changes in strategy. Risks and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's most recent annual report on Form 10 ks filed by the company with the U. S.

Securities and Exchange Commission. Additionally, some of the comments made during this conference call may refer to non GAAP financial measures. Reconciliations of the non GAAP financial measures to the most directly comparable U. S. GAAP financial measures may be found in our earnings release, financial supplement and slide presentation.

Thanks, Humphrey. Good morning to everyone on the call. Before I get into the highlights for the quarter, I'd like to make a few comments on the current environment. We are operating in a market that is incredibly dynamic. Policy shifts and uncertainty surrounding the market outlook have contributed to a more cautious investor tone and heightened focus on resilience.

The magnitude of the volatility we have seen in April has been extreme and unprecedented and impacts our fee revenue in retirement and asset management. We expect market volatility to persist, making upcoming quarters more difficult to predict. While complex, we successfully navigated market volatility before with a clear strategy, a resilient and diversified business model, and a strong commitment to supporting our customers when it matters most. From a financial perspective, we will continue to focus on what we can control, with a disciplined approach to aligning expenses with revenue. Actions to support this are underway.

In addition, the actions we have taken over the last few years to transform our business mix have uniquely positioned us to perform through market cycles. Our conviction in our strategy has never been stronger, with a laser focus on growth across the retirement ecosystem, SMBs, and global asset management. Each presents outsized market growth opportunities aligned with our strong differentiated capabilities. Slide four of our materials highlights the progress we are making in advancing these growth drivers. Turning to the quarter, I am proud of our results, which reflect the strength and discipline of our strategy as well as the benefits of our diversified business.

First quarter adjusted non GAAP earnings, excluding significant variances, was $439,000,000 or $1.92 per diluted share, a 10 increase in EPS over the first quarter of twenty twenty four. We returned $370,000,000 of capital to shareholders in the first quarter, including $200,000,000 of share repurchases and a continued increase in our common stock dividend. We have the capital flexibility to continue supporting our customers, investing in growth, and returning capital responsibly. Our capital strategy remains grounded in long term financial discipline. Despite market volatility, total company managed AUM increased to $718,000,000,000 at the end of the quarter, reflecting positive market performance and the beneficial impact of exchange rates.

Net cash flow was negative $4,000,000,000 in the quarter, driven by two low fee institutional fixed income withdrawals in investment management. Overall, higher fee inflows relative to outflows are driving a positive impact to run rate revenue from institutional flows. We saw strong results in key asset classes, including private real estate, preferreds, and stable value. In addition, we saw strong local investment management flows of $700,000,000 total in Mexico and Southeast Asia, reinforcing our local strategies and the benefits of our global business reach. We are also encouraged by signs of green shoots in high yield preferreds, real estate, and international equities, some of which have already funded in April, pointing to additional growth in the quarters ahead.

In retirement, we generated positive account value net cash flow of $400,000,000 after adjusting for the low fee contract lapse discussed on our last call. We continue to see strong activity in our small and mid sized market, delivering $1,300,000,000 of positive flows, up from $1,000,000,000 in the year ago quarter. Turning to sales. Pension risk transfer volume grew year over year, reaching $800,000,000 in the quarter. We remain a leader in the industry, ranking among the top four providers by sales premium and third by number of contracts based on the 2024 LIMRa results.

Looking ahead, we see positive momentum in the pipeline across our retirement ecosystem. This momentum is being reinforced by recent industry recognition. Principal was top rated across all categories in the plan advisor survey and received 17 best in class awards from plan sponsor. Moving to specialty benefits, underwriting results were strong, and overall growth is being impacted by the absence of new PFML markets and lower dental sales, a result of our disciplined pricing actions. In life, sales were up 6% compared to the year ago quarter, driven by bundled business market sales and strong growth in nonqualified sales, a key component of our total retirement solutions.

Importantly, our well established and long tenured SMB block remains resilient. Findings from our recent SMB pulse survey indicate our customers are focused on adapting to the current environment through pricing actions, shifting suppliers, and managing margin with less emphasis on reducing benefits or staff. Across all of our businesses, the key fundamentals remain strong, including recurring deposits, deferrals, matches, and wage and employment growth. We remain focused on what matters most: delivering for our customers, operating with discipline, and executing on our long term strategy. We have built this company to perform through many cycles, resilient, diversified, and purpose led.

Importantly, our approach continues to be recognized. For the fourteenth time, Principal was named one of the twenty twenty five World's Most Ethical Companies by Ethisphere. This award reflects our ongoing commitment to doing what's right for our customers, employees, and shareholders, not just in times of strength, but especially in moments of uncertainty. We are also being recognized for how we use technology to work strategically. Our proprietary generative AI powered assistant, Paige, was honored with a CIO one hundred award for its impact on employee productivity.

In just one year, it's helped cut task completion time in half, streamlined training, and made it easier for teams to create content and serve our customers more efficiently. Overall, I am proud of our results this quarter and confident in the strength and resiliency of our integrated and diversified portfolio. We will continue to invest in growth, operate with discipline, and stay close to the evolving needs of our customers. And we will do so with the same clarity and commitment that have defined our success over the past one hundred and forty five years. With that, I'll turn it over to Joel to walk through the results in more detail.

Thanks, Deanna. Good morning to everyone on the call. I will walk through our financial performance for the first quarter and provide updates on our investment portfolio and capital position. As shown on slide three, excluding significant variances, first quarter non GAAP operating earnings were $439,000,000 or $1.92 per diluted share. This represents a 10% increase in EPS over the first quarter of twenty twenty four on an adjusted and a reported basis.

As previously disclosed, first quarter earnings were impacted by year over year elevated seasonal expenses in investment management. This was offset by a lower tax rate during the quarter. First quarter reported net income, excluding exited business, was $299,000,000 with immaterial credit losses of $4,000,000 Net income reflects the noncash impact of the previously announced transition of our Hong Kong MPF schemes to Bank Consortium Trust, or BCT. Importantly, this has no impact to free capital flow. Non GAAP operating ROE for the quarter, excluding our actuarial assumption review, was 14%, a 100 basis point improvement from a year ago and within our targeted range.

Equity markets created modest tailwinds for much of the first quarter, though softened in the final weeks. The S and P 500, small and mid cap, and real estate all finished the quarter down, while international equities and fixed income products delivered positive returns. Foreign exchange rates had a positive $8,000,000,000 impact on AUM for the quarter as spot rates improved. The following commentary excludes significant variances, which can be found on slide 12. Our first quarter results demonstrate the strength of our integrated and diversified businesses, which enabled us to deliver 10% year over year EPS growth.

Starting with RIS, first quarter top line growth was strong at 5%. This, coupled with expense discipline while investing in the business, resulted in a 41% margin, a 120 basis point improvement over the prior year quarter. Pretax operating earnings increased 8% from the first quarter twenty twenty four, driven by growth in the business, higher net investment income, and favorable year over year market performance. Underlying fundamentals in the business remained strong. Recurring deposit growth of 9% in the quarter was strong across all segments, with continued outperformance in our small and mid sized business market generating 12% growth.

The number of individuals deferring and receiving employer matches are up 4% compared to first quarter of twenty twenty four. In addition, the dollar amount of these deferrals and matches increased by 54%, respectively, during the same period. Net revenue growth and margin are at the high end of our targeted range this quarter, a product of our disciplined focus on profitable revenue growth. In principal asset management, investment management revenue increased 4% compared to the year ago quarter, within our targeted range. Management fees increased 5% year over year, driven by higher AUM and stable fee rate, while transaction and borrower fees remain muted.

As discussed on last quarter's call, seasonality played out largely as anticipated. Investment management had $35,000,000 of higher deferred compensation and payroll taxes compared to the fourth quarter, partially offset by lower variable expenses. These seasonal expenses are expected to return to normal levels while we continue to invest in our business. These are factored in our outlook. In international pension, net revenue was down slightly, primarily due to impacts from foreign currency.

On a constant currency basis, net revenue increased 4% year over year. Pretax operating earnings increased 5% from the prior year quarter despite a $6,000,000 FX headwind, driven by strong expense discipline. This resulted in margin expansion of nearly 400 basis points over the year ago quarter and is at the high end of our targeted range. In specialty benefits, premium and fees growth was 4% compared to the year ago quarter. As Deanna mentioned, this result was impacted by lower dental sales and a difficult comparison from new PFML markets in the year ago quarter.

These were factored into our full year outlook, implying higher growth in future quarters. While the environment is competitive, both employment and wage growth remain healthy, and persistency remained stable, which contributed to the year over year growth. SBD pretax operating earnings grew 5% over the prior year quarter, driven by business growth, more favorable underwriting experience, and higher net investment income. Margin expanded compared to the year ago quarter and remains within our targeted range. SPD loss ratio improved by 40 basis points year over year to 60.7% and was at the low end of our targeted range, driven by better group disability and group life results, partially offset by dental experience.

Dental pricing changes continue to move through the block, and we expect to see loss ratio improvement when comparing full year 2025 to 2024. Premium and fees growth in our life business increased compared to the prior year quarter as strong business market growth was up 20% and at or above targeted returns. Pretax operating earnings in the quarter were $14,000,000 down from the prior year quarter, driven by higher mortality, primarily from net claim severity. This included a single claim of $5,000,000 that was part of a much larger face amount shared by many carriers issued in 1999. While this impacted results in the quarter, our one year and longer term mortality is at our expected levels.

Our tax rate in the quarter was lower compared to the full year due to foreign tax credit benefits, as well as seasonal impacts from share based compensation. We expect the tax rate to be within our targeted range of 17% to 20% for the full year 2025. Our general account investment portfolio remains high quality, aligned with our liability profile, and well positioned for a variety of economic conditions. The portfolio remains healthy from a credit risk perspective. While we are closely monitoring the evolving trade policy landscape and its potential impact, our current assessment is minimal exposure to industries most likely to be directly affected by tariffs.

Our commercial mortgage loan portfolio remains healthy. As discussed in our last call, we had two scheduled loan maturities in the first quarter in our office portfolio, both of which have been paid off. The remainder of the office portfolio and the underlying metrics remain favorable and relatively unchanged from last quarter. Turning to capital and liquidity. We ended the quarter in a very strong position with $1,800,000,000 of excess and available capital.

This includes $1,200,000,000 at the holding company, above our $800,000,000 targeted level, $250,000,000 in our subsidiaries, and $300,000,000 in excess of our targeted 375% risk based capital ratio, which was estimated at 395% at quarter end. Capital was elevated by $400,000,000 this quarter as we exercise our twenty twenty eight PCAPS and will use the proceeds to pay down a $400,000,000 debt maturity in May. Concurrently, we issued $500,000,000 of new PCAPS in February, bringing the total off balance sheet facility to $850,000,000 This addresses our near term maturities, with our next maturity occurring in November 2026. We continue to deliver on our targeted 75% to 85% free capital flow. As discussed on last quarter's call, free capital flow is typically the lightest in the first quarter due to timing of capital generation and increases throughout the year.

As shown on slide three, we returned $370,000,000 to shareholders in the first quarter, including $200,000,000 of share repurchases and $170,000,000 of common stock dividends. Last night, we announced a $0.76 common stock dividend payable in the second quarter. This represents a $01 increase over the prior quarter's dividend and a 9% dividend growth rate on a trailing twelve month basis. We remain aligned with our targeted 40% dividend payout ratio, underscoring our confidence in continued growth and overall performance. As Deanna outlined, our first quarter results reflect our resilient and diversified business that continues to perform through various market cycles.

We remain disciplined in how we deploy capital, confident in the fundamentals of our businesses, and focused on delivering long term value to shareholders while supporting customers when they need us most. As we have consistently done and as economic conditions evolve, we remain committed to aligning expenses with revenue, with actions already underway while continuing to invest for growth. This concludes our prepared remarks. Operator, please open the call for questions.

At this time, I would like to remind everyone that to ask a question, please press 11 on your telephone. We'll pause for just a moment to compile the Q and A roster. Our first question comes from Joel Hurwitz with Dowling and Partners. Your line is open.

Good morning. I wanted to start on your EPS growth outlook. I know there remains a lot of uncertainty in the environment, you have the 9% to 12% EPS growth target. How do you feel about that just given the current macro backdrop?

Yeah, thanks for that question, Joel. I'll give a few high level remarks and then turn it over to Joel to get into more details. If you listen back to my prepared remarks, I reiterated, and as you just mentioned, we're operating in an environment that is incredibly dynamic and also very unpredictable driven by policy shifts and uncertainty. If you just look at the daily volatility swings that we experienced in the last four weeks, both positive and negative, they've been extreme. And because of that, that will have an impact on our fee revenue in both retirement and asset management.

I think it's important to remember that we have a diverse and resilient portfolio of businesses with revenue diversity by source, by geography, by asset class, and customer base. And that diversity is very critically important in times like this. I'd start with that first quarter was a strong start to the year, and I'll now turn it over to Joel for more details. But keep in mind, we are going to continue to focus on what we can control, including being there for our customers, leaning into growth, and being smart about expenses. Joel?

Yeah. Good morning, Joel. Thanks for the question. When looking at the full year, I think it's important to first ground ourselves on what happened during the first quarter. As I mentioned in my prepared remarks, 10% earnings per share growth on reported and adjusted basis.

You know, first quarter is a really strong start to the year and in line with our nine to 12% earnings per share guidance. This is a product of a 4% revenue growth year over year and 5% on a trailing twelve month basis and 40% of margin expansion over the past year. So although volatile, the first quarter average macro conditions were largely in line with what we expected in outlook as the market downturn occurred later in the quarter. So now to your question as it relates to the remainder of the year, as Deanna noted, we benefit in normal and volatile times from a diversified mix of business. Specifically, our benefits and protection spread businesses are relatively insulated from the recent market volatility.

So, I realize it makes it difficult to model, but our portfolio of business is resilient in times of volatility. A proof point we found on page three of our financial supplement, whereby you can see we had a 3,500,000,000 increase in AUM for market performance during the quarter. And this occurred despite a 5% decline in the S and P 500 during the quarter. So as for our fee businesses, the macro impact will depend on the severity and longevity of market disruption. On page 10 of the earnings call slide deck, you see we highlight the macro sensitivities.

It's important to note these exclude the impact of management actions, and it also shows the AV and AUM composition within investment management and RIS. So again, these sensitivities defined in that page ignore the expense actions we're taking to compensate for the macro headwinds that have emerged. During market volatility, we focus on what we can control. We lean into expense management activities and will not allow macro headwinds to hit our bottom line dollar for dollar. So in addition to expense management, important to note the beneficial impact on AUM levels from lower interest rates.

The decline in interest rates during the quarter provide a tailwind for our fee businesses. During the quarter, would be a higher AUM and account value levels. And then lastly, another relevant macro factor for us is FX. These headwinds are importantly dissipating. On a sequential basis, FX headwind and IP or international pension were less than $1,000,000 compared to $32,000,000 headwind on a trailing twelve month basis.

On this front, in first quarter alone, the Brazilian real strengthened 8% and the Chilean peso strengthened 4% relative to the US dollar. So it's a long way of saying there are a lot of macro variables in play, But importantly, based on what we know today, a path exists to remain in the nine to 12% EPS range, but that will be dependent on duration and severity of market disruption from here on out. So, Joel, I hope that helps.

Yeah, maybe just on the management actions and the expense side, can you just provide some more color on how much flexibility you have on the expense side and what you've sort of taken thus far in Q2?

Yes, I think I'd start with, if you look back through every economic cycle, we have a proven track record of aligning expenses with revenue, and that alignment is our North Star. It's obviously critical in it. And really the volatility really has started in the last four weeks. But again, we're underway. There's a lot of flexibility and levers that we can pull.

We'll continue to be thoughtful, disciplined, and focused on it, but Joel, can you give just a little bit more color on how we're thinking about expenses?

Yeah, so as I said in my prior comments, Joel, we take it very seriously. We want to make sure that we do align expense with revenue, and revenue is gonna be our guide. So on that front, it's evidenced by a continued margin expansion. You you look over the past year, our ability to align expense with revenue is reflected in our 40 basis point improvement year over year in margins. And so again, as I said before, during periods of volatility like this, we'll focus on what we can control and lean into expense management activities.

So examples of those things are what you would expect, you know, certain travel, delayed hiring, consulting spend, etcetera. And as we've done historically, we will actively and importantly responsibly align expense with revenues.

Thank you. Our next question comes from Ryan Krueger with KBW. Your line is open.

Good morning. Could you talk a little bit about client behavior in your asset management business? I guess, amidst the elevated market volatility, what changes you're seeing and how you think that will affect activity going forward?

Yeah, I think that's a great question, Ryan. As I mentioned in my remarks, we're seeing some good green shoots as we think about mandates and client activity as we go through the rest of the year. But I'll ask Kamal to give some more color relative to that.

Sure. Thank you, Deanna. Ryan, good morning. So, I'll touch upon a couple of things. I think client behavior, particularly given the macro environment, has become a little bit more volatile given rebalancing.

But from my seat, what I'm seeing is a material improvement in our pipeline. What I would highlight for you and what I'm most excited about is how clients are actually helping improve the business fundamentals of asset management. And I'll give you three reasons, what I would highlight there for you. One, I think as highlighted is, in 1Q, you highlighted our NCF behavior, but it truly doesn't capture the strengthening of our underlying business fundamentals, because the net revenue rate for asset management continues to increase substantially. In fact, mandates that we are bringing in now are higher than our average book of business.

So that's certainly aligned with our strength in private markets and some of the strategies we have outside The US. The other piece of client behavior that I would highlight for you is our global pipeline, which we actively track, is materially going up. In fact, one of the measures that I see in clients is right now there is an increased activity in business now versus business later. So the way you think about it, RFPs are requests for money now versus RFIs, which is informational requests, and we are seeing a lot of activity from investment consultants. In fact, just in 1Q, we are running at 40% of our annual run rate volume.

So, is up. The quality of mandates that are coming and we are participating is going up, and the net revenue rate is going up with the client

Thanks. Yes. I guess a similar question on retirement. One of your competitors a few weeks ago said they were seeing elevated hardship withdrawals. Is that something you're seeing at all?

It seems like the metric you were citing still seem pretty constructive, but wanted to hear what you're seeing there.

Yeah. Hi, Brian. Thank you. You know, with respect to participant behavior, broadly, I'd say from an investment perspective, we're definitely seeing risk on to risk off activity and a change out into more guaranteed options. With respect to withdrawals, we really haven't seen hardship withdrawals in particular.

We really haven't seen a significant increase in loans or hardship withdrawals from our participants at this point. So it's largely in line with last year's quarter as well as on a quarter over quarter and trailing twelve month basis. We're just we're not seeing that as a big driver of activity. If I think broadly just outside of loans and withdrawals and just about participant withdrawals in general, that rate has stabilized as well. And so, when we look at participant draws both on a quarter over quarter and the trailing twelve month basis, it's largely in line and has stabilized, as we indicated.

That was our expectation last quarter, and we've seen that come through. Now, dollars of participant withdrawals are up, but they're up in line with the increase in average AV, which really speaks to that impact that equity market performance has on flows and withdrawals. So overall, we're not seeing major changes in either loans or hardship withdrawals or in participant withdrawal rate at this time.

Yeah, Ryan, I think if you look at the revenue growth and the margin that Chris's business put out in the first quarter, it is a strength of our and a testament to the strategy. And ultimately, the fundamentals of that business remain very strong. So, next question.

Thank you. Our next question comes from Wilma Burdis with Raymond James. Your line is open.

more about mortality in the life business? What were the drivers there? And was the result you saw in line with the industry? Thanks.

Yeah, I'll ask Amy to answer that. Obviously mortality can be volatile quarter to quarter, so we can highlight what drove the quarterly results. But keep in mind, if we look at that over a one year and a longer term basis, our mortality still is aligned with our expectations. But Amy, a little bit more color on the quarter?

Yeah, Deanna gave a great starting point to think about the mortality in the life business. I am going to address a couple points there though. Number one is the individual life business. Deanna hit on it, it can be a bit volatile. We saw some of that volatility flow through.

We still feel really good about when we look over one year, three year, five year mortality. We definitely did see a little severity bump. We called out a specific large impact this quarter. What I would also offer though is that group life, which tends to be more of that working age population, produced a really nice result this quarter. So the severity that we're tending to see tends to be where we pick up more all population, not necessarily working population.

And Amy, I do know the current quarter's results in individual life was driven much more by severity and even a single large So any color on that larger claim?

That larger claim is one that's been on our books for twenty six years. It is one where we took a small portion of what appears to be a much larger insurable benefit at the time. And so my guess is that that particular claim will have some impact across the industry. Again, that could be with mutual or public companies, and it could be with reinsurers as well.

Thanks, Wilma. Do you have a follow-up question?

little bit of an update on the growth of the spread based products in retirement? I think you touched on this a bit earlier, but has it been growing, and could market uncertainty accelerate that glide path? Thanks.

Yeah, that's a great question. And obviously that does provide some resilience to our overall results. And there's many different aspects of what drives that spread, including even aspects from our four zero one business. So Chris, maybe give a little bit more of a flavor there.

Yes, sure. Good morning, Wilma. When I think about spread based growth overall, we're seeing really strong performance in our spread based businesses. We saw strong registered index linked annuity sales, up over $500,000,000 We had a strong PRT quarter, over $800,000,000 And we're also, as part of our overall strategy, continuing to drive additional utilization of our guaranteed fixed rate products into our retirement plans. And so we're seeing nice WSRS GA growth as well.

So, you know, really strong, and that's really part of the strategy as we continue to drive profitable growth, profitable plan dynamics, and using spread where it makes sense to serve our customers' needs. And so we are seeing positive there. If you look at sort of where we see a little bit of pressure on the spread base, it would be in the investment only. So if you think about investment only, that's an opportunistic business for us. We dial it up or down depending on what other opportunities we have to deploy capital.

And given the fact that we've been able to deploy capital and at nice returns and whether it's RILE, PRT or WSRS GA products. We have sort of dialed down investment only, and that contributed a drag of minus $500,000,000 in the current quarter, given IO maturities and the issuance that we lower issuance that we did in Q1 this year versus last year. So again, seeing positive dynamics on spread, and it is part of our overall strategy in RES to drive overall total revenue and profitable revenue growth.

Thank you. Our next question comes from Wes Carmichael with Autonomous Research. Your line is open.

On specialty benefits, I was hoping you could talk a little bit about your approach to new business in the quarter. I think you mentioned dental price earning in there. Are you done with actions on dental and any other products where you're taking price? Because I think sales are down across most lines and I'm asking this in recognition of very good underwriting result.

Yeah, I'll ask Amy to expand upon that. Obviously, we have a very competitive SPD product portfolio. There were some dynamics that impacted that growth rate year over year, including the PSML volatility. But I'll ask Amy to give some more color on sales, what we're seeing, and how it leads into our overall results.

Yeah, thanks. Deanna and Joel both caught this in their earlier prepared remarks, but new sales quarter over quarter is a difficult comparison. So we've mentioned that keeping in mind that paid family medical leave does come through that group disability line. So specifically we had a state come online last year first quarter, and so it makes those comparisons difficult. So when I back that out of the comparison, the new sales gap to expectations really is coming from dental.

Since third quarter of last year, we've experienced increased dental competition. I think we've talked about it a few times. We're seeing some mutual companies, medical carriers, and to a lesser extent probably other public company peers be really competitive in that space. So what we're doing there is staying really disciplined. We know that new sale pricing on all of our products, including dental benefits from staying disciplined.

When we've got a customer pricing impact, particularly for SMBs that moves around a lot, that really means that their ability to plan for cash flow just isn't there. So we do everything we can to keep those consistent predictable renewals happening. And that really starts with keeping that discipline on new sale. You had specifically asked about dental pricing. We had taken a series of actions on dental pricing throughout 'twenty four and even in early 'twenty five.

And the thing to keep in mind there is that when we take those actions, they hit first on new sales. So when we adjust that, we see that immediately in our new sale. And I would say that is what we're seeing in the result quarter over quarter. What is a little bit harder to keep the beat on is that those pricing actions are going to be aligned though with policy anniversaries for the in force block of business. So it's gonna blend in through the next twelve months to come in through the rest of the portfolio.

What I feel really comfortable about is that when I look at its impact on loss ratio, we are going to see a loss ratio in full year '25 that is better than we saw in full year '24. The other thing I would add is keep in mind, we function and sell and service on an in force basis with a bundle of products. Group benefits really hit an all time high this quarter in terms of our bundle. So that's the total coverages we have with a customer. So within that bundle, we are doing things that are not only taking action on those coverages like dental that need some corrective action, but we're also taking action on products that we're seeing good experience flow through.

So we're putting things back into the rate that are very positive for us on life and disability. So I'd point you back to looking at our persistency. So our persistency is exactly in line with where we hoped it would be for this first quarter experience, and I'm really proud of that result. I think that really speaks to our renewal formula. It speaks to the things we do within the bundle, And it speaks to the fact that when we have to move up on one product, we're often able to treat the whole case in a really competitive way.

So hopefully that gives a little bit more color of how we think about it and what we're expecting for '25.

Yeah, does. Thank you. And just switching gears, but on variable investment income, it was a little bit of a headwind this quarter. I know it's called out in significant variances, so it's excluded from your EPS guide. But when you think about the balance of the year, particularly in light of some equity market volatility in April, how are you now thinking about VII?

Principal Financial (PFG) Q1 2025 Earnings Call Transcript

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