Principal Financial Group Earnings Call Nuggets: FSA Operations, Buyback Authorization
Joanne Smith – Scotia Capital: I guess, I was wondering if you could talk a little bit about the strong sales results in your FSA operations. They far exceeded my expectations and I was just wondering if you could talk about the trends there.
Larry D. Zimpleman – Chairman, President and CEO: This is Larry. I’ll let Dan comment. But what I would say at a very high level is that we’re really in a very nice sweet spot in terms of our retirement sales. I say that based on of course having great distribution presence and continuing strong pipeline. We also have because of PGI we have a very solid investment performance to present to clients. Of course, the unique bundling that we do around total retirement services as well as a lot of worksite activities really does put us in a strong competitive position. I’ll let Dan give you some of the these specifics.
Daniel J. Houston – President, Retirement, Insurance and Financial Services: Thanks Larry. So, Joanne, couple of stats you might find interesting. The growth really was across the emerging dynamic in Institutional, which is the way we like to see it. We did have seven nice-sized institutional plans come in. Those were plans over $100 million, but nothing over $1 billion. So, again, this speaks right at that little lower end of large and high-end of medium size marketplace. We had good traction again continuance in the third-party administration area. About 40% of the sales for the quarter were TRS or Total Retirement Suite or some combination of DB/DC or non-qualified or ESOP, and alliance sales were up roughly 120% from first quarter of 2011. As Larry mentioned in his earlier comments, we did add Edward Jones, which is a really great partner for PFG and we’re looking forward to working with the good people at Edward Jones.
Joanne Smith – Scotia Capital: Just as a follow-up, just on the ROAs, you mentioned in the beginning of the call that the change in DAC and this is a trade-off between good sales numbers and near-term earnings. Can you give us an estimate as to how much the increase or decrease in capitalized acquisition expenses impacted the ROA?
Larry D. Zimpleman – Chairman, President and CEO: Joanne, this is Larry. I would say, it impacts at about $15 million to $20 million in terms of quarterly earnings. So you can sort of work it out from that.
John Nadel – Sterne, Agee & Leach, Inc.: Close enough yet again, good morning everybody. Larry, even if I apply a relatively strong ramp to your earnings for the remainder of the year it appears pretty difficult to get to your guidance. But interestingly your guidance had originally assumed I think an average S&P of about 1275 and that averages is already year-to-date a 100 points higher. I guess the question is, where is the weakness versus your original expectations when – I would’ve expected your business model and leverage to equity markets to frankly be a nice tailwind?
Larry D. Zimpleman – Chairman, President and CEO: Sure John. This is Larry. So, let me make a few comments. What I would say here is a very general comment before I walk through a little bit of detail with you. What I would say is that, guidance is based on a full year and I’d say it would be very important to remember that things that happen over the course of a full don’t happen in 25% increments over each quarter. So, for example, variable investment income, as an example. Last year that was a little bit frontloaded, this year we expect it to be a little bit back loaded. You have seasonality in Specialty Benefits as we have commented before. As a general comment you might see Specialty Benefits first quarter earnings be 20% of the full-year earnings, not 25%. So what I would say is if you sort of take Terry’s normalized, the $0.72, you ramp it up to 2% to 3% that you would expect sort of based on our assumptions of equity market growth. That gets you very near the $2.95 to $3 level, you then adjusted for things like variable investment income, Specialty Benefits, you adjust for the change in share count, and you are if you were well inside our previously communicated guidance. Having said all of that, we obviously don’t update that guidance and it really doesn’t take into account, John, at all, the very strong asset accumulation and net cash flow growth that we saw in the first quarter, which obviously hasn’t yet fed through to financials, because it’s just received in the current quarter. And if that – if the market stays stead and that continues to repeat itself in subsequent quarters, that’s going to be a very significant tailwind on earnings as we go into the subsequent quarters of 2012. So, like always, there’s a number of assumptions in there, but the key thing I would continue to remind everybody is, things don’t happen in one-fourth increments every year. There’s frontloads, there’s backloads, all that’s taken into account when we gave our guidance back in December.
John Nadel – Sterne, Agee & Leach, Inc.: I have one separate one, and that is, are you in the Board giving any consideration to changing your approach to setting your buyback authorization? I asked this, Larry, because obviously with your current approach you were out of the market for the first two months of the year and that clearly has at least, at the margin, a negative impact on your ability to generate EPS and orderly improvement has a somewhat faster pace.
Larry D. Zimpleman – Chairman, President and CEO: So, that’s an interesting question, John, and I suspect that every management team you talk to might have a little bit different view on share repurchase in the era post the financial crisis. I think, we have tried to communicate over several different times, including at our earnings guidance for 2012 that we see share repurchase now as a more opportunistic lever for us, and we frankly see higher levels of common stock dividend as a more regular lever for us to return capital to shareholders. So, we see ourselves moving to higher payout ratios overtime and we see ourselves moving to someone lower levels of share repurchase overtime, because we do want to invest in the businesses and to the extent we would do share repurchase, we will look at that based on sort of our view of the intrinsic value of the shares versus where they are trading at. So, in the past I think share repurchase for many companies has been more of a ‘automatic lever’ and in our case, we’re really trying to not see as much capital return and share repurchase and we’re trying to be more thoughtful to make sure that we’re doing share repurchase at the right times and that we’re not doing it at the wrong times. So, I hope that helps a little bit.
John Nadel – Sterne, Agee & Leach, Inc.: That does. I guess, my only follow-up to that Larry would be I’m not necessarily asking you to put up an authorization that would be a giant number that covers the potential buybacks over a couple of years but I am not sure I understand why not just an authorization that would cover at least your expectations for a 12-month period let’s say.
Larry D. Zimpleman – Chairman, President and CEO: Again, a lot of that John is because I think we are trying to recognizing the changing nature of our business model with more fee-based earnings. I would argue that it’s much more appropriate for us as a management team and a Board to think about returning capital to shareholders in the form of common stock dividends more than share repurchases. What you already know from things we’ve communicated is that somewhere between 65% and 70% of our operating earnings for the year are going to be able to flow through as capital deployed back to shareholders based on whatever amount of M&A we might do. So, I don’t have to sit and really give you a large share repurchase. I mean, investors already know that the vast majority of our earnings are able to be returned to shareholders. So, we’ve shown in the past, we’re good stewards of our capital. Again, the thing I would want to communicate is that it’s going to be done more as common stock dividends and higher payout ratios. That’s appropriate because we move to a more fee-based business model and that’s very different than our competitors where perhaps they’re able to return 40% to 50% of their earnings back to shareholders. In our case that number is closer to 65% to 70%.