Good morning and welcome to the Principal Financial Group Third Quarter 2023 Financial Results Conference Call. I’d like to introduce the participants of today’s call:
– Amy Christine Friedrich, President of Benefits & Protection at Principal Financial Group, Inc.
– Christopher James Littlefield, President of Retirement & Income Solutions at Principal Financial Group, Inc.
– Daniel Joseph Houston, Chairman, CEO & President of Principal Financial Group, Inc.
– Deanna Dawnette Strable-Soethout, Executive VP & CFO of Principal Financial Group, Inc.
– Humphrey Lee, VP & Head of IR at Principal Financial Group, Inc.
– Kamal Bhatia, Senior Executive MD & Global Head of Investments – Principal Asset Management at Principal Financial Group, Inc.
– Patrick Gregory Halter, President & CEO of Principal Asset Management at Principal Financial Group, Inc.
– Jamminder Singh Bhullar, Senior Analyst at JPMorgan Chase & Co, Research Division
– Joshua David Shanker, MD at BofA Securities, Research Division
– Ryan Joel Krueger, MD of Equity Research at Keefe, Bruyette, & Woods, Inc., Research Division
– Suneet Laxman L. Kamath, Equity Analyst at Jefferies LLC, Research Division
– Taylor Alexander Scott, Equity Analyst at Goldman Sachs Group, Inc., Research Division
– Thomas George Gallagher, Senior MD at Evercore ISI Institutional Equities, Research Division
– Tracy Dolin-Benguigui, Director & Senior Equity Research Analyst at Barclays Bank PLC, Research Division
– Wesley Collin Carmichael, VP & Equity Analyst at Wells Fargo Securities, LLC, Research Division
– Wilma Carter Jackson Burdis, Research Analyst at Raymond James & Associates, Inc., Research Division
Operator: Good morning, and welcome to the Principal Financial Group Third Quarter 2023 Financial Results Conference Call. (Operator Instructions) I would now like to turn the conference call over to Humphrey Lee, Vice President of Investor Relations.
Humphrey Lee: Thank you, and good morning. Welcome to Principal Financial Group’s Third Quarter 2023 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, Dan Houston, and CFO, Deanna Strable, will deliver some prepared remarks. We will then open up the call for questions. Other members of senior management will also be available for Q&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-K 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. We’ll be hosting a combined fourth quarter 2023 earnings and 2024 outlook call on February 13. We will share more details earlier next year. Dan?
Daniel Joseph Houston: Thanks, Humphrey, and welcome to everyone on the call. This morning, I’d like to share key aspects of our third quarter financial results and some notable performance highlights. Deanna will follow with additional details and an update on our current financial and capital position. Our diversified and increasingly integrated business model, as well as our leading and differentiated position in the U.S. small-to-midsized business market, contributed to a strong quarter. Across the enterprise, we continue to balance investing for growth in our businesses with disciplined expense management.
Starting on Slide 3, we saw healthy sales growth across our businesses and strong underwriting results, which drove reported non-GAAP operating earnings of $420 million or $1.72 per diluted share in the third quarter. Excluding significant variances, earnings per share increased 14% over the third quarter of 2022. The synergies between our businesses, increasingly integrated offering, and the value of our distribution and joint venture partnerships continue to unlock value for our customers and shareholders. During the quarter, we delivered on our capital deployment strategy, investing for growth in our businesses and returning over $350 million of capital to shareholders through share repurchases and common stock dividends. Our strong capital position allowed us to complete $200 million of share repurchases in the third quarter and increase our dividend.
After a strong start to the year, equity markets retreated in August and September. The U.S. dollar strengthened on growth and higher yields in the U.S., outpacing much of the rest of the world. These macroeconomic dynamics impacted our total company-managed assets under management (AUM), which ended the quarter over $650 billion. Despite continued pressure in the real estate sector, we generated $800 million of positive real estate net cash flow in the quarter as institutional investors started to put money to work in select real estate strategies. We have several real estate opportunities boosting our optimism for the coming quarters.
Turning to Principal International, we ended the quarter with $168 billion of total reported AUM. This reflected strong retirement net cash flow in Latin America, including $1 billion in Brazil. We continue to have great confidence in the global asset management opportunity and our ability to deliver global and local investment capabilities and client support across more than 80 markets. As part of our efforts to invest for growth, we have added 2 new highly regarded investment leaders George Maris from Janus Henderson as CIO of Equities; and Michael Goosay from Goldman Sachs as CIO fixed income.
Looking at U.S. retirement, account value net cash flow was positive in the third quarter. Total RIS sales grew 30% and fee-based transfer deposits increased 78% compared to a year ago. We had 2 large retirement plan sales in the quarter, which contributed $3 billion to sales and transfer deposits. The SMB segment continues to be strong and has proven resilient as employment… (content continues)
