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Principal Financial (PFG) Q4 Earnings Miss, Revenues Top

Zacks Equity Research

Principal Financial Group, Inc.’s PFG fourth-quarter 2018 operating net income of $1.11 per share missed the Zacks Consensus Estimate by 16.5%. Also, the bottom line deteriorated 6.7% year over year.

Nonetheless, Principal Financial delivered growth in assets under management (AUM). The company’s investment performance also remained solid while maintaining a disciplined expense management. Moreover, the company displayed a balanced approach to capital management.

Including net realized capital losses as adjusted, net income of 83 cents per share plunged 71.1% from the year-ago quarter.

Full-Year Highlights

For 2018, Principal Financial reported operating net income of $5.53 per share, which though lagged the Zacks Consensus Estimate by 3.8%, it improved 9.7% year over year.

Moreover, total operating revenues of $14.3 billion beat the consensus mark by 2.1% and also grew 5.5% 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. Quote

Behind the Headlines

Operating revenues rose 18.5% year over year to $3.9 billion. Higher premiums and other considerations plus net investment income drove this upside. The top line also trumped the Zacks Consensus Estimate by 6.1%.

Total expenses increased 20.7% year over year to $3.5 billion due to higher benefits, claims and settlement expenses.

Principal Financial’s Asset Under Management (AUM) as of Dec 31, 2018 amounted to $626.8 billion, down 6% year over year.

Segment Update

Retirement and Income Solution: Revenues surged nearly 36% year over year to about $2.2 billion.

Pre-tax operating earnings decreased 15.1% year over year to $171.3 million on account of weak performance at Retirement and Income Solution — Fee business.

Principal Global Investors: Revenues of $355.4 million were down 5.4% from the prior-year quarter.

Operating earnings declined 19% year over year to $100.5 million.

Principal International: Revenues fell 6.9% year over year to $312.8 million in the fourth quarter.

Operating earnings plunged nearly 31% year over year to $54.2 million.

U.S. Insurance Solution: Revenues grew 4.5% year over year to $1 billion.

Operating earnings of $107.6 million slipped 2.9% year over year, mainly due to soft performance at Individual Life Insurance business.

Corporate: Operating loss of $54.7 million was narrower than $61.5 million loss incurred a year ago. This improvement is attributable to lower expenses.

Financial Update

As of Dec 31, 2018, cash and cash equivalents were $2.9 billion, up 20.5% year over year.

At fourth-quarter end, debt was $3.3 billion, up 2.6% from $3.2 billion a year ago.

As of Dec 31, 2018, book value per share (excluding AOCI other than foreign currency translation adjustment) was $41.84, up 2.8% year over year.

Dividend and Share Repurchase Update

The company paid $152.1 million in dividends and deployed $210.1 million to buy back 4.4 million shares in the quarter under review.

The board of directors at Principal Financial announced a dividend of 54 cents per share for the first quarter of 2019, translating into a 6% rise over the first quarter of 2018. This dividend will be paid on Mar 29, 2019 to shareholders of record as of Mar 4, 2019.

Principal Financial deployed $1.4 billion capital, above its guided range of $0.9-$1.3 billion for 2018.

Zacks Rank

Principal Financial carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Finance Stocks

Among other players from the finance sector having reported fourth-quarter earnings so far, the bottom line of MGIC Investment Corporation MTG and The Travelers Companies, Inc. TRV beat the respective Zacks Consensus Estimate while that of The Progressive Corporation PGR missed the same.

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