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Principal Financial (PFG) Q2 Earnings and Revenues Beat

Zacks Equity Research

Principal Financial Group, Inc.’s PFG second-quarter 2019 operating net income of $1.52 per share beat the Zacks Consensus Estimate by 8.6%. Also, the bottom line increased 12.6% year over year.

Principal Financial recorded growth in assets under management (AUM). The company’s investment performance also remained solid. It was able to maintain disciplined expense management. Moreover, the company displayed a balanced approach to capital management.

Behind the Headlines

Operating revenues rose 25.5% year over year to nearly $4 billion. Higher premiums and other considerations plus net investment income drove this upside. The top line beat the Zacks Consensus Estimate by 4.2%.

Total expenses increased 29.5% year over year to $3.5 billion due to higher benefits, claims and settlement expenses as well as operating expenses.

Principal Financial’s AUM as of Jun 30, 2019 was a record $696.2 billion, up 4.4% year over year.

Principal Financial Group, Inc. Price, Consensus and EPS Surprise

Principal Financial Group, Inc. Price, Consensus and EPS Surprise

Principal Financial Group, Inc. price-consensus-eps-surprise-chart | Principal Financial Group, Inc. Quote

Segment Update

Retirement and Income Solution: Revenues surged 48.9% year over year to about $2.2 billion.

Pre-tax operating earnings increased 12.6% year over year to $256.2 million on account of solid performance at Retirement and Income Solution — Fee as well as Spread business.

Principal Global Investors: Revenues of $359.5 million were down 5.3% from the prior-year quarter.

Operating earnings declined 11% year over year to $115.6 million due to lower revenues and continued investments in the business.

Principal International: Revenues increased 5.6% year over year to $411.6 million in the quarter.

Operating earnings increased 8% year over year to $93.2 million driven by growth in the business and favorable encaje performance, partially offset by foreign currency translation headwinds and inflation in Latin America.

U.S. Insurance Solution: Revenues grew 8.3% year over year to $1.1 billion.

Operating earnings of $146.3 million increased 29.1% year over year, driven by sturdy performance at Specialty Benefits Insurance business.

Corporate: Operating loss of $983.1 million was wider than $70.7 million loss incurred a year ago. This downside was due to higher expenses.

Financial Update

As of Jun 30, 2019, cash and cash equivalents were $3.3 billion, up 41.6% year over year.

At second-quarter end, debt was $3.3 billion, up 16.9% year over year.

As of Jun 30, 2019, book value per share (excluding AOCI other than foreign currency translation adjustment) was $43.75, up 7% year over year.

Capital Deployment

Principal Financial paid $154.4 million in dividends.

The company committed $1.2 billion to acquire the Wells Fargo Institutional Retirement & Trust business.

The board of directors approved third-quarter dividend of 55 cents per share, up 4% year over year.

Zacks Rank

Principal Financial currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Investment Managers

Among the investment managers that have reported second-quarter results so far, T. Rowe Price Group TROW and Ameriprise Financial AMP beat the respective Zacks Consensus Estimate for earnings. However, BlackRock BLK missed the same.

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