PRINCIPAL FINANCIAL GROUP, INC.

(PFG)
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Delayed Nasdaq  -  05/20 04:00:00 pm EDT
69.24 USD   -0.73%
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Principal Financial nears insurance units sale to Talcott Resolution -sources

01/18/2022 | 11:55am EDT

Jan 18 (Reuters) - Insurer Principal Financial Group Inc is in advanced talks to sell two of its units, with capital reserves totaling $25 billion, to peer Talcott Resolution Life Insurance Co, according to people familiar with the matter.

The deal would be the culmination of a strategic review that Principal launched last year after coming under pressure from activist investment firm Elliott Management Corp to shed its low-growth and capital-intensive businesses. Principal has said it will use part of the proceeds to fund an increase in its share buyback program.

An agreement for Talcott to acquire Principal's U.S. retail fixed annuity business and its unit for universal life insurance with secondary guarantees (ULSG), could be announced as early as this week, the sources said.

It is possible that negotiations will fail at the last minute, added the sources, requesting anonymity because the matter is confidential.

Talcott Resolution is owned by investment firm Sixth Street, which declined to comment. Principal Financial also declined to comment.

The price Talcott would pay could not be learned, but the transaction is expected to generate significant benefits for Principal through a combination of sale proceeds, released capital and other financial enhancements.

By comparison, when Sixth Street agreed last year to acquire a fixed-index annuities business from Allianz with $35 billion of reserves against it, the German insurer said the deal unlocked $4.1 billion of total value.

Principal said in June it would divest https://www.reuters.com/article/principal-fincl-review-elliott-idCNL2N2OA1I7 the fixed annuity and ULSG units in order to focus on its higher-growth retirement, global asset management and U.S. benefits and protection businesses. It also added, as part of its agreement with Elliott, two independent directors to its board last year.

The annuity book had $18 billion of cash reserves set against it as of the end of March 2021, while the ULSG business had $7 billion of reserves, according to a company presentation to investors in June.

The presentation outlined plans to return between $1.5 billion and $1.7 billion of cash to shareholders in 2022 through dividends and stock buybacks, although those numbers would be higher following the divestment to Talcott, the sources said.

Buyout firms have been enthusiastic acquirers of such life insurance and annuity assets https://www.reuters.com/article/us-insurance-m-a/u-s-insurance-asset-sales-attract-new-private-equity-players-strategies-idUSKBN2A811G because they offer a major pool of long-term capital for their credit investments. Some, like Apollo Global Management Inc and Blackstone Inc, have dedicated insurance arms. (Reporting by David French in New York; editing by Jonathan Oatis)


© Reuters 2022
Stocks mentioned in the article
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ALLIANZ SE 0.40% 195.58 Delayed Quote.-5.81%
APOLLO GLOBAL MANAGEMENT, INC. -0.72% 53.95 End-of-day quote.-25.51%
BLACKSTONE INC. 2.86% 107.57 Delayed Quote.-16.86%
ON SEMICONDUCTOR CORPORATION 0.70% 56.46 Delayed Quote.-16.87%
PRINCIPAL FINANCIAL GROUP, INC. -0.73% 69.24 Delayed Quote.-3.57%
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Financials (USD)
Sales 2022 13 360 M - -
Net income 2022 1 598 M - -
Net Debt 2022 - - -
P/E ratio 2022 10,8x
Yield 2022 3,79%
Capitalization 17 496 M 17 496 M -
Capi. / Sales 2022 1,31x
Capi. / Sales 2023 1,28x
Nbr of Employees 18 600
Free-Float 51,3%
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Mean consensus HOLD
Number of Analysts 13
Last Close Price 69,24 $
Average target price 75,00 $
Spread / Average Target 8,32%
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Managers and Directors
Daniel Joseph Houston Senior Vice President
Deanna Dawnette Strable-Soethout Chief Financial Officer & Executive Vice President
Kathleen B. Kay Chief Information Officer & Senior Vice President
Elizabeth B. Happe Chief Compliance Officer
Noreen Fierro Chief Compliance Officer & Senior Vice President
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