Scott Mills, Lead Director
From the Board of Directors:
On behalf of the Board, I want to provide you an update on a memorable and productive year for Principal.
As Dan mentioned in his letter, the Board—together with the management team—undertook an extensive strategic review of the company's business mix and approach to capital management. The success of a review of this magnitude requires everyone to engage with an open mind, a collaborative spirit, and a willingness to dig deep into the details. That all happened.
Our discussions were intense and candid. We challenged assumptions. Hit difficult topics head on. Considered external and internal viewpoints. Above all, we kept our purpose at the center—focusing on the customers and shareholders who put their trust in us and the employees who deliver on that trust.
Our guiding principles
I want to underscore how engaged the Board was throughout the year. We analyzed the dynamic competitive environment, changing customer expectations, and our ability to reshape our portfolio to enhance competitiveness. We learned from each other. Both the Board and the Principal management team committed to continuous and fruitful interactions with intense preparation and conversations, leading to substantive outcomes.
Four key principles guide our commitment to continued transformation at Principal:
•Pursue attractive growth markets.
•Leverage competitive advantages.
•Generate returns in excess of cost of capital.
•Deploy capital to the most attractive opportunities.
In addition, we considered how potential decisions would impact the company's risk profile. We examined portfolio diversification, stability of returns, competitive and market risk, and the ability to weather stress scenarios as well as macroeconomic sensitivities. Risk management is a vital piece of our stewardship.
Governance and diversity
Our commitment to governance best practices helps ensure a well-diversified and highly engaged board of directors. Active refreshment ensures strong oversight. This past year, we made tremendous strides.
Two-thirds of our directors have joined the Board since 2015. Our average tenure is seven years. In 2021, we added two new Board members—Maliz Beams and Claudio Muruzábal. They bring additional skill sets and perspectives that are already helping Principal transform, preparing the company for growth and a more sustainable and technology-driven future.
Our Nominating and Governance committee recruits new directors with an eye toward diversity and relevant experience. This ensures the right mix of diverse perspectives to help us meet the changing needs of the company and its stakeholders. Of note, eight of our 13 directors (62%) identify as women or people of color. And three of our four committees are chaired by women, one of whom is a person of color.
Eight of our 13 directors (62%) identify as women or people of color.
Four key principles guide our commitment to continued transformation at Principal:
Pursue attractive growth markets.
Leverage competitive advantages.
Generate returns in excess of cost of capital.
Deploy capital to the most attractive opportunities.
I'm proud of this Board's strength and talent—a credit both to our directors and our rigorous process to identify and select its members. It's my pleasure to work and learn with them all. It was especially nice to get back to in-person meetings last fall, seeing some of our new directors in person for the first time.
Keeping purpose at the forefront
In 2021, Principal laid out new sustainability commitments, taking a strong track record with social responsibility to a new level. Principal is focused on:
•Taking care of people, as an advocate for security and inclusion among employees, customers, and community.
•Taking care of our environment, by creating sustainable practices through long-term responsible actions.
This past year, I had the opportunity to discuss our ESG strategy with some of the company's largest shareholders. I'm heartened by the growing interest in this topic. And I'm proud to share the great work Principal has done, strengthening the tie between the company's strategy and purpose. I'm excited about the road ahead.
Strong performance, strong results
Principal delivered strong results in 2021. And, as evidence of the company's commitment to creating long-term shareholder value, Principal returned $1.6 billion of capital to shareholders in 2021 through common stock dividends and share repurchases. As Dan noted, total shareholder return for the year was an impressive 51%.
Strong total shareholder return, regular dividends, and increased buybacks all create value and enable shareholders to take part in the company's success.
Reflecting and looking ahead
This was a uniquely rewarding year to be part of the Principal board. The intensive strategic review process highlighted the unique talents and exceptional engagement of our directors and the deep knowledge and expertise of the Principal management team. Together, we charted our path forward.
A sincere thank-you to the Board Finance Committee, especially committee chair Clare Richer, for unwavering commitment to the best interests of Principal customers and shareholders.
I commend Dan Houston and the Principal management team for the transformation underway to position Principal for even greater success. I'm proud of the role the Board is playing, and I look forward to our continued deep engagement in 2022 and beyond.
Sincerely,
Scott Mills
Lead Director, Principal Financial Group