Principal Financial Group, Inc. (PFG) reported second-quarter 2013 operating net earnings of 91 cents per share. The reported results exceeded the Zacks Consensus Estimate by 11% and improved 30% year over year. Operating income was $271.4 million in the quarter, up 29% year over year.
A surge in fees and other revenues along with higher premiums and other considerations more than offset the impact from lower net investment income and escalation in expenses. In addition, a lower share count buoyed Principal Financial’s bottom line.
Including net realized capital losses of $47.6 million or 16 cents, and other unfavorable adjustments of $4 million, net income available to common stockholders was $222.3 million or 75 cents per share, compared with $167.6 million or 56 cents per share a year ago.
The prior-year quarter included net realized capital losses of 13 cents and other unfavorable after-tax adjustments of 1 cent.
Operational Performance
Operating revenues of Principal Financial in the second quarter improved 8% to $2.31 billion. The rise was primarily due to an increase in premiums and other considerations and fees and other revenues. Revenues marginally fell short of the Zacks Consensus Estimate of $2.34 billion.
Total expenses incurred by Principal Financial escalated 5.2% year over year to $1.9 billion. Higher commissions, depreciation and amortization, compensation, interest expense primarily contributed to the escalation.
Principal Financial’s assets under management were $450.6 billion as of Jun 30, 2013, up 22.7% year over year.
Book value per share as of Jun 30, 2013, stood at $29.81, inching up 0.03% year over year.
Segment Update
Retirement and Investor Services: Revenues in the quarter augmented nearly 6.3% year over year to $1.1 million.
Operating earnings increased 21.5% year over year to $172.3 million in the quarter.
Principal Global Investors: Revenues in the quarter were $168.2 million, 19% higher than the prior-year period, driven by higher management fees due to AUM growth.
Operating earnings improved 59% year over year to $29 million. The increase was primarily due to improved revenues and enhanced pretax margin.
Principal International: Revenues were $338 million in the quarter, up 25% year over year.
Operating earnings surged 85% year over year to $26.8 million in the quarter, attributable to the benefit from the Cuprum acquisiiton.
US Insurance Solution: Revenues were $773 million in the reported quarter, up 2.9% year over year.
Operating income was $47.2 million in the reported quarter, down 10% year over year.
Corporate: Operating losses widened to $35.4 million from a loss of $30.7 million recorded in the year-ago quarter.
Dividend Update
The board of directors of Principal Financial declared a quarterly dividend of 26 cents per share, representing an increase of 13%. The dividend will be payable on Sep 27, 2013 to shareholders of record as of Sep 5, 2013.
Principal Financial also paid a quarterly dividend of 23 cents on Jun 8.
Results of Few Other Investment Managers
Ameriprise Financial, Inc. (AMP) reported second-quarter operating earnings of $1.69 per share. The results surpassed the Zacks Consensus Estimate of $1.62 as well as the year-ago earnings of $1.13.
BlackRock, Inc.’s (BLK) second-quarter 2013 adjusted earnings came in at $4.15 per share. The results surpassed the Zacks Consensus Estimate of $3.82 as well as the year-ago earnings of $3.10.
The Blackstone Group L.P (BX) reported second-quarter earnings of 62 cents per share, surpassing the Zacks Consensus Estimate of 52 cents. It also improved substantially from 19 cents earned in the year-ago quarter.
Our Take
Increased focus on fee-based revenue sources aided Principal Financial to earn steadily and return capital to its shareholders through dividends or deploy them in strategic acquisitions. The approval of a 13% dividend hike further substantiates it.
Its inorganic growth story also looks quite impressive. Principal Global Investors, LLC, the investment arm of Principal Financial Group, agreed to purchase 55% shares of Liongate Capital Management in an effort to expand its alternative investment capabilities.
Principal Financial presently carries a Zacks Rank #3 (Hold).
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