Monday 31st of January 2022 08:40:05 AM

Principal Financial enters reinsurance pact, boost stock buyback program by $1.6B

Stock Buyback text on sticky notes with office desk. Stock Market Exchange Concept syahrir maulana/iStock via Getty Images Principal Financial Group (NASDAQ:PFG) entered an agreement with Sixth Street an its insurance platform, Talcott Resolution, to reinsure PFG's in-force U.S. retail fixed annuity and universal life insurance with secondary guarantee (ULSG) blocks of business. Combined with some other capital efficiency improvements, the the reinsurance transaction is expected to generate deployable proceeds of ~$800M that Principal (PFG) expects to use for share repurchases. Principal's board approved a $1.6B increase to the $1.1B that's still available under its existing share repurchase authorization as of Dec. 31, 2021, bringing the total amount now available to $2.7B. The deal represents an important step toward its commitment of becoming more capital efficient with a focus on higher growth businesses within retirement in the U.S. and select emerging markets, global asset management, and U.S. benefits and protection, the company said. Reinsurance of the blocks also reduces Principal's (PFG) risk exposure to interest rates, credit markets, and policyholder behavior. The company has increased its share repurchase target for 2022 to $2.0B-$2.3B from $800M-$1.0B. Principal (PFG) now plans to return up to $4.6B to shareholders between 2021 and 2022 through share repurchases and common stock dividends. The actions announced today are expected to add to Principal's (PFG) non-GAAP operating EPS starting in 2023, improve non-GAAP operating return on average equity and affirms its 15% target in 2023, and enhance free capital flow conversion by ~10 percentage points annually, increasing the company's target range to 75%-85% upon close. Investor call starts at 10:00 AM ET. Earlier this month, Reuters reported that Sixth Street was in advanced talks to buy the two insurance units

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