Principal Financial's fourth quarter bottom line outperformed the Zacks Consensus Estimate as well as and improved year over year. Increased focus on fee-based businesses (2/3 of earnings coming from this) drove the top line, and more than offset the increase in expenses thereby propelling earnings. Riding on this strength, it deployed $855 million of capital, more than 75% of 2014 net income. It also raised its 2014 dividend. Over the 5 years, the company has grown its earnings at a CAGR of 19%. It is aligning itself to focus more on the strategic opportunities in the growing asset accumulation and asset management businesses. Deeper focus on fee-based revenue (expects 70% coming from it by 2018) sources have been helping the company earn steadily, besides limiting exposure to the interest rate environment. However, escalating expenses continue to pressurize margin expansion.
Ranked among the Fortune 500 companies, Des Moines, IA-based Principal Financial Group Inc. (PFG) provides an expansive range of retirement savings, investment and insurance products and services through its various subsidiaries. Its primary arm, Principal Life Insurance Co., was formed following the conversion of Principal Mutual Holding Co. from a mutual insurance holding company to a stock-owned company.
As of Sep 30, 2014, the company had $513.5 billion assets under management (AUM), up 10% year over year. The company serves approximately 19 million customers worldwide from its offices in Asia, Australia, Europe, Latin America, and the United States. The largest administrator of employer-sponsored retirement plans, Principal Financial segregates its operations primarily into four segments.
Retirement and Investor Services (RIS) (accounted for 49% of 2013 revenues) provides retirement and related financial products and services primarily to businesses, their employees and other individuals.
US Insurance Solution (USIS) (32%) provides individual and group life and disability insurance.
Principal International (PI) (12%) offers retirement savings products and services, and asset management services.
Principal Global Investors (PGI) (7%) provides asset management services and houses Principal Global Investors.
Additionally, the company has a Corporate segment (revenues of negative $215.8 million in 2013), which consists of the assets and activities that have not been allocated to any particular segment.