Principal launches strategic review after settlement with Elliott

Principal Financial Group Inc. said it plans to launch a strategic review and appoint two new independent directors as part of a settlement agreement with activist investor Elliott Investment Management.

The New York-based hedge fund has been pushing the company to explore selling or spinning off its more capital-intensive life insurance business to focus on its more profitable wealth management operations, according to people familiar with the matter, who asked to not be identified because the matter isn’t public.

The company said in a statement Monday as part of the deal with Elliott it had struck a committee to initiate a strategic review of its business mix, capital management, and capital deployment options.

“This review builds on work Principal has consistently undertaken to enhance shareholder returns and will help ensure we remain well positioned for continued growth, future success, and value creation,” said Dan Houston, Principal’s chairman, president and chief executive, in a statement announcing the move, which confirmed a Bloomberg News report. Elliott Investment didn’t disclose the size of its stake.

Principal rose as much as 10% on the news.

Principal offers life insurance products such as annuities in its retirement business, and has a large institutional asset management arm. The firm had $502 billion in assets under management at the end of December.

Principal said it was appointing Maliz Beams, the former chief executive officer of retirement solutions at Voya Financial Inc., to its board as part of the settlement. Voya agreed to sell its own insurance and annuity business in 2017 to Athene Holding Ltd. Another independent director will also be appointed at a later date, the company said.

The company said it expected to deliver the results of the review at its 2021 investor day.

There have been a wave of companies taking similar moves, including insurer American International Group Inc.’s plan to spin off its life and retirement unit and Prudential Plc’s plan to spin off Jackson National Life.

Principal said it believed the current competitive landscape and recent transaction activity in the life and annuity market suggests a supportive environment for a review. It said it builds on other initiatives to create value for shareholders in recent years, including the 2019 acquisition of Wells Fargo & Co.’s institutional retirement and trust business, the recent halt of new sales of lifetime guaranteed universal life products, and its exit of its retail investment and retirement business in India.

Elliott, which was founded by billionaire Paul Singer, has pushed for changes at some of the most prominent companies around the world, including Twitter Inc., SoftBank Group Corp. and AT&T Inc. The firm had about $42 billion in assets under management at year-end.