Principal Financial’s First-Quarter Profit Up 65% as Assets Under Management Rise
April 28, 2014 by Fran Matso Lysiak
DES MOINES, Iowa – Principal Financial Group Inc.’s first-quarter profit increased 65%, as net income available to common stockholders rose to $293.7 million.
Total company assets under management grew 9% to $495.5 billion. Principal International reported net cash flows of $2 billion and record assets under management of $109.1 billion, a 2% increase over the year ago quarter despite a strengthening U.S. dollar.
“Our fee-based business model and financial flexibility are the key ingredients for continued success going forward,” Terry Lillis, chief financial officer and executive vice president said in a statement.
Retirement and investor services accumulation sales were $7.8 billion, and included $2.7 billion for full service accumulation and $600 million for individual annuities.
Equity analysts with Barclays Capital wrote in a research note that the full service accumulation business is benefiting from increased 401(k) deferrals and company matching as well as salary increases.
Principal Financial in October 2012 agreed to buy AFP Cuprum S.A., a pension manager in Chile, for $1.51 billion in a move that would provide Principal with a larger presence in fast-growing emerging markets for long-term savings and retirement. Based in Santiago, AFP Cuprum is a publicly traded pension company whose products include mandatory employee-funded pension plans, voluntary pension products and other long-term savings products (Best’s News Service, Dec. 7, 2012).
The Principal international segment generated operating earnings of $63 million, the Barclays analysts wrote. Results benefited from the Cuprum acquisition but were negatively impacted by the strengthening of the U.S. dollar.
Total first-quarter operating revenues for Principal rose 12% to nearly $2.5 billion
In its U.S. life insurance unit, Principal would likely benefit from the 10-year Treasury yield being at-or-above 3% with inflation rising to 2%-2.5%, the Barclays analysts wrote. Increases in employment and inflation are greater drivers for the company than interest rates, they wrote.
The Des Moines-based Principal Financial (NYSE: PFG) is in the retirement services, insurance and asset-management businesses. The company has about 19.4 million customers worldwide from offices in the United States, Asia, Australia, Europe and Latin America.
Principal Life Insurance Co. currently has a Best’s Financial Strength Rating of A+ (Superior).
On the afternoon of April 25, Principal Financial’s stock was trading at $46.29 a share, up 3.35% from the previous close.
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
