Daniel Houston: We used to share that number years ago. At benefit event, there’s job changers, there’s retirees, it’s really trying to identify the best prospects for Principal and whether that’s retained through partnering with our brokers that brought the business to us or to do it on a direct basis, but, again, it is a significant part of our value creation for our participants to be able to give them that choice of benefit event for either purchasing a Principal product or, in many cases, leaving the money in the plan, and that’s another area that’s sort of hard to measure because we don’t know how long that money will stay within the plans. But, anyway, there’s a real mix of measurements out there in the industry.
Operator: The next question is coming from Wes Carmichael of Autonomous Research.
Wes Carmichael: I wanted to stick with RIS maybe for a moment, but you mentioned the pipeline remains strong and you called out PRT as one of those areas. Can you maybe just help us with what the size of that pipeline looks like and how much you might be targeting in terms of sales or capital you want to deploy there for the year?
Daniel Houston: One other thing I’m just going to add before Chris jumps into those specifics. We just actually were on the West Coast together, Chris and I and his team, with our institutional client council and our institutional client advisory group, and the feedback was really positive. We really are seeing a strong momentum with our customers in terms of them embracing, helping their participants be better educated, very open to providing additional services to those plan sponsors, and frankly, the IRT integration is well behind us at this point in time, and the sentiment was quite positive. Chris, you want to go ahead and respond directly to the question?
Christopher Littlefield: I think, Wes, your question was about PRT and the momentum in PRT and what we expect for the year. We certainly had a strong start to the year in the first quarter with PRT sales at close to $800 million. We certainly saw that carryover benefit from the fourth quarter. We saw good fourth quarter momentum, and that carried into the first quarter, and so we continue to take advantage of that, and most importantly, we did that above our targeted returns, as we’ve talked about in the past. We really tried to get the right balance between growth in our PRT business and overall returns. As we looked toward the balance of the year, the industry is expecting another strong year in PRT at about $30 billion to $40 billion in total industry sales.
We are targeting, and we’ve said on the first quarter – the end of the year call, we’re targeting somewhere in the neighborhood at $2.5 billion to $3 billion in PRT sales for the full year, and we expect most of that to come a little bit now later in the year as people close out their defined benefit pension liabilities, and look at that as they head into 2025. So, we do generally see a ramp up in PRT activity in the late third and fourth quarters, and we expect that sort of seasonality of the sales to continue.
Wes Carmichael: On the Department of Labor, I know you’re still in early endings of analyzing a very big document, but you mentioned a little bit in terms of increased compliance costs. Is there any way you can help us with sizing that and what you think the increased expense might be associated with that based on what you know today?
Daniel Houston: My guess is that’s going to be sorted out over the next 6 to 12 months as we continue to digest this most recent decision on the Department of Labor. It’s something I’ve been involved with all the way back to 2010. One of the pieces of good news that came out of that is the regulation that provides a bit more clarity on guidance and advice and education at the work site, which we find very positive. But I don’t think we’ve got this all sorted out except to say that it will require more licensing on the part of some of our internal personnel. There’s training that will need to take place and, of course, just the appropriate oversight and overseeing these registered reps and staying in compliance and working on matters related to transparency and disclosure.
So we’ll sort it out over the course of the next 6 to 12 months to keep you apprised of how that’s impacting our business. Bottom line is, it’s something we view as manageable and quantifying the cost is not something we put a figure on yet.
Operator: The next question is coming from Joel Hurwitz of Dowling.
Joel Hurwitz: I wanted to start on RIS fee rates. So the fee rate looked to be down around 2 basis points from where it ran in 2023. Could you just provide some color on sort of the fee rate compression you saw in the quarter and the expectations moving forward? And then also in terms of the fee business, how much of the business has revenue that’s based off of account value versus a per participant fee?
Daniel Houston: I’ll just have Chris go and pick that one up, Joel.
Christopher Littlefield: We think fee revenue rate performed largely in line with our expectations this quarter. We’ve previously guided that we expect in the neighborhood of 2 to 3 basis points of compression in normal markets. A couple of factors I’d point out, strong equity markets impact fee revenue rate. And when you think about the proportion that’s asset based versus either per member or transaction or flat fee based, about 80% of that revenue is asset based and around 20% is non-asset based. So as a result, when you see a significant equity market performance, it can impact fee revenue rate as the denominator tends to be more sensitive to equity markets than the numerator. In addition, there’s fluctuation in fee revenue collection from period to period.
And reminder that fourth quarter of last year, the revenue was quite strong due to seasonal demand for some consulting and other billable services. And as a result, because that fee revenue rate fluctuates from quarter to quarter, whether it’s through the markets or seasonality of fees or expenses – of fees, it’s better to look at on a long-term basis. And when you look at the trailing 12-month period, the fee revenue rate held steady at about 40 bps. So that’s the comment I’d give you on fee revenue rate.
Joel Hurwitz: Switching gears to specialty benefits. So sales were very strong, particularly in group disability. Could you just provide some color on what you saw in terms of the group disability sales and in terms of group disability top line overall? I guess I was sort of surprised, though, to see it down from where it was in Q4, given the strong sales and anything that drove the sequential decline in group disability premiums and fees.
