Principal Financial (PFG) Q4 Earnings Miss, Revenues Top

Principal Financial Group, Inc.’s (NASDAQ: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.

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 (NYSE:MTG) and The Travelers Companies, Inc. (NYSE:TRV) beat the respective Zacks Consensus Estimate while that of The Progressive Corporation (NYSE:PGR) missed the same.

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