With operating net income of $1.06 per share reported for the
first quarter of 2014,
Principal Financial Group, Inc
) has successfully managed to keep its positive surprise streak
alive. Earnings outperformed the Zacks Consensus Estimate by
15.2% marking the sixth straight quarter of positive earnings
surprise. Moreover, earnings improved nearly 34.2% on a
Including net realized capital losses of 8 cents, and adjustment
for redeemable non-controlling interest of 3 cents, net income
available to common stockholders was 95 cents per share, up 56%
year over year.
Increased focus on fee-based businesses along with improved
investment income, driving an upsurge in the top line, more than
offset the escalation in expenses, thereby aiding solid results
at Principal Financial.
Behind the Headlines
Operating revenues in the first quarter increased 12% to $2.5
billion. A 16% rise in premiums and other considerations, a 13.1%
increase in fees and other revenues and a 6.5% improvement in net
investment income drove the upside. Revenues outpaced the
Zacks Consensus Estimate by about 4%.
Total expense incurred by Principal Financial increased 8% year
over year to $2.1 billion. Increase in benefits, claims and
settlement expenses, commissions, depreciation &
amortization, and compensation and other accounted for the rise
Principal Financial's assets under management in the quarter were
a record $495.5 billion as of March 31, 2014, up 9% year over
Book value per share as of March 31, 2014, stood at $30.81, up 6%
year over year.
Retirement and Investor Services
: Revenues in the quarter improved nearly 14.4% year over year to
Operating earnings increased 27% year over year to $216.5
Principal Global Investors
: Revenues in this segment amounted to $171.1 million, 11.3%
higher than the prior-year period, driven by higher management
fees due to AUM growth and higher borrower and transaction fees.
Operating earnings increased 32% year over year to $26.9 million.
The improvement came primarily on the back of improved revenues
and better margins.
: Revenues were $300.4 million in the quarter, up 21.4% year over
year, driven by the Cuprum addition and the growth in AUM from
positive net cash flows.
Operating earnings surged 42% year over year to $63.3 million in
the quarter. Earnings benefited from the Cuprum acquisition,
though strengthening of the U.S. dollar weighed on the upside.
US Insurance Solution
: Revenues were $804.4 million in the reported quarter, up 3.4%
year over year.
Operating income was $43.4 million, up about 36% year over year.
: Operating loss narrowed to $33 million from a loss of $37.3
million recorded in the first quarter of 2013.
Dividend and Share Repurchase Update
The board of directors of Principal Financial approved a 14% hike
in its quarterly dividend. The increased dividend of 32 cents per
share will be paid on June 27 to shareholders of record of June
Principal Financial also paid a dividend of 28 cents per share on
With respect to share repurchases, the board approved the company
to buy back $200 million worth of its shares. It bought back more
than $72 million worth of shares in the first quarter.
Results of Few Other Investment Managers
T. Rowe Price Group, Inc
) reported its first-quarter 2014 net income of $1.05 per share,
beating the Zacks Consensus Estimate by 3 cents. Moreover, this
significantly outperformed the year-ago earnings of 91 cents.
) first-quarter adjusted earnings of $4.43 per share surpassed
the Zacks Consensus Estimate of $4.11 and were up 21% from $3.65
per share earned in the year-ago quarter.
The Blackstone Group L.P
) first quarter 2014 economic net income (ENI) of 70 cents per
share surpassed the Zacks Consensus Estimate by 25%. Also, the
figure was up 27% from 55 cents reported in the prior-year
With this quarter, the investment manager delivered six straight
quarters of positive earnings surprises.
Increased focus on fee-based revenue sources helped Principal
Financial earn steady income and return capital to its
shareholders through dividends, or deploy the same in strategic
acquisitions. Principal Financial remains focused with a
capital deployment target between $500 and $700 million.
Given the strategic acquisitions that the company has undertaken,
its inorganic growth story also looks attractive.
Principal Financial also noted that business model
diversification coupled with successful execution of investment
management strategy sustained the growth momentum for the
Principal Financial presently carries a Zacks Rank #3 (Hold).
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