Principal Financial Group Strategic Review Leads to New Focus

The firm is getting out of the retail annuity business and focusing on its retirement and asset management businesses, including initiatives to improve the participant experience. 

Following a strategic review, Principal Financial Group has renewed its focus on the small to medium-sized business (SMB) market.

Principal says it will fully exit U.S. retail fixed annuities—discontinuing new sales of its deferred annuities, payout annuities and indexed annuities. The firm will continue selling its variable annuity offering, which it says plays an important role within its complete suite of retirement solutions.

“Our go-forward plan includes expanding emphasis on fee-based businesses and focus on three key areas—retirement in the U.S. and emerging markets, global asset management, and U.S. specialty benefits and protection in the small to medium-sized business market,” a spokesperson said. “Principal is an expert in the SMB market and a leader in providing comprehensive benefits packages to our customers, with business owners and key executives being a strategic focus for us for more than 10 years.”

The firm will continue to offer group benefits for employees and life and disability insurance products for business owners.

Principal, which acquired Wells Fargo’s retirement plans business in 2019, ranked as the No. 5 recordkeeper by total 401(k) assets in the most recent PLANSPONSOR Recordkeeping Survey. For plans with $10 million to $100 million in assets, it ranked No. 4.

“We will continue to grow our U.S. retirement franchise, which we have doubled in the last three years with the integration of Wells Fargo Institutional Retirement & Trust,” the spokesperson said. “We’ll invest in key differentiated and integrated offerings like our Total Retirement Solutions that provide us unmatched breadth and depth for our retirement customers. Participant experience will continue to be an integral focus for us, with strong plan design and financial wellness support that creates the best outcomes for our participants. We will also pursue digital solutions, such as Principal SimpleInvest, our digital IRA [individual retirement account] and advice offering, and our mobile apps that make it easier for customers to do business with us on their terms. We’ll consider the learnings of this review as we continue to evolve our strategy, portfolio and go-to-market approach to allow us to grow and create value.”

Principal also has a strong nonqualified deferred compensation (NQDC) plan business, ranking No. 4 by total 409A NQDC plan liabilities in the PLANSPONSOR Recordkeeping Survey.

“As a part of our Total Retirement Solutions, NQDC is truly a competitive differentiator for Principal. It’s an appealing key employee benefit that is also versatile, flexible, tax attractive and works for many companies,” the spokesperson said. “We will continue to support business owners and key executives, allowing for an even sharper focus on the business market and products with limited interest rate exposure.”

Dan Houston, chairman, president and CEO of Principal, said in an announcement about the results of the strategic review, “This thorough and intensive review considered strategic fit, client needs, financial impact and the risk profile of our business lines. We identified opportunities to reduce complexity and risk, improve our return profile, and increase our cash flow conversion to better enable us to execute on our strategy, reinvest in growth and support our financial strength.”