Principal Financial Group Inc
) unveiled its capital deployment plan and its segments' outlook
Principal Financial expects net revenue growth at Retirement and
Investor Services - Accumulation to be in the range of 5-7%,
while at Retirement and Investor Services - Guaranteed it
is projected in the range of negative 2-2%. Solid improvement at
Full Service Accumulation and Funds will drive growth at
Retirement and Investor Services - Accumulation.
Net revenue growth at Principal Global Investors is estimated to
be in the range of 7-10% in 2014. It estimates pre-tax margin in
2014 in the range of 26-28%. Management stated that it remains on
track to achieve pretax margin of more than 30% by 2017.
Principal International expects to achieve net revenue growth
between 16-18% in 2014. The guidance includes full year of Cuprum
acquisition in 2014. However, management estimates fourth-quarter
2013 operating earnings to be lowered by $6 million due to a
one-time reset of deferred tax liabilities, attributable to a
change in tax provisions in Mexico.
Additionally, another $3 million is likely to impact
fourth-quarter operating earnings of the segment attributable to
an expected change in a straight-line amortization pattern of the
intangible asset related to the 23-year partnership agreement
with Banco do Brasil. The same will reduce the segment's 2014
operating earnings by $9 million.
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Management estimates encaje returns of 8.0% in Chile and 7.5% in
Mexico in 2014.
At US Insurance Solution segment, premium and fee in 2014 for
both Individual Life and Specialty Benefits is projected to
increase in the range of 3-5%. Pretax operating margin at Life is
estimated to be between 14-16% (low interest rate environment
weighing on margin expansion) while at Specialty Benefits the
same is estimated to be in the range of 10-12% for 2014.
Operating losses at Corporate and Other in 2014 is expected in
the range of $130-$150 million.
Principal Financial estimates tax rate to be approximately
The company, over the past few years, has set aside capital for
deployment in either strategic acquisitions or for enhancing
shareholders' value. For 2014, the company intends to
utilize $500-$700 million for quarterly dividends, strategic
acquisitions and share buybacks as well as deleverage its balance
sheet. Management has set aside $400-$600 million for quarterly
dividends, share buybacks and acquisitions in 2013, of which $480
million has already been allocated.
Principal Financial expects shares outstanding at 2014-end to
range between 297-300 million.
Principal Financial is aligning itself to focus more on the
strategic opportunities in the growing asset accumulation and
asset management businesses. Also, it is well positioned on the
back of its extensive distribution footprint, best-in-class
solutions and operational discipline. We believe these attributes
will help it achieve its expectations going forward.
Principal Financial presently carries a Zacks Rank #2 (Buy). Some
other stocks worth considering are
Kohlberg Kravis Roberts & Co. L.P.
Virtus Investment Partners, Inc.
Ameriprise Financial, Inc
). While Kohlberg Kravis Roberts and Virtus Investment sport a
Zacks Rank #1 (Strong Buy), Ameriprise Financial holds the same
Zacks Rank as Principal Financial.