On November 27, Principal Financial Group Inc. (PFG) unveiled its capital deployment plan for 2013 as well as its segments outlook for 2013 and the next five years.
Principal Financial expects net revenue growth at Retirement and Investor Services - Accumulation to be in the range of 2–4% while at Retirement and Investor Services – Guaranteed it is projected in the range of 6–8%. It expects long-term net revenue growth 6–8% range both at Accumulation and at Guaranteed.
Net revenue growth at Principal Global Investors is estimated to be in the range of 6–8% in 2013 while the same for the next five years is projected at 14–17%. Pretax margin is expected to be between 23–25% in 2013 while it is projected to be more than 30% in the next five years.
Principal International anticipates achieving net revenue growth between 16–19% in 2013 and in the range of 15–20% by 2017.
At US Insurance Solution segment, premium and fee for Individual Life is projected to increase in the range of 3–5% while for Specialty Benefits the same is estimated to grow between 6–8% in 2013. The long-term outlook for premium and fee growth at Individual Life is projected between 4–8% while at Specialty Benefits it is 8–12%. Pretax operating margin at Life is estimated to be between 15–17% while at Specialty Benefits the same is estimated to be in the range of 8–10% for 2013. Long term pre-tax margin at Individual Life is estimated in the 16–21% range while for Specialty Benefits it is in the 8–12% range.
Operating losses at Corporate and Other in 2013 is expected in the range of $145–$165 million.
Principal Financial estimates tax rate to be approximately 24%.
The company, over the past few years, has set aside capital, which is deployed in either strategic acquisitions or for enhancing shareholders value. For 2013, the company intends to utilize $400–$600 million for quarterly dividends, strategic acquisitions and share buybacks. Year-to-date in 2012, Principal Financial has spent $2.1 billion in share buybacks, dividends and acquisitions.
Principal Financial expects shares outstanding at 2013 end to be between 295–297 million.
Principal Financial is aligning its business 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 carries a Zacks #3 Rank, translating into a short-term hold rating. We have a long-term Neutral recommendation on the company. Its peer, Lincoln National Corporation (LNC), carries a Zacks #2 Rank, implying a short-term Buy rating.
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