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Segment Information | 3 Months Ended
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Mar. 31, 2023
Segment Information |
Segment Information | 17. Segment Information We provide financial products and services through the following segments: Retirement and Income Solutions, Principal Asset Management and Benefits and Protection. 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. Prior to 2023, we separately reported Principal Global Investors and Principal International as segments. Those are now integrated into our Principal Asset Management segment. The new segment presentation has been applied retrospectively to our segment results, which have been recast for LDTI, but did not impact our consolidated financial statements. The Retirement and Income Solutions segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The segment includes workplace savings and retirement solutions, banking, trust and custodial services, individual variable annuities, pension risk transfer, investment only and our exited retail fixed annuities business. The 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. The segment is organized into Principal Global Investors, which provides public, multi-asset and private market capabilities across all asset classes, including equity, fixed income, real estate and alternatives, to serve a breadth of client investment objectives; and Principal International, which provides long-term savings and retirement solutions through pension accumulation, mutual funds and income annuities, along with retail asset management services in Asia and Latin America. The Benefits and Protection (formerly known as U.S. Insurance Solutions) segment focuses on solutions for small-to-mid sized businesses and their employees. The segment is organized into Specialty Benefits, which provides group dental, group life insurance, group disability insurance (including short-term disability, long-term disability and paid family and medical leave), supplemental health products (including vision, critical illness, accident and hospital indemnity) and individual disability insurance; and Life Insurance, which provides life insurance, with a focus on the business market customer, including universal life and variable universal life (including indexed universal life) and traditional life insurance (including term life insurance). All remaining customers are part of the legacy life block of business, including universal and variable universal life insurance (including indexed universal life), traditional life insurance (including participating whole life, adjustable life products and term 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 the change in fair value of the funds withheld embedded derivative, net realized capital gains (losses) on funds withheld assets, strategic review costs and impacts, amortization of reinsurance gain (loss) and other impacts of reinsured business. 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. Other impacts 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,
| ● | Certain variable annuity fees,
| ● | Market value adjustments of market risk benefits,
| ● | Related changes in the amortization pattern of 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 variable annuity fees,
| ● | Certain market value adjustments to fee revenues,
| ● | Pre-tax net realized capital gains (losses) adjustments related to equity method investments and
| ● | Pre-tax net realized capital gains (losses) adjustments related to sponsored investment funds.
| ● | 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 other postretirement employee benefits (“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: ​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ |  | March 31, 2023 |  | December 31, 2022
​ | ​ | (in millions)
Assets: | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions | ​ | $ | 207,109.0 | ​ | $ | 202,294.2
Principal Asset Management | ​ |  | 48,462.3 | ​ |  | 45,950.7
Benefits and Protection | ​ |  | 41,082.2 | ​ |  | 40,048.3
Corporate | ​ |  | 2,754.7 | ​ |  | 2,285.1
Total consolidated assets | ​ | $ | 299,408.2 | ​ | $ | 290,578.3
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended
​ | ​ | March 31,
​ |  | 2023 |  | 2022
​ | ​ | (in millions)
Operating revenues by segment: | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions (1) | ​ | $ | 1,616.1 | ​ | $ | 1,263.0
Principal Asset Management: | ​ | ​ | ​ | ​ | ​ | ​
Principal Global Investors | ​ |  | 392.7 | ​ |  | 435.3
Principal International | ​ |  | 305.1 | ​ |  | 327.2
Eliminations | ​ | ​ | (5.3) | ​ | ​ | (6.6)
Total Principal Asset Management (2) | ​ | ​ | 692.5 | ​ | ​ | 755.9
Benefits and Protection: | ​ |  | ​ | ​ |  | ​
Specialty Benefits | ​ | ​ | 782.2 | ​ | ​ | 717.7
Life Insurance | ​ |  | 321.4 | ​ |  | 525.7
Eliminations | ​ | ​ | (0.2) | ​ | ​ | (0.1)
Total Benefits and Protection | ​ | ​ | 1,103.4 | ​ | ​ | 1,243.3
Corporate | ​ | ​ | 27.6 | ​ | ​ | 6.3
Total segment operating revenues | ​ | ​ | 3,439.6 | ​ | ​ | 3,268.5
Net realized capital losses, net of related revenue adjustments | ​ | ​ | (39.2) | ​ | ​ | (146.4)
Revenues from exited business (3) | ​ | ​ | (547.6) | ​ | ​ | —
Adjustments related to equity method investments | ​ | ​ | (22.6) | ​ | ​ | (18.5)
Market risk benefit derivative settlements | ​ | ​ | (11.2) | ​ | ​ | (8.1)
Total revenues per consolidated statements of operations | ​ | $ | 2,819.0 | ​ | $ | 3,095.5
​ | ​ | ​ | ​ | ​ | ​ | ​
Pre-tax operating earnings (losses) by segment: | ​ | ​ | ​ | ​ | ​ | ​
Retirement and Income Solutions | ​ | $ | 249.8 | ​ | $ | 294.2
Principal Asset Management | ​ |  | 187.8 | ​ |  | 211.0
Benefits and Protection | ​ | ​ | 99.3 | ​ | ​ | 92.8
Corporate | ​ |  | (96.1) | ​ |  | (129.0)
Total segment pre-tax operating earnings | ​ |  | 440.8 | ​ |  | 469.0
Pre-tax net realized capital losses, as adjusted (4) | ​ |  | (24.3) | ​ |  | (87.9)
Pre-tax loss from exited business (5) | ​ | ​ | (608.3) | ​ | ​ | —
Adjustments related to equity method investments and noncontrolling interest | ​ | ​ | (20.7) | ​ | ​ | (2.7)
Income (loss) before income taxes per consolidated statements of operations | ​ | $ | (212.5) | ​ | $ | 378.4
(1) | Reflects inter-segment revenues of $94.8 million and $97.4 million for the three months ended March 31, 2023 and 2022, respectively.
(2) | Reflects inter-segment revenues of $70.7 million and $76.5 million for the three months ended March 31, 2023 and 2022, respectively.
(3) | Revenues from exited business is derived as follows:
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended
​ | ​ | March 31,
​ | ​ | 2023 | ​ | 2022
​ | ​ | (in millions)
Revenues from exited business: |  | ​ |  |  | ​ |
Change in fair value of funds withheld embedded derivative | ​ | $ | (626.6) | ​ | $ | —
Net realized capital gains on funds withheld assets | ​ | ​ | 81.0 | ​ | ​ | —
Amortization of reinsurance gain | ​ |  | 1.4 | ​ |  | —
Other impacts of reinsured business | ​ |  | (3.4) | ​ |  | —
Total revenues from exited business | ​ | $ | (547.6) | ​ | $ | —
​
(4) | Pre-tax net realized capital gains (losses), as adjusted, is derived as follows:
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended
​ | ​ | March 31,
​ |  | 2023 |  | 2022
​ | ​ | (in millions)
Net realized capital losses: | ​ | ​ | ​ | ​ | ​ | ​
Net realized capital losses | ​ | $ | (66.0) | ​ | $ | (136.6)
Derivative and hedging-related revenue adjustments | ​ | ​ | 2.1 | ​ | ​ | (32.0)
Certain variable annuity fees | ​ | ​ | 18.4 | ​ | ​ | 20.0
Adjustments related to equity method investments | ​ | ​ | 0.2 | ​ | ​ | (3.6)
Adjustments related to sponsored investment funds | ​ | ​ | 6.1 | ​ | ​ | 5.8
Net realized capital losses, net of related revenue adjustments | ​ |  | (39.2) | ​ |  | (146.4)
Amortization of deferred acquisition costs and other actuarial balances | ​ |  | — | ​ |  | 6.6
Capital losses distributed | ​ |  | 18.4 | ​ |  | 91.0
Market value adjustments of market risk benefits | ​ | ​ | (6.5) | ​ | ​ | (22.7)
Market value adjustments of embedded derivatives | ​ |  | 3.0 | ​ |  | (16.4)
Pre-tax net realized capital losses, as adjusted (a) | ​ | $ | (24.3) | ​ | $ | (87.9)
| (a) | As adjusted before noncontrolling interest capital gains (losses).
(5) | Pre-tax income (loss) from exited business included:
​
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | For the three months ended
​ | ​ | March 31,
​ | ​ | 2023 | ​ | 2022
​ | ​ | (in millions)
Pre-tax loss from exited business |  | ​ |  |  | ​ |
Change in fair value of funds withheld embedded derivative | ​ | $ | (626.6) | ​ | $ | —
Net realized capital gains on funds withheld assets | ​ | ​ | 81.0 | ​ | ​ | —
Amortization of reinsurance loss | ​ |  | (22.1) | ​ |  | —
Other impacts of reinsured business | ​ |  | (40.6) | ​ |  | —
Total pre-tax loss from exited business | ​ | $ | (608.3) | ​ | $ | —
​

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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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