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Segment Information | 9 Months Ended
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Sep. 30, 2022
Segment Information |
Segment Information | 13. Segment Information We provide financial products and services through the following segments: Retirement and Income Solutions, Principal Global Investors, Principal International and U.S. Insurance Solutions. In addition, we have a Corporate segment. The segments are managed and reported separately because they provide different products and services, have different strategies or have different markets and distribution channels. The Retirement and Income Solutions segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The segment is organized into Retirement and Income Solutions – Fee, which includes full service accumulation, trust and custody services, individual variable annuities and the acquisition, integration and migration expenses associated with the purchase of the Institutional Retirement & Trust business of Wells Fargo Bank, N.A.; and Retirement and Income Solutions – Spread, which includes investment only, pension risk transfer, banking services and our exited retail fixed annuities business. The Principal Global Investors segment provides asset management services to our asset accumulation business, our insurance operations, the Corporate segment and third party institutional clients. This segment also includes our mutual fund business. The Principal International segment has operations in Latin America (Brazil, Chile and Mexico) and Asia (China, Hong Kong Special Administrative Region and Southeast Asia). We focus on locations with large middle classes, favorable demographics and growing long-term savings, ideally with voluntary or mandatory pension markets. We entered these locations through acquisitions, start-up operations and joint ventures. The U.S. Insurance Solutions segment focuses on solutions for small-to-mid sized businesses and their employees. The segment is organized into Specialty Benefits insurance, which provides group dental and vision insurance, individual and group disability insurance, group life insurance, critical illness, accident, paid family and medical leave and non-medical fee-for-service claims administration; and Individual Life insurance, which includes universal life, variable universal life, indexed universal life, traditional life insurance and our exited ULSG business. Our Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect our 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. (“PSI”), our retail broker-dealer and registered investment advisor (“RIA”); and our exited group medical and long-term care insurance businesses are reported in this segment. Management uses segment pre-tax operating earnings in evaluating performance, which is consistent with the financial results provided to and discussed with securities analysts. We determine segment pre-tax operating earnings by adjusting U.S. GAAP income before income taxes for pre-tax net realized capital gains (losses), as adjusted, pre-tax income (loss) from exited business, pre-tax other adjustments that management believes are not indicative of overall operating trends and certain adjustments related to equity method investments and noncontrolling interest. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of pre-tax operating earnings enhances the understanding of our results of operations by highlighting pre-tax earnings attributable to the normal, ongoing operations of the business. The pre-tax net realized capital gains (losses), as adjusted, excluded from pre-tax operating earnings reflects consolidated U.S. GAAP pre-tax net realized capital gains (losses) excluding the following items that are included in pre-tax operating earnings:
| ● | Periodic settlements and accruals on derivative instruments not designated as hedging instruments,
| ● | Certain market value adjustments of derivatives and embedded derivatives and
| ● | Certain market value adjustments of derivative instruments used to economically hedge embedded derivatives.
Pre-tax income (loss) from exited business includes amounts associated with our exited U.S. retail fixed annuity and ULSG businesses, including strategic review costs and impacts, amortization of reinsurance gain (loss), impacts to actuarial balances of reinsured businesses, net realized capital gains (losses) on funds withheld assets and the change in fair value of the funds withheld embedded derivative. The strategic review costs and impacts primarily include actuarial balance re-cohorting impacts resulting from the Strategic Review and costs to close the Reinsurance Transaction. Impacts to actuarial balances of reinsured business primarily include DAC amortization. Pre-tax net realized capital gains (losses), as adjusted, are further adjusted for:
| ● | Amortization of hedge accounting book value adjustments for certain discontinued hedges,
| ● | Certain hedge accounting market value revenue adjustments,
| ● | Certain market value adjustments to fee revenues,
| ● | Pre-tax net realized capital gains (losses) adjustments related to equity method investments,
| ● | Pre-tax net realized capital gains (losses) adjustments related to sponsored investment funds,
| ● | Recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services,
| ● | Related changes in the amortization pattern of DAC and related actuarial balances,
| ● | Certain hedge accounting market value expense adjustments and
| ● | Net realized capital gains (losses) distributed.
Segment operating revenues reflect consolidated U.S. GAAP total revenues excluding:
| ● | Net realized capital gains (losses), except periodic settlements and accruals on derivatives not designated as hedging instruments and certain market value adjustments of derivative instruments used to economically hedge embedded derivatives, and their impact on:
| ● | Amortization of hedge accounting book value adjustments for certain discontinued hedges,
| ● | Certain hedge accounting market value revenue adjustments,
| ● | Certain market value adjustments to fee revenues,
| ● | Pre-tax net realized capital gains (losses) adjustments related to equity method investments,
| ● | Pre-tax net realized capital gains (losses) adjustments related to sponsored investment funds and
| ● | Recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services.
| ● | Pre-tax revenues from exited business,
| ● | Pre-tax other adjustments and income taxes of equity method investments and
| ● | Pre-tax other adjustments management believes are not indicative of overall operating trends.
The accounting policies of the segments are consistent with the accounting policies for the consolidated financial statements, with the exception of: (1) pension and OPEB cost allocations, (2) certain expenses deemed to benefit the entire organization and (3) income tax allocations. For purposes of determining pre-tax operating earnings, the segments are allocated the service component of pension and other postretirement benefit costs. The Corporate segment reflects the non-service components of pension and other postretirement benefit costs as assumptions are established and funding decisions are managed from a company-wide perspective. Additionally, the Corporate segment reflects expenses that benefit the entire organization for which the segments are not able to influence the spend. This includes expenses such as public company costs, executive management costs, acquisition and disposition costs, among others. The Corporate segment functions to absorb the risk inherent in interpreting and applying tax law. For purposes of determining non-GAAP operating earnings, the segments are allocated tax adjustments consistent with the positions we took on tax returns. The Corporate segment results reflect any differences between the tax returns and the estimated resolution of any disputes. The following tables summarize select financial information by segment, including operating revenues for our products and services, and reconcile segment totals to those reported in the consolidated financial statements: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | September 30, 2022 |  | December 31, 2021
​ | ​ | (in millions)
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions | ​ | $ | 201,000.7 | ​ | $ | 221,993.8
Principal Global Investors | ​ |  | 2,239.1 | ​ |  | 2,445.1
Principal International | ​ |  | 37,535.1 | ​ |  | 42,812.4
U.S. Insurance Solutions | ​ |  | 39,969.5 | ​ |  | 33,222.6
Corporate | ​ |  | 1,836.2 | ​ |  | 4,183.3
Total consolidated assets | ​ | $ | 282,580.6 | ​ | $ | 304,657.2
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | For the nine months ended
​ | ​ | September 30, | ​ | September 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
​ | ​ | (in millions)
Operating revenues by segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions – Fee | ​ | $ | 551.5 | ​ | $ | 580.9 | ​ | $ | 1,693.8 | ​ | $ | 1,723.9
Retirement and Income Solutions – Spread | ​ |  | 1,031.1 | ​ |  | 1,072.0 | ​ | ​ | 2,508.7 | ​ |  | 2,823.9
Total Retirement and Income Solutions (1) | ​ |  | 1,582.6 | ​ |  | 1,652.9 | ​ | ​ | 4,202.5 | ​ |  | 4,547.8
Principal Global Investors (2) | ​ |  | 406.0 | ​ |  | 465.2 | ​ | ​ | 1,304.9 | ​ |  | 1,334.1
Principal International | ​ |  | 376.9 | ​ |  | 328.1 | ​ | ​ | 1,130.9 | ​ |  | 942.3
U.S. Insurance Solutions: | ​ |  | ​ | ​ |  | ​ | ​ | ​ | ​ | ​ |  | ​
Specialty Benefits insurance | ​ | ​ | 749.0 | ​ | ​ | 684.4 | ​ | ​ | 2,218.3 | ​ | ​ | 2,007.9
Individual Life insurance | ​ |  | 344.0 | ​ |  | 505.7 | ​ | ​ | 1,024.6 | ​ |  | 1,539.1
Eliminations | ​ | ​ | (0.1) | ​ | ​ | — | ​ | ​ | (0.4) | ​ | ​ | (0.1)
Total U.S. Insurance Solutions | ​ | ​ | 1,092.9 | ​ | ​ | 1,190.1 | ​ | ​ | 3,242.5 | ​ | ​ | 3,546.9
Corporate | ​ | ​ | (15.9) | ​ | ​ | (14.3) | ​ | ​ | (23.2) | ​ | ​ | (21.8)
Total segment operating revenues | ​ | ​ | 3,442.5 | ​ | ​ | 3,622.0 | ​ | ​ | 9,857.6 | ​ | ​ | 10,349.3
Net realized capital losses, net of related revenue adjustments | ​ | ​ | (76.6) | ​ | ​ | (188.2) | ​ | ​ | (493.0) | ​ | ​ | (157.0)
Revenues from exited business (3) | ​ | ​ | 1,249.6 | ​ | ​ | — | ​ | ​ | 5,043.2 | ​ | ​ | —
Adjustments related to equity method investments | ​ | ​ | (14.6) | ​ | ​ | (10.1) | ​ | ​ | (38.2) | ​ | ​ | (20.7)
Total revenues per consolidated statements of operations | ​ | $ | 4,600.9 | ​ | $ | 3,423.7 | ​ | $ | 14,369.6 | ​ | $ | 10,171.6
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Pre-tax operating earnings (losses) by segment: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions | ​ | $ | 278.6 | ​ | $ | 243.2 | ​ | $ | 852.4 | ​ | $ | 811.4
Principal Global Investors | ​ |  | 142.0 | ​ |  | 190.1 | ​ | ​ | 465.4 | ​ |  | 515.6
Principal International | ​ |  | 66.7 | ​ |  | 81.0 | ​ | ​ | 216.9 | ​ |  | 203.8
U.S. Insurance Solutions | ​ |  | 135.7 | ​ |  | 151.6 | ​ | ​ | 403.2 | ​ |  | 373.4
Corporate | ​ |  | (100.8) | ​ |  | (97.1) | ​ | ​ | (382.7) | ​ |  | (273.6)
Total segment pre-tax operating earnings | ​ |  | 522.2 | ​ |  | 568.8 | ​ | ​ | 1,555.2 | ​ |  | 1,630.6
Pre-tax net realized capital losses, as adjusted (4) | ​ |  | (47.4) | ​ |  | (133.5) | ​ | ​ | (405.2) | ​ |  | (141.7)
Pre-tax income from exited business (5) | ​ | ​ | 1,268.6 | ​ | ​ | — | ​ | ​ | 4,887.1 | ​ | ​ | —
Adjustments related to equity method investments and noncontrolling interest | ​ | ​ | (13.3) | ​ | ​ | (7.2) | ​ | ​ | 18.1 | ​ | ​ | (14.3)
Income before income taxes per consolidated statements of operations | ​ | $ | 1,730.1 | ​ | $ | 428.1 | ​ | $ | 6,055.2 | ​ | $ | 1,474.6
(1) | Reflects inter-segment revenues of $89.9 million and $106.0 million for the three months ended September 30, 2022 and 2021, respectively, $275.9 million and $307.7 million for the nine months ended September 30, 2022 and 2021, respectively.
(2) | Reflects inter-segment revenues of $73.7 million and $79.7 million for the three months ended September 30, 2022 and 2021, respectively, $244.5 million and $223.9 million for the nine months ended September 30, 2022 and 2021, respectively.
(3) | Revenues from exited business is derived as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | For the nine months ended
​ | ​ | September 30, | ​ | September 30,
​ | ​ | 2022 | ​ | 2021 | ​ | 2022 | ​ | 2021
​ | ​ | (in millions)
Revenues from exited business: |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Change in fair value of funds withheld embedded derivative | ​ | $ | 1,237.7 | ​ | $ | — | ​ | $ | 4,305.0 | ​ | $ | —
Net realized capital gains on funds withheld assets | ​ | ​ | 8.5 | ​ | ​ | — | ​ | ​ | 697.5 | ​ | ​ | —
Strategic review costs and impacts | ​ |  | — | ​ |  | — | ​ |  | 32.4 | ​ |  | —
Amortization of reinsurance gain | ​ |  | 3.4 | ​ |  | — | ​ |  | 8.3 | ​ |  | —
Total revenues from exited business | ​ | $ | 1,249.6 | ​ | $ | — | ​ | $ | 5,043.2 | ​ | $ | —
​
(4) | Pre-tax net realized capital gains (losses), as adjusted, is derived as follows:
​
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | For the nine months ended
​ | ​ | September 30, | ​ | September 30,
​ |  | 2022 |  | 2021 |  | 2022 |  | 2021
​ | ​ | (in millions)
Net realized capital losses: | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Net realized capital losses | ​ | $ | (55.7) | ​ | $ | (152.0) | ​ | $ | (394.1) | ​ | $ | (41.7)
Derivative and hedging-related revenue adjustments | ​ | ​ | (32.9) | ​ | ​ | (30.6) | ​ | ​ | (106.7) | ​ |  | (108.4)
Market value adjustments to fee revenues | ​ | ​ | — | ​ | ​ | (0.2) | ​ | ​ | 0.1 | ​ | ​ | (0.6)
Adjustments related to equity method investments | ​ | ​ | 6.6 | ​ | ​ | (10.8) | ​ | ​ | (6.0) | ​ | ​ | (18.3)
Adjustments related to sponsored investment funds | ​ | ​ | 5.2 | ​ | ​ | 5.8 | ​ | ​ | 16.9 | ​ | ​ | 15.9
Recognition of front-end fee revenue | ​ | ​ | 0.2 | ​ | ​ | (0.4) | ​ | ​ | (3.2) | ​ | ​ | (3.9)
Net realized capital losses, net of related revenue adjustments | ​ |  | (76.6) | ​ |  | (188.2) | ​ | ​ | (493.0) | ​ |  | (157.0)
Amortization of deferred acquisition costs and other actuarial balances | ​ |  | 7.7 | ​ |  | 9.9 | ​ | ​ | (13.0) | ​ |  | 22.8
Capital (gains) losses distributed | ​ |  | 25.5 | ​ |  | (33.0) | ​ | ​ | 146.1 | ​ |  | (86.3)
Market value adjustments of embedded derivatives | ​ |  | (4.0) | ​ |  | 77.8 | ​ | ​ | (45.3) | ​ |  | 78.8
Pre-tax net realized capital losses, as adjusted (a) | ​ | $ | (47.4) | ​ | $ | (133.5) | ​ | $ | (405.2) | ​ | $ | (141.7)
| (a) | As adjusted before noncontrolling interest capital gains (losses).
(5) | Pre-tax income (loss) from exited business included:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended | ​ | For the nine months ended
​ | ​ | September 30, | ​ | September 30,
​ | ​ | 2022 | ​ | 2021 | ​ | 2022 | ​ | 2021
​ | ​ | (in millions)
Pre-tax income from exited business |  | ​ |  |  | ​ |  |  | ​ |  |  | ​ |
Change in fair value of funds withheld embedded derivative | ​ | $ | 1,237.7 | ​ | $ | — | ​ | $ | 4,305.0 | ​ | $ | —
Net realized capital gains on funds withheld assets | ​ | ​ | 8.5 | ​ | ​ | — | ​ | ​ | 697.5 | ​ | ​ | —
Strategic review costs and impacts | ​ | ​ | (27.6) | ​ | ​ | — | ​ | ​ | (95.0) | ​ | ​ | —
Amortization of reinsurance loss | ​ |  | (18.8) | ​ |  | — | ​ |  | (60.2) | ​ |  | —
Impacts to actuarial balances of reinsured business | ​ |  | 68.8 | ​ |  | — | ​ |  | 39.8 | ​ |  | —
Total pre-tax income from exited business | ​ | $ | 1,268.6 | ​ | $ | — | ​ | $ | 4,887.1 | ​ | $ | —
​

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI https://asc.fasb.org/topic&trid=2134510 + Details
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