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Principal Financial Misses on Q3 Earnings, Okays Buyback

Principal Financial Group, Inc.PFG delivered third-quarter 2015 operating net income of $1.06 per share, missing the Zacks Consensus Estimate by a penny. Earnings also declined 11% year over year.

Principal Financial Group Inc. - Earnings Surprise | FindTheBest

A higher level of expense offset the revenue improvement and resulted in the miss. Nonetheless, the company continues to experience strong investment performance and distribution relationships. Increased focus on fee-based business continues to support performance and capital deployment.

Including net realized capital losses of 5 cents, net income available to common stockholders was 77 cents per share, up 31% year over year.

Behind the Headlines

Operating revenues in the third quarter increased 27% year over year to $3.2 billion. A 78% rise in premiums and other considerations, and a 0.9% increase in fees and other revenues drove the upside. Revenues also surpassed the Zacks Consensus Estimate of $2.8 billion.

Total expense incurred by Principal Financial increased 37% year over year to $2.8 billion. Increase in benefits, claims and settlement expenses, commissions, compensation and other expenses contributed to the rise in total expense.

Principal Financial's AUM as of Sep 30, 2015 was a record $516.2 billion, down 4.4% from Jun 30, 2015.

Book value per share as of at the same date was $34.56, up 8% year over year.

Segment Update

Retirement and Investor Services : Revenues improved about 47.8% year over year to $2.0 billion.

Operating earnings decreased 20% year over year to $163.3 million.

Principal Global Investors : Revenues of $182.8 million were up 5.3% from the prior-year quarter on higher management fees and transaction fees.

Operating earnings increased 20% year over year to $30.4 million on revenue growth and improved scale.

Principal International : Revenues were $311.2 million in the quarter, up 5.7% year over year.

Operating earnings decreased 38% year over year to $45.8 million in the quarter due to unfavorable foreign exchange rates.

US Insurance Solution : Revenues were $853.2 million, up 3.9% year over year.

Operating income was $114.5 million, up 37.5% year over year.

Corporate : Revenues were ($69) million, comparing unfavorably with ($61.1) million in the year-ago quarter.

Operating loss of $37 million was wider than a loss of $33 million incurred in the year-ago quarter.

Dividend and Share Repurchase Update

Principal Financial paid a quarterly dividend of 38 cents per share. In addition, the board of directors of Principal Financial declared a dividend of 38 cents per share in the quarter. The dividend will be paid on Dec 28, 2015, to shareholders of record as of Dec 7.

Also, the board of directors approved a $150 million buyback authorization.

Principal Financial expects to achieve the higher end of its $0.8-$1 billion capital deployment goal in 2015.

Our Take

Increased focus on fee-based revenue sources helped Principal Financial to earn a steady income, return capital to its shareholders through dividends and deploy capital for strategic acquisitions.

The company's diversified business and geographical exposure position it well to capitalize on opportunities in both the domestic and global markets, and fortify its worldwide investment management leadership position. Its acquisitions continue to drive inorganic growth.

Principal Financial presently carries a Zacks Rank #4 (Sell).

Results of Other Investment Managers

Ameriprise Financial Inc. AMP outperformed the Zacks Consensus Estimate in the quarter. However, earnings of The Blackstone Group L.P. BX and Janus Capital Group, Inc. JNS missed our respective estimates.

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PRINCIPAL FINL (PFG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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