Principal Financial Group, Inc. (PFG) is a leader in global financial services offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and workplace benefits and protection solutions through diverse family of financial services companies.
The company’s global asset management businesses serve a broad range of institutional, retirement, high net worth, and retail investors worldwide. The company’s focused...
Principal Financial Group, Inc. (PFG) is a leader in global financial services offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement, asset management and workplace benefits and protection solutions through diverse family of financial services companies.
The company’s global asset management businesses serve a broad range of institutional, retirement, high net worth, and retail investors worldwide. The company’s focused investment teams provide diverse, long-term investment capabilities including equity, fixed income, real estate, and other alternative investments, as well as fund offerings. The company’s international asset management and accumulation businesses focus on the opportunities created as aging populations around the world drive increased demand for retirement accumulation, retirement asset management and retirement income management solutions.
In the U.S., the company offers a broad array of retirement and employee benefit and insurance solutions to meet the needs of the business owner and their employees. The company is a leading provider of defined contribution plans, nonqualified plans, defined benefit plans and pension risk transfer services. The company is also a leading employee stock ownership plan (ESOP) consultant. In addition, the company is one of the largest providers of specialty benefits and insurance solutions for business owners and their employees.
Segments
The company operates through Retirement and Income Solutions; Principal Asset Management; and Benefits and Protection.
Talcott Reinsurance Transaction
During 2022, the company closed a coinsurance with funds withheld reinsurance transaction with Talcott Life &Annuity Re, Ltd. (Talcott Life & Annuity Re), a limited liability company organized under the laws of the Cayman Islands and an affiliate of Talcott Resolution Life, Inc., a subsidiary of Sixth Street, pursuant to which it ceded its in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee (ULSG) blocks of business (the Talcott Reinsurance Transaction).
Retirement and Income Solutions segment
This segment offers a comprehensive portfolio of products and services for retirement savings along with select products for retirement income:
To businesses of all sizes, the company offers products and services for defined contribution plans, including 401(k) and 403(b) plans; defined benefit plans; nonqualified executive benefit plans; stock services, including ESOPs and equity compensation; and pension risk transfer services;
To large institutional clients, the company also offers investment only products, including guaranteed investment contracts (GICs);
To employees of businesses and other individuals, the company offer the ability to accumulate savings and provide an income stream for retirement and other purposes through mutual funds, individual variable annuities, registered index-linked annuities (RILAs) and bank products; and
To non-retirement businesses, the company offers trust and custody services.
Workplace Savings and Retirement Solutions (WSRS)
The company offers a wide variety of investment and administrative products and services for defined contribution plans, including 401(k) and 403(b) plans; defined benefit plans; nonqualified executive benefit plans and stock services, including ESOPs and equity compensation.
Products
WSRS products respond to the needs of plan sponsors seeking both administrative and investment services for defined contribution plans or defined benefit plans. The investment component of both the defined contribution and defined benefit plans may be in the form of a guaranteed account, separate account, a mutual fund offering or a collective investment trust. In addition, defined contribution plan sponsors may also offer their own employer securities as an investment option under the plan.
The company delivers both administrative and investment services to its defined contribution plan and defined benefit plan customers through annuity contracts, collective investment trusts and mutual funds. Group annuity contracts and collective investment trusts used to fund qualified plans are not required to be registered with the United States Securities and Exchange Commission (SEC). The company’s mutual fund service platform is called Principal Advantage. It is a qualified plan service package based on the company’s series mutual fund, Principal Funds, Inc. (PFI). The company offers investments covering the full range of stable value, equity, fixed income, real estate and international investment options managed by its Principal Asset Management segment, as well as third party asset managers. In addition, WSRS offers plan sponsors trust services through an affiliated trust company.
As of December 31, 2023, the company provided WSRS products to over 40,000 defined contribution plans including assets and covering approximately 11.1 million eligible plan participants, and to over 1,700 defined benefit plans, including assets and covering over 418,000 eligible plan participants. As of December 31, 2023, approximately 32% of the company’s WSRS account values were managed by its Principal Asset Management segment, 63% were managed entirely by the third party asset managers that were not under contract to sub-advise a PFG product, 2% were sub-advised and 3% represented employer securities.
Markets and Distribution
The company offers its WSRS products and services to plans, including qualified and nonqualified defined contribution plans and defined benefit plans. These products and services are offered to businesses of all sizes including plans sponsored by small and mid-sized businesses, which remains underpenetrated, and large institutional clients. The company distributes its WSRS products and services nationally, primarily through a captive retirement services sales force. As of December 31, 2023, 88 retirement services sales representatives in 14 offices, operating as a wholesale distribution network, maintained relationships with over 11,000 independent advisors, consultants and agents. Retirement services sales representatives are an integral part of the sales process alongside the referring consultant or independent advisor. The company compensates retirement services sales representatives through a blend of salary and production-based incentives. The company administers, on behalf of the plan, commission or fee payments to independent advisors, consultants and agents.
As of December 31, 2023, the company had a staff of over 320 service and education specialists located across the U.S. These specialists play a key role in the ongoing servicing of plans by providing local services to the company’s customers, such as reviewing plan performance, investment options and plan design; communicating the customers’ needs and feedback to it and helping employees understand the benefits of their plans. The following summarizes the company’s distribution channels:
The company distributes its annuity-based products through intermediaries who are primarily state licensed individuals.
Principal Advantage platform is targeted at defined contribution plans through broker-dealer distribution channels. Principal Advantage gives the company access to Financial Industry Regulatory Authority (FINRA) registered distributors who are not traditional sellers of annuity-based products and broadens opportunities for it in the investment advisor and broker-dealer distribution channels.
Through its Retire Secure strategy the company provides financial education and other assistance to individual investors who are participants/members of employer-based accumulation solutions to help them achieve financial security. The company’s approach to WSRS plan services distribution, which gives it a targeted sales and service presence, along with its offering of PrincipalÒ Total Retirement Solutions. The company has also established a number of marketing and distribution relationships to increase the sales of its products and services.
Individual Variable Annuities and RILAs
Individual variable annuities and RILAs, which are savings vehicles through which the customer makes one or more deposits of varying amounts and intervals, are offered to individuals.
Products
The company’s individual variable deferred annuities provide customers with the flexibility to allocate their deposits to mutual funds managed by the Principal Asset Management segment or unaffiliated third party asset managers, with variable and guaranteed options. Generally speaking, the customers bear the investment risk for the variable options and have the right to allocate their assets among various separate mutual funds. Customers have the option to allocate all or a portion of their account to the company’s guaranteed option, in which case it credits interest at rates it determines, subject to contractual minimums.
The company’s major source of revenue from individual variable annuities is mortality and expense fees it charges to the customer, generally determined as a percentage of the market value of the assets held in a separate investment sub-account.
In the second quarter of 2023, the company began offering a new RILA, which provides policyholders with index-linked investment options and a fixed interest investment option, with different available term lengths. The index-linked investment options include protection against negative index performance through floor or buffer rates.
Markets and Distribution
The company’s target markets for individual variable annuities and RILAs include owners, executives and employees of small and medium-sized businesses and individuals seeking to accumulate and/or eventually receive distributions of assets for retirement. The company markets variable annuities and RILAs to individuals for both qualified and nonqualified retirement savings.
The company sells its individual variable annuity products primarily through its affiliated financial representatives, including Principal Connection, who collectively accounted for 85% of annuity sales for the year ended December 31, 2023. The remaining sales were made primarily through unaffiliated broker-dealer firms. Principal Connection is the company’s direct distribution channel for retail financial services products to individuals. Principal Connection’s services are available by phone, email or mail.
Investment Only
Products
The two primary products for which the company provides investment only services are GICs and funding agreements. The company’s investment only products contain provisions disallowing or limiting early surrenders, including penalties for early surrenders and minimum notice requirements.
Deposits to investment only products are predominantly in the form of single payments. As a result, the level of new deposits can fluctuate from one fiscal quarter to another. The amounts earned by the company are derived in part from the difference between the investment income earned by it and the amount credited to the customer. The Principal Asset Management segment manages the assets supporting the contractual promises.
Markets and Distribution
Funding agreements are issued directly to non-qualified institutions, the Federal Home Loan Bank of Des Moines (FHLB Des Moines) and unconsolidated special purpose entities. As part of its funding agreement-backed note programs, U.S. and foreign institutional investors purchase debt obligations from the special purpose entity which, in turn, purchases the funding agreement from the company with terms similar to those of the debt obligations. The strength of this market is dependent on debt capital market conditions. As a result, the company’s sales through this channel can vary widely from one quarter to another.
Pension Risk Transfer
Products
Pension risk transfer products respond primarily to the needs of pension plan sponsors in the form of single premium group annuities, which are immediate or deferred annuities that provide a current or future specific income amount, fully guaranteed by the company. The majority of the company’s business originates from defined benefit plans that are being terminated. In these situations, the plan sponsor transfers all its obligations under the plan to an insurer by paying a single premium. Generally, plan sponsors restrict their purchases to insurance companies with superior or excellent financial quality ratings because the Department of Labor (DOL) has mandated that annuities be purchased only from the safest available insurers.
Since premium received from pension risk transfer products is generally in the form of single payments, the level of premiums can fluctuate depending on the number of large-scale annuity sales in a particular quarter. The Principal Asset Management segment manages the assets supporting pension risk transfer account values.
Markets and Distribution
The company’s primary distribution channel for pension risk transfer products consists of several specialized home office sales consultants working through consultants and brokers that specialize in this type of business. The company’s sales consultants also make sales directly to institutions. The company’s nationally dispersed retirement services sales representatives act as a secondary distribution channel for these products.
Banking Services
Principal Bank is a U.S. federal savings bank. As of December 31, 2023, Principal Bank had nearly 708,000 customers. Principal Bank operates under a limited purpose charter and may only accept deposits held in a fiduciary capacity.
Products
Individual retirement accounts (IRAs) are provided by Principal Bank, primarily funded by retirement savings rolled over from qualified retirement plans. Principal Bank offers Federal Deposit Insurance Corporation (FDIC) insured cash solutions for customers in the form of savings accounts, money market accounts and certificates of deposit. The deposit products provide a relatively stable source of funding and liquidity for Principal Bank and are backed by purchases of investment securities and residential mortgage loans. In addition, Principal Bank serves as a trustee or custodian for institutional customers and facilitates cash sweep services for its affiliates and their customers through the Principal Deposit Sweep program.
Markets and Distribution
Principal Bank offers products and services primarily to participants rolling out of qualified retirement plans largely serviced by affiliates of PFG. Principal Bank services customers by telephone, mail and internet and offers digital advice services through its subsidiary, Principal Advised Services, LLC.
Individual Fixed Annuities
In 2022, the company reinsured the block of business existing as of January 1, 2022, with Talcott Life & Annuity Re as part of the Talcott Reinsurance Transaction.
Principal Asset Management segment
Principal Asset Management segment provides global investment solutions to institutional, retirement, retail and high net worth investors in the U.S. and select emerging markets.
Principal Global Investors
The company’s Principal Global Investors operations manages assets for sophisticated investors around the world using focused investment teams that provide diverse investment capabilities, including equity, fixed income, real estate and other alternative investments. The company also has experience in asset allocation, stable value management and other structured investment strategies. The company focuses on providing services to its other segments in addition to its retail mutual fund and third party institutional clients. The company maintains offices in Australia, Brazil, China, France, Germany, Hong Kong, Ireland, Italy, Japan, South Korea, Luxembourg, the Netherlands, Portugal, Singapore, Spain, Sweden, Switzerland, the United Arab Emirates, the United Kingdom and the United States.
The company delivers its products and services through its network of focused investment teams, including Principal Global Equities; Principal Global Fixed Income (including Finisterre emerging market debt teams); Aligned Investors; Principal Real Estate Investors, LLC; Principal Real Estate Europe Limited; Spectrum Asset Management, Inc.; Post Advisory Group, LLC; Principal Dynamic Growth; Edge Asset Management; Claritas Administração de Recursos Ltda. (Claritas); Origin Asset Management Limited Liability Partnership and Principal Asset Allocation.
The company provides mutual funds to customers. The company offers mutual funds to individuals, businesses and institutional investors for use within variable life contracts, variable annuity contracts and employer-sponsored pension plans; as a rollover investment option and for general investment purposes. The company also maintains various other domestic and global fund platforms, separately managed accounts and segregated accounts for some larger institutional and retail investors. The company’s products and services are provided for a fee as defined by client mandates. The company’s fees are generally driven by AUM.
Focused Investment Teams
The company’s focused investment team strategy is diversified across the following primary asset classes and service delivery options.
Equity Investments: As of December 31, 2023, Principal Global Equities, Aligned Investors and Principal Real Estate Investors, LLC along with Principal Dynamic Growth, Edge Asset Management, Origin Asset Management Limited Liability Partnership and Claritas managed global equity assets. The company’s equity capabilities encompass large-cap stocks, mid-cap stocks, small-cap stocks and real estate investment trusts in developed and emerging markets worldwide.
Fixed Income Investments: As of December 31, 2023, Principal Global Fixed Income and Principal Real Estate Investors, LLC along with Spectrum Asset Management, Inc. and Post Advisory Group, LLC managed global fixed income assets. Collectively, the company’s experience in fixed income management spans multiple economic and credit market cycles and encompasses all major fixed income security types and sectors, including commercial mortgage-backed securities (CMBS). The company’s research and risk management capabilities in worldwide debt markets provide a strong foundation for broadly diversified multi-sector portfolios, tailored to specific client objectives.
Real Estate and Other Alternative Investments: The company offers products and services through other alternative asset classes, including managing private real estate equity through Principal Real Estate Investors, LLC and Principal Real Estate Europe Limited; managing commercial mortgages and bridge/mezzanine loans through Principal Real Estate Investors, LLC and managing real estate and timber investments through Claritas.
Principal Asset Allocation: Principal Asset Allocation is a specialized asset allocation investment team offering multi-asset and/or multi-manager portfolio construction services that aim to deliver reliable, risk-adjusted investment outcomes to individual investors, institutional investors and participants in employer-sponsored plans.
Products and Services
Products offered by the Principal Global Investors operations include individually managed accounts, separately managed accounts for high net worth individuals and several fund platforms for retail and institutional investors, as described below.
Principal Funds, Inc.: PFI is a series mutual fund that offers investment options for defined contribution plans, individuals, institutional investors, adviser fee-based programs and other retirement plan clients. The company reports the results for this fund in the Retirement and Income Solutions segment or Principal Global Investors operations based on the distribution channel associated with the AUM.
Principal Variable Contracts Funds, Inc.: Principal Variable Contracts Funds, Inc. is a series mutual fund that provides investment options for variable annuity and variable life insurance contracts issued by the Principal Life Insurance Company (Principal Life) and other insurance companies not affiliated with Principal Life. AUM backing the company’s variable annuity contracts is reported in the Retirement and Income Solutions segment. AUM backing the company’s variable life insurance contracts is reported in the Benefits and Protection segment.
Other Principal Global Investors Funds: Principal Global Investors maintains various fund platforms including Qualifying Investor Alternative Investment Fund and Undertaking for Collective Investment in Transferable Securities (UCITS) funds domiciled in Dublin, collective investment trusts, exchange traded funds and other focused investment team sponsored funds. These funds are generally managed by the company’s focused investment teams.
Markets and Distribution
To effectively reach and cater to a diverse range of investors, the company employs a multi-channel distribution strategy. The company’s Global Institutional Advisory Services and Global Wealth Advisory Services teams, relationship managers and client service professionals collaborate with consultants and directly interact with investors to acquire and retain institutional, retail and other investors. These teams are organized into three geographic groups: U.S./Europe clients, Asia Pacific/Middle East clients and Latin America clients. Additionally, the company leverages partnerships with independent broker-dealers to further broaden its distribution reach. With a global presence spanning over 80 countries, the company is committed to serving a wide range of clients with diverse investment needs.
Principal International
Principal International has operations in Latin America and Asia. The company focuses on locations with growing middle classes and affluent segments, favorable demographics and increasing long-term savings, ideally with defined contribution retirement markets. The company also focuses on markets with relevant size. The company entered these locations through acquisitions, start-up operations and joint ventures.
The activities of the company’s Principal International operations reflect its efforts to provide long-term savings and retirement solutions to individuals in the locations in which it operates, as well as asset management services for institutional clients. The company offers pension accumulation products and services, mutual funds, asset management, income annuities and life insurance accumulation products.
Markets, Products and Distribution
Latin America
Brazil: The company offers pension accumulation, income annuity, and life insurance accumulation products through a co-managed joint venture, Brasilprev Seguros e Previdencia S.A. (Brasilprev). The company owned 25.005% of the economic interest and 50.01% of the voting shares as of December 31, 2023. The partner is Banco do Brasil (Banco).
Brasilprev has the exclusive distribution rights of its pension accumulation and income annuity products through the Banco network until October 2032. The company’s joint venture provides products for the retirement needs of individuals and employers. Banco’s employees sell these products directly to individual clients through its bank branches and digital channels. In addition, the company’s joint venture reaches corporate clients through two wholesale distribution channels: a network of independent brokers who sell to the public and Banco’s corporate account executives who sell to existing and prospective corporate clients.
The company also distributes pension and other protection products through a digital insurance brokerage company, Ciclic Corretora de Seguros S.A. (Ciclic). The company’s partner is BB Corretora De Seguros e Administradora De Bens S.A. (a subsidiary of Banco). The company owned 25.005% of the economic and 50.01% of the voting shares of Ciclic as of December 31, 2023.
Chile: The company offers a complete array of pension accumulation and income annuity solutions. The company also offers mutual fund, asset management services and life insurance accumulation products.
The company offers mandatory employee-funded pension and voluntary savings plans through Administradora de Fondos de Pensiones Cuprum S.A. (Cuprum). The company owned 97.97% of Cuprum as of December 31, 2023, and the rest is publicly floated. Cuprum’s products are sold through digital means and via a proprietary sales network of sales employees.
The company offers income annuity and life insurance accumulation solutions through Principal Compañía de Seguros de Vida Chile S.A., its wholly owned life insurance company. The annuity products are distributed directly by the company’s sales teams and through a network of brokers and independent agents. Life insurance accumulation products are offered to individuals through brokers and financial advisors and through digital means.
The company offers voluntary savings plans, mutual funds, and asset management solutions through Principal Administradora General de Fondos S.A., uts wholly owned mutual fund company. Products are distributed to retail and institutional clients through digital means (the company launched an open architecture service platform that provides support to financial advisors) as well as through its proprietary sales force, financial advisors, brokerage houses and alliances with financial institutions.
Mexico: The company offers pension accumulation, mutual funds and asset management services through its wholly owned companies.
The company offers mandatory and voluntary pension plans through Principal Afore, S.A. de C.V., Principal Grupo Financiero. The company manages and administers individual retirement accounts under the mandatory privatized social security system for formal employees in Mexico. As of December 31, 2023, the company had approximately 2.6 million individual retirement accounts. The company distributes products and services through a proprietary sales force of approximately 294 sales representatives as of December 31, 2023, as well as independent brokers who sell directly to individuals.
The company offers mutual funds and asset management services through Principal Fondos de Inversión, S.A. de C.V., Operadora de Fondos de Inversión, Principal Grupo Financiero. The company distributes products and services through a sales force and through distribution agreements with other financial entities. The company offers both domestic and international products, typically sold directly to institutional and retail clients. The company works in close collaboration with its Principal Global Investors operations for both international products and for the institutional segment.
Asia
China: The company offers mutual funds and asset management services to individuals and institutions through a joint venture, CCB Principal Asset Management Co., Ltd. (CCB PAM). The company owned 25% of CCB PAM as of December 31, 2023. China Construction Bank (CCB) is the majority partner with 65% ownership. China Huadian Capital Holdings owns 10%. CCB PAM distributes its mutual funds through CCB and third-party distributors, such as banks, securities brokers and e-channels. CCB provides widespread distribution support for the joint venture via its extensive network of bank branches and brand awareness activities.
The company offers entrust, account services and investment management for individual and group retirement security products through a joint venture, CCB Pension Management Co., Ltd. (CCBP). The company owned 17.647% of CCBP as of December 31, 2023. China Construction Bank is the majority partner with 70% ownership. The Social Security Fund of China owns 12.353%.
Hong Kong Special Administrative Region: The company offers both pension saving and mutual fund products to corporate and individual clients through wholly owned companies with $10.9 billion in AUM as of December 31, 2023.
The company offers two types of pension saving schemes, Mandatory Provident Fund and Occupational Retirement Schemes Ordinance, which it distributes through third party intermediaries, such as insurance companies, independent financial advisors, brokers, and employee benefit consultants. The company’s most significant partnership is with AXA Hong Kong with whom it has a 15-year distribution partnership through 2030. The company serviced approximately 655,000 accounts as of December 31, 2023. To help Hong Kong customers save for retirement beyond the mandatory pension schemes, Principal also offers mutual funds to retail customers through third party intermediaries, the most significant being banks.
Southeast Asia: The company offers mutual funds, asset management services and retirement solutions through its joint ventures in Malaysia, Principal Asset Management Berhad (PAM) and Principal Islamic Asset Management Sdn. Bhd. (PIAM). The partner is CIMB Group (CIMB), a leading ASEAN universal bank that has strong presence in the region.
PAM offers conventional and Islamic mutual funds, retirement solutions through the branches of CIMB and through its agency sales force of 1,950 agents selling to retail customers as of December 31, 2023. PAM also distributes its mutual funds and retirement solutions through third party institutions, including banks, security houses and digital platforms, such as digital wallet and online marketplaces. PAM has subsidiaries in Singapore (Principal Asset Management (S) Pte. Ltd.), Indonesia (PT Principal Asset Management) and Thailand (Principal Asset Management Company Limited).
PIAM offers Islamic asset management services to clients across Southeast Asia and the Middle East. PIAM also offers Islamic mutual funds in Southeast Asia, the Middle East and Europe via Principal Global Investors’ UCITS platform in Dublin.
Benefits and Protection segment
Benefits and Protection segment sells individual life insurance products. The company is uniquely positioned to protect businesses through its broad set of solutions, its expertise and the experiences it offers.
The company protects their employees by offering a comprehensive set of employee benefits that helps recruit and retain talent, including nonqualified deferred compensation, employer paid and voluntary group benefits, and guaranteed standard issue life and individual disability insurance.
The company protects their business in the event of a death, disability or resignation of a key employee or future change in management through business owner solutions and disability solutions.
The company protects business owners and their personal needs by helping maintain their lifestyle through life or disability insurance and building and protecting their retirement savings.
The company organizes its operations into two divisions: Specialty Benefits and Life Insurance. However, the company shares key resources in its core areas such as strategic leadership, distribution, operations and marketing.
Specialty Benefits
Specialty Benefits, which includes group dental, vision, life, critical illness, accident, hospital indemnity, paid family and medical leave (PFML), disability insurance and individual disability insurance, is an important component of the employee benefit offering primarily at small and medium-sized businesses.
Products and Services
Group Dental and Vision Insurance: The company’s plans provide partial reimbursement for dental and vision expenses. As of December 31, 2023, the company had over 117,000 group dental and vision insurance policies in force covering over 2.9 million employees. In addition to indemnity and preferred provider organization dental offered on both an employer paid and voluntary basis, the company offers a prepaid dental plan in Arizona through its Employers Dental Services, Inc. subsidiary. The company also offers a discount dental product nationally. The company’s indemnity vision and its managed care vision products are offered on both an employer paid and voluntary basis.
Group Life and Other Insurance: The company’s group life insurance provides coverage to employees and their dependents for a specified period. As of December 31, 2023, the company had over 95,000 group policies providing nearly $178 billion of group life insurance in force covering approximately 3.0 million employee lives. The company sells traditional group life insurance that does not provide for accumulation of cash values on both an employer paid and voluntary basis. The company’s group life insurance business remains focused on the traditional, annually renewable term product. Group term life and group universal life accounted for 99% and 1%, respectively, of the company’s total group life insurance in force as of December 31, 2023.
Group Disability Insurance: The company’s group disability insurance provides a benefit to insured employees who become disabled. In most instances, this benefit is in the form of a monthly income. The company’s group disability products include both short-term and long-term disability, offered on both an employer paid and voluntary basis. As of December 31, 2023, long-term disability represented 59% of total group disability premium, while short-term disability represented 41% of total group disability premium. The company also provides disability management services, called rehabilitation services, to assist individuals in returning to work as quickly as possible following disability. The company works with disability claimants to improve the approval rate of Social Security benefits, thereby reducing payment of benefits by the amount of Social Security payments received. As of December 31, 2023, the company served approximately 2.2 million employee lives through over 67,000 contracts. The company also offers voluntary critical illness insurance, which provides a lump-sum benefit to pay for additional expenses associated with common critical illnesses; voluntary accident insurance, which pays a lump sum benefit when covered injuries occur because of an accident; and hospital indemnity insurance, which provides a lump sum benefit associated with hospitalization. In 2021, the company began selling PFML on a limited basis, which provides paid time off to care for specified family needs or an employee’s own serious health condition. As of December 31, 2023, the company had sold PFML in three states. The company plans to expand to other states in the future.
Individual Disability Insurance: The company’s individual disability insurance products provide income protection to the insured member and/or business in the event of disability. In most instances, this benefit is in the form of a monthly income. In addition to income replacement, the company offers products to pay business-related costs, such as overhead expenses for a disabled business owner, buy-out costs for business owners purchasing a disabled owner’s interest in the business, expenditures for replacement of a key person and business loan payments. The company also offers a product to protect retirement savings in the event of disability. As of December 31, 2023, the company served approximately 220,000 individual disability policyholders.
Fee-for-Service: The company offers administration of group dental, disability and vision benefits on a fee-for-service basis.
Life Insurance
The company specializes in providing solutions primarily for small to medium-sized businesses to protect against risk and loss, assist with succession planning and wealth transfer and to build and protect wealth for retirement. The company also provides solutions to meet the personal needs of business owners, executives and key employees. In 2022, the company reinsured its ULSG block of business with Talcott Life & Annuity Re as part of the Talcott Reinsurance Transaction. The company’s U.S. operations administered approximately 722,000 individual life insurance policies with over $539.0 billion of individual life insurance in force as of December 31, 2023.
Products and Services
The company’s Business Owner Solutions platform, as well as its nonqualified deferred compensation offering combines administration and consulting to service its clients’ needs. The company focuses on the business and personal insurance needs of owners, executives and key employees primarily of small and medium-sized businesses with an emphasis on providing insurance solutions for nonqualified executive benefits. The company offers a variety of individual life insurance products, both interest sensitive (including universal life, variable universal life and indexed universal life insurance) and traditional.
Interest Sensitive: Interest sensitive includes universal life (UL), variable universal life and indexed universal life insurance products. These products offer the policyholder the option of adjusting both the premium and the death benefit amounts of the insurance contract. Universal life insurance typically includes a cash value account that accumulates at a credited interest rate based on the investment returns of the block of business. Variable universal life insurance is credited with the investment returns of the various investment options selected by the policyholder. Indexed universal life is credited with investment returns tied to an external index, subject to a contractual minimum and maximum.
Traditional Life Insurance: Traditional life insurance includes term, whole and adjustable life insurance products; however, the company no longer market whole and adjustable life insurance products. Term insurance products provide a guaranteed death benefit for a specified period of time in return for the payment of a fixed premium. Term life insurance products represented 80% of individual life insurance in force as of December 31, 2023, and 25% of the company’s individual life insurance annualized first year premium sales for the year ended December 31, 2023. Whole life policies provide a guaranteed death benefit and a cash surrender value in return for payment of fixed premiums. Adjustable life insurance products provide a guaranteed benefit in return for the payment of a fixed premium while allowing the policyholder to set the coverage period, premium and face amount combination.
Benefits and Protection Markets and Distribution
For each of its products, administration and distribution channels are customized to meet customer needs and expectations for that product.
The company markets its group insurance products primarily to small and medium-sized businesses, through brokers and consultants. The company sells its group insurance products in all 50 states and the District of Columbia. The company continually adapts its products and pricing to meet local market conditions and to comply with state and federal legislation. The company markets its fee-for-service capabilities to employers that self-insure their employees’ dental, disability and vision benefits. The company markets its fee-for-service businesses in all 50 states and the District of Columbia.
The group insurance market continues to see a shift to voluntary/worksite products due to various pressures on employers. In keeping with this market change, which shifts the funding of such products from the employer to the employee, the company continues to place an enhanced focus on its voluntary benefits platform.
As of December 31, 2023, the company had 141 sales representatives and 176 service representatives in 26 local markets. The company’s sales representatives accounted for 100% of its group insurance sales for the year ended December 31, 2023. The service representatives play a key role in servicing the case by providing local, responsive services to the company’s customers and their brokers, such as renewing contracts, revising plans, solving administrative issues and communicating the customers’ needs and feedback to it.
The company sells its individual life and individual disability insurance products in all 50 states and the District of Columbia, primarily targeting owners, executives and key employees of small and medium-sized businesses. In 2023, small and medium-sized business sales represented 100% of individual life sales and 70% of individual disability sales for the year ended December 31, 2023. The company’s life insurance sales efforts focus on the Nonqualified Deferred Compensation and the Business Solutions market. This strategy offers solutions to address business owner financial challenges such as exiting the business, business transition, retaining key employees and retirement planning. Key employees also have needs to supplement retirement income, survivor income and business protection.
The company distributes its individual life and individual disability insurance products through its affiliated financial representatives and independent brokers, as well as other marketing and distribution alliances. To meet the needs of the various marketing channels, particularly the independent brokers, the company employs wholesale distributors — Regional Vice Presidents for nonqualified, business solutions and individual disability.
Corporate segment
Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect the company’s financing activities (including financing costs), income on capital not allocated to other segments, inter-segment eliminations, income tax risks and certain income, expenses and other adjustments not allocated to the segments based on the nature of such items. Results of Principal Securities, Inc., the company’s retail broker-dealer and registered investment advisor, and its exited group medical and long-term care insurance businesses are reported in this segment.
Regulation
Principal Life and PNLIC are domiciled in Iowa and their principal insurance regulatory authority is the Insurance Division of the Department of Commerce of the State of Iowa.
The company also has entities that are registered as investment advisers with the SEC under, and is therefore subject to, the Investment Advisers Act of 1940.
As the company provides products and services for the U.S. and Puerto Rico employee benefit plans, the company is subject to regulation under the Employee Retirement Income Security Act (ERISA). ERISA provisions include reporting and disclosure requirements and standards of conduct.
Principal Bank, a wholly owned subsidiary, is a U.S. federal savings bank regulated by the Office of the Comptroller of the Currency. Principal Bank’s depositors are insured by the FDIC up to specified limits, making Principal Bank subject to certain of the FDIC’s regulations.
Delaware Charter Guarantee & Trust Company conducting business as Principal Trust Company, a wholly owned subsidiary, is a Delaware state chartered trust company regulated by the State of Delaware Office of the State Bank Commissioner. Principal Trust Company is subject to Delaware banking and trust law.
Principal Global Investors Trust Company, a wholly owned subsidiary, is an Oregon state registered banking corporation with trust powers regulated by the State of Oregon Division of Financial Regulations. Principal Global Investors Trust Company is subject to Oregon banking regulations.
Regulations, such as the revised Markets in Financial Instruments Directive and the General Data Protection Regulation (GDPR) have a global impact on the company’s businesses.
History
Principal Financial Group, Inc. was founded in 1879. The company was incorporated in 2001.
