Principal Financial Group, Inc.
) reported first-quarter 2012 operating earnings of 70 cents per
share, lagging the Zacks Consensus Estimate by 4 cents. However,
results in the quarter were better than 68 cents earned in the
prior-year quarter. Operating income was $213 million in the
quarter, down 3.1% from $219.8 million in the first quarter of
The year-over-year improvement was primarily driven by
double-digit growth in the Principal International segment.
Including net realized capital losses of $10.0 million and an
unfavorable after tax adjustment of $1.5 million, net income
available to common stockholders was $201.5 million or 66 cents per
share, compared with $182.0 million or 56 cents per share a year
The prior-year quarter included net realized capital losses of
$54.9 million and other favorable after-tax adjustments of $17.1
Operating revenues in the first quarter crept up 2.9% to $2.11
billion. The increase was primarily due to an increase in premiums
and other considerations, partially offset by lower net investment
income and fees and other revenues. Revenue was almost in line with
the Zacks Consensus Estimate of $2.12 billion.
Principal in the first quarter reported 18.5% year-over-year
growth in premium. The fees and other revenues in the quarter
decreased 2.0% along with a 4% year-over-year decline in net
Total expenses increased 4.2% year over year to $1.8 billion.
Higher benefits, claims and settlement expenses, commissions,
interest expense and compensations contributed to the increase.
Assets under management were $364.1 billion as of March 31,
2012, up 11% year over year.
Book value per share as of March 31, 2012, stood at $27.70, up
5% from $26.43 as of March 31, 2011.
Retirement and Investor Services
: Revenues in the quarter increased by 3.6% to $1.055 billion from
$1.018 billion in the year-ago quarter. The increase was on the
back of higher premiums and fees, but net investment income was a
Operating earnings slid to $143.6 million in the quarter from
$154.1 million in the first quarter of 2011.
Principal Global Investors
: Revenues in the quarter were $138.1 million, 10.2% higher than
the prior-year period, primarily due to an increase in the
management fees resulting from a growth in assets under management
coupled with higher borrower transaction fees.
Operating earnings were $16.2 million in the reported quarter
compared with $16.6 million in the year-ago quarter. The decrease
was due to higher compensation cost, arising from an increase
in the number of staff in the distribution and investment wing to
support the company's growth strategies.
: Revenues were $262.5 million in the quarter, modestly higher than
$206.1 million in the prior-year quarter. A 22% increase in assets
under management contributed to the growth.
Operating earnings improved to $41.8 million from $27.8 million
in the year-ago quarter, mainly due to a growth in assets under
US Insurance Solution
: Revenues declined to $697.8 million in the quarter from $732
million in the year-ago quarter, as fees and other revenue were
adversely affected due to change in the amortization basis.
Operating earnings declined to $50.2 million in the quarter from
$53.4 million in the year-ago quarter.
Operating losses increased to $38.8 million from a loss of $32.1
million recorded in the year-ago quarter, mainly due to higher tax
and legal expenses incurred by the company.
Dividend and Share Repurchase
During the reported quarter, the company's board of directors
authorized a share repurchase program worth $100 million. The
company also paid a quarterly dividend of 18 cents per common share
on March 30, 2012.
We believe that Principal Financial can align its business to
focus more on the strategic opportunities in the growing asset
accumulation and asset management businesses while shedding the
line of business, which provides little growth.
The company's sound capital position and financial liquidity are
supportive of its expansion policies in the emerging markets as
they offer ample growth opportunities.
The company remains focused on enhancing its shareholders value
via share buyback and dividend payments. Given the company
has $1.8 billion of excess capital, we expect it return further
value to its shareholders going forward.
We retain our long term Neutral recommendation on Principal
Financial. The quantitative Zacks #2 Rank (short-term Buy rating)
for the company indicates slight upward pressure on the shares over
the near term.
Based in Des Moines, Iowa, Principal Financial Group Inc.
provides an expansive range of retirement savings, investment and
insurance products and services through its various subsidiaries.
Lincoln National Corporation
), which competes with Principal Financial, is scheduled to release
its results on May 2, 2012 after the bell.
LINCOLN NATL-IN (
): Free Stock Analysis Report
PRINCIPAL FINL (
): Free Stock Analysis Report
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