Principal Financial Group, Inc. PFG delivered operating net income of $1.09 per share, outperforming the Zacks Consensus Estimate by about 4% and improving 3% year over year.
Despite macro headwinds, the quarter witnessed improved sales riding on the strength of strong investment performance and distribution relationships. The company saw record assets under management (AUM), and total net cash flows were solid at $9.4 billion. Increased focus on fee-based businesses continues to support steady performance and capital deployment.
Principal Financial Group Inc. - Earnings Surprise | FindTheCompany
Including net realized capital gains of 5 cents and favorable other after-tax adjustments of 25 cents, net income available to common stockholders were a record $1.39 per share, up 46% year over year.
Behind the Headlines
Operating revenues in the first quarter increased 2% year over year to $2.5 billion. A 14% rise in premiums and other considerations and a 7% increase in fees and other revenues drove the upside. Revenues however missed the Zacks Consensus Estimate of $2.6 billion.
Total expense incurred by Principal Financial increased 2.3% year over year to $2.1 billion. Increase in benefits, claims and settlement expenses, commissions, compensation and other expenses accounted for the expense rise.
Principal Financial’s AUM as of Mar 31, 2015 was a record $530.3 billion, up 2.2% from Dec 31, 2014.
Book value per share as of at the same date was $33.56, up 4.7% year over year.
Segment Update
Retirement and Investor Services: Revenues in the quarter improved nearly 4.6% year over year to $1.3 billion.
Operating earnings decreased 2.6% year over year to $210.9 million.
Principal Global Investors: Revenues of $186.6 million were up 9% from the prior-year quarter on higher management fees, which increased in line with AUM growth, and higher performance fees.
Operating earnings increased 14% year over year to $30.7 million on revenue growth and improved margins.
Principal International: Revenues were $236.2 million in the quarter, down 21% year over year.
Operating earnings decreased 5% year over year to $59.9 million in the quarter due to strengthening of the U.S. dollar.
US Insurance Solution: Revenues were $861.7 million, up 7% year over year.
Operating income was $55.1 million, up 27% year over year.
Corporate: Operating loss narrowed to $30.2 million from a loss of $33.3 million recorded in the year-ago quarter.
Dividend and Share Repurchase Update
The board of directors of Principal Financial approved a quarterly dividend of 38 cents per share, reflecting an increase of 6% over the last payout. The dividend will be paid on Jun 26 to shareholders of record on Jun 8. The hike also marks eight increases in the last three years.
Principal Financial paid a dividend of 36 cents per share in the quarter.
The company spent about $51 million to buy back 1 million shares in the quarter. The board also approved a $150 million share repurchase program in the quarter.
Principal expects $0.8–$1 billion in capital deployment 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 positions it well to capitalize on opportunities in both 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 #3 (Hold).
Results of Other Investment Managers
While The Blackstone Group L.P.’s BX earnings outperformed the Zacks Consensus Estimate on sturdy revenues and AUM growth, BlackRock, Inc. BLK surpassed as revenues rose. However, Ameriprise Financial Inc. AMP missed our earnings estimate due to higher costs.
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