Company Also Announces Increase to Common
Stock Dividend
Company Highlights
- First quarter 2017 net income
available to common stockholders of $348.9 million, or $1.19 per
diluted share
- First quarter 2017 operating
earnings1 of $370.5 million, or $1.27 per diluted
share
- Record assets under management (AUM)
of $619.7 billion, up 13 percent on a trailing twelve month basis,
reflecting $19.8 billion in net cash flows and strong investment
performance
- Company declares second quarter 2017
common stock dividend of $0.46 per share; an 18 percent increase
over the second quarter 2016 common stock dividend
Principal Financial Group® (NYSE: PFG) today announced results
for first quarter 2017.
- Net income available to
common stockholders for first quarter 2017 of $348.9 million,
compared to $368.0 million for first quarter 2016. Net income per
diluted share of $1.19 for first quarter 2017 was down 5 percent,
compared to $1.25 in prior year quarter, which had favorable
derivative marks driven by interest rate volatility.
- Operating earnings increased 29
percent to $370.5 million for first quarter 2017, compared to
$286.3 million for first quarter 2016. Operating earnings per
diluted share (EPS) of $1.27 for first quarter 2017 was up 31
percent, compared to $0.97 for first quarter 2016.
- Quarterly common stock dividend
of $0.46 per share for second quarter 2017 was authorized by the
company’s Board of Directors, bringing the trailing twelve month
dividend to $1.75 per share, a 14 percent increase compared to the
prior year trailing twelve month period. The dividend will be
payable on June 30, 2017, to shareholders of record as of June 5,
2017.
“First quarter was a good start to the year for Principal, as we
continued to deliver solid results and build additional momentum.
We grew AUM by $28 billion over the three month period and by $72
billion over the trailing twelve months, reaching a record $620
billion at quarter end,” said Dan Houston, chairman, president and
CEO. “This strong growth reflects competitive long-term investment
performance; and ongoing investments to enhance our solution set,
expand our distribution reach, improve the customer experience, and
deliver better outcomes for clients overall.”
“Strong execution across all of our businesses -- Fee, Spread,
and Risk -- coupled with improving macroeconomic conditions and
opportunistic share repurchase, helped drive a 31 percent increase
in EPS compared to the year ago quarter,” added Deanna Strable,
chief financial officer. “We continue to benefit from our global,
diversified and integrated model – by business, geography and asset
class – and view this as a differentiator. Our model allows us to
generate and deploy capital in multiple ways that create long-term
value for our shareholders and advance our leadership in
retirement, asset management and protection.”
Other first quarter highlights
- Strong Morningstar investment
performance, with 80 percent of Principal’s investment options2
above median on a three-year basis and 89 percent above median on a
five-year basis.
- Retirement and Income Solutions - Fee
sales of $3.8 billion and net cash flows of $2.2 billion helped
drive end of period account values to $203.8 billion.
- Retirement and Income Solutions –
Spread had sales of $2.1 billion driving account values to $38.5
billion.
- Principal Global Investors achieved
record AUM of $403.0 billion and operating revenues less
pass-through commissions3 increased 14 percent from the year ago
quarter.
- Principal International (PI) generated
net cash flows of $1.3 billion and achieved record AUM of $147.3
billion, both increased 18 percent over the year ago quarter on a
constant currency basis4. Additionally, PI had record quarterly
pre-tax operating earnings in Brazil, China, and Hong Kong.
- Specialty Benefits premium and fees5
increased 8 percent compared to the year ago quarter, driven by
strong sales and retention.
- Individual Life Insurance premium and
fees increased 6 percent over the year ago quarter.
- Continued strong capital position with
a 2017 capital deployment target of $800 million to $1.1 billion.
Deployed $248 million of capital in first quarter 2017, including:
- $130 million of common stock dividends
with the $0.45 per share dividend paid in the first quarter;
and
- $118 million to repurchase 1.9 million
shares of common stock.
Segment Results
Retirement and Income Solutions -
Fee
(in millions except percentages or
otherwise noted)
Quarter Trailing Twelve Months 1Q17
1Q16 % Change
1Q17
1Q16 % Change
Pre-tax operating earnings6
$144.7 $114.0 27% $524.1
$465.7 13%
Net revenue7
$403.5 $363.7 11% $1,550.9 $1,546.7 0%
Pre-tax return on net revenue8
35.9% 31.3%
33.8% 30.1%
- Pre-tax operating earnings
increased $30.7 million driven by an increase in net revenue.
- Net revenue increased $39.8
million primarily due to higher fees driven by higher account
values, and higher variable investment income9.
Retirement and Income Solutions -
Spread
(in millions except
percentages or otherwise noted)
Quarter Trailing Twelve
Months 1Q17 1Q16 %
Change
1Q17 1Q16
% Change Pre-tax operating earnings $99.5
$67.4 48% $333.2 $252.9
32% Net revenue $143.9 $114.7 25% $520.7 $445.6 17% Pre-tax return
on net revenue 69.1% 58.8%
64.0% 56.8%
- Pre-tax operating earnings
increased $32.1 million due to an increase in net revenue and a
slight decline in expenses.
- Net revenue increased $29.2
million due to strong growth in the business as well as higher
variable investment income and mortality gains.
Principal Global Investors
(in millions except
percentages or otherwise noted)
Quarter Trailing Twelve
Months 1Q17 1Q16 %
Change
1Q17 1Q16
% Change Pre-tax operating earnings $100.0
$79.7 25% $464.1 $375.6
24% Operating revenues less pass-through commissions $306.3 $269.7
14% $1,260.7 $1,147.3 10%
Pre-tax return on operating revenues less
pass-through commissions10
33.1% 30.0% 37.3% 33.1% Total PGI assets under management
(billions) $403.0 $368.3 9% Institutional assets under management
(billions) $133.4 $122.7
9%
- Pre-tax operating earnings
increased $20.3 million driven by an increase in operating revenues
less pass-through commissions and improved margins.
- Operating revenues less pass-through
commissions increased $36.6 million primarily due to growth in
management fees.
Principal International
(in millions except
percentages or otherwise noted)
Quarter Trailing Twelve
Months 1Q17 1Q16 %
Change
1Q17 1Q16
% Change Pre-tax operating earnings $100.9
$68.0 48% $321.0 $258.5
24%
Combined11
$227.7 $184.7 23% $834.7 $761.2 10% Combined pre-tax return on net
revenue (at PFG share) 44.3% 36.8% 38.5% 34.0% Assets under
management (billions) $147.3 $121.0
22%
- Pre-tax operating earnings
increased $32.9 million. Adjusting for higher than expected encaje
returns, Principal International continues to generate mid-teens
growth on a constant currency basis.
- Combined net revenue (at PFG
share) increased $43.0 million driven by growth in AUM and
higher than expected encaje returns.
Specialty Benefits Insurance
(in millions except percentages or otherwise
noted)
Quarter Trailing Twelve Months 1Q17
1Q16 % Change
1Q17 1Q16 % Change
Pre-tax operating earnings $45.5 $38.6
18% $257.8 $212.2 21% Premium and fees $487.6 $449.7 8% $1,900.2
$1,746.7 9%
Pre-tax return on premium and fees12
9.3% 8.6% 13.6% 12.1% Incurred loss ratio 66.5%
66.4% 63.6%
63.4%
- Pre-tax operating earnings
increased $6.9 million primarily due to growth in the business and
the benefits of scale. In the quarter, higher variable investment
income was offset by an assessment associated with the Penn Treaty
liquidation.
- Premium and fees increased $37.9
million reflecting strong sales and retention.
- Incurred loss ratio was within
our expected range.
Individual Life Insurance
(in millions except
percentages or otherwise noted)
Quarter Trailing Twelve
Months 1Q17 1Q16 %
Change
1Q17 1Q16
% Change Pre-tax operating earnings $40.7
$41.9 (3)% $109.1 $215.9
(49)% Premium and fees $270.0 $255.2 6% $1,010.9 $973.5 4% Pre-tax
return on premium and fees 15.1% 16.4%
10.8% 22.2%
- Pre-tax operating earnings
decreased $1.2 million primarily reflecting more favorable claims
experience in 1Q16.
- Premium and fees increased $14.8
million reflecting strong sales growth.
Corporate
(in millions except
percentages or otherwise noted)
Quarter Trailing Twelve
Months 1Q17 1Q16 %
Change
1Q17 1Q16
% Change Pre-tax operating losses $(58.5)
$(53.3) (10)% $(224.1)
$(208.3) (8)%
- Pre-tax operating losses
increased $5.2 million reflecting higher corporate expenses.
Forward looking and cautionary statementsCertain
statements made by the company which are not historical facts may
be considered forward-looking statements, including, without
limitation, statements as to operating earnings, net income
available to common stockholders, net cash flows, realized and
unrealized gains and losses, capital and liquidity positions, sales
and earnings trends, and management’s beliefs, expectations, goals
and opinions. The company does not undertake to update these
statements, which are based on a number of assumptions concerning
future conditions that may ultimately prove to be inaccurate.
Future events and their effects on the company may not be those
anticipated, and actual results may differ materially from the
results anticipated in these forward-looking statements. The risks,
uncertainties and factors that could cause or contribute to such
material differences are discussed in the company’s annual report
on Form 10-K for the year ended Dec. 31, 2016, filed by the company
with the U.S. Securities and Exchange Commission, as updated or
supplemented from time to time in subsequent filings. These risks
and uncertainties include, without limitation: adverse capital and
credit market conditions may significantly affect the company’s
ability to meet liquidity needs, access to capital and cost of
capital; conditions in the global capital markets and the economy
generally; volatility or declines in the equity, bond or real
estate markets; changes in interest rates or credit spreads or a
sustained low interest rate environment; the company’s investment
portfolio is subject to several risks that may diminish the value
of its invested assets and the investment returns credited to
customers; the company’s valuation of investments and the
determination of the amount of allowances and impairments taken on
such investments may include methodologies, estimations and
assumptions that are subject to differing interpretations; any
impairments of or valuation allowances against the company’s
deferred tax assets; the company’s actual experience could differ
significantly from its pricing and reserving assumptions; the
pattern of amortizing the company’s DAC and other actuarial
balances on its universal life-type insurance contracts,
participating life insurance policies and certain investment
contracts may change; the company may not be able to protect its
intellectual property and may be subject to infringement claims;
the company’s ability to pay stockholder dividends and meet its
obligations may be constrained by the limitations on dividends or
distributions Iowa insurance laws impose on Principal Life; changes
in laws, regulations or accounting standards; results of litigation
and regulatory investigations; from time to time the company may
become subject to tax audits, tax litigation or similar
proceedings, and as a result it may owe additional taxes, interest
and penalties in amounts that may be material; applicable laws and
the company’s certificate of incorporation and by-laws may
discourage takeovers and business combinations that some
stockholders might consider in their best interests; competition
from companies that may have greater financial resources, broader
arrays of products, higher ratings and stronger financial
performance; a downgrade in the company’s financial strength or
credit ratings; changes in investor preferences; inability to
attract and retain qualified employees and sales representatives
and develop new distribution sources; international business risks;
fluctuations in foreign currency exchange rates; the company may
need to fund deficiencies in its “Closed Block” assets that support
participating ordinary life insurance policies that had a dividend
scale in force at the time of Principal Life’s 1998 conversion into
a stock life insurance company; the company’s reinsurers could
default on their obligations or increase their rates; risks arising
from acquisitions of businesses; and a computer system failure or
security breach could disrupt the company’s business and damage its
reputation.
Use of Non-GAAP financial measuresThe company uses a
number of non-GAAP financial measures that management believes are
useful to investors because they illustrate the performance of
normal, ongoing operations, which is important in understanding and
evaluating the company’s financial condition and results of
operations. They are not, however, a substitute for U.S. GAAP
financial measures. Therefore, the company has provided
reconciliations of the non-GAAP measures to the most directly
comparable U.S. GAAP measure at the end of the release. The company
adjusts U.S. GAAP measures for items not directly related to
ongoing operations. However, it is possible these adjusting items
have occurred in the past and could recur in future reporting
periods. Management also uses non-GAAP measures for goal setting,
as a basis for determining employee and senior management awards
and compensation, and evaluating performance on a basis comparable
to that used by investors and securities analysts.
Earnings conference callOn Friday, Apr. 28, 2017, at
10:00 a.m. (ET), Chairman, President and Chief Executive Officer
Dan Houston and Executive Vice President and Chief Financial
Officer Deanna Strable will lead a discussion of results and the
impacts on future prospects, asset quality and capital adequacy
during a live conference call, which can be accessed as
follows:
- Via live Internet webcast. Please go to
principal.com/investor at least 10-15 minutes prior to the start of
the call to register, and to download and install any necessary
audio software.
- Via telephone by dialing 866-427-0175
(U.S. and Canadian callers) or 706-643-7701 (international callers)
approximately 10 minutes prior to the start of the call. The access
code is 92541151.
- Replay of the earnings call via
telephone is available by dialing 855-859-2056 (U.S. and Canadian
callers) or 404-537-3406 (international callers). The access code
is 92541151. This replay will be available approximately two hours
after the completion of the live earnings call through the end of
day May 5, 2017.
- Replay of the earnings call via webcast
as well as a transcript of the call will be available after the
call at: principal.com/investor.
The company’s financial supplement is currently available at
principal.com/investor, and may be referred to during the call.
Other slides that will be referenced during the call will be
available at principal.com/investor approximately one-half hour
prior to call start time.
About Principal®13
Principal helps people and companies around the world build,
protect and advance their financial well-being through retirement,
insurance and asset management solutions that fit their lives. Our
employees are passionate about helping clients of all income and
portfolio sizes achieve their goals – offering innovative ideas,
investment expertise and real-life solutions to make financial
progress possible. To find out more, visit us at principal.com.
Summary of Principal Financial Group,
Inc. and Segment Results
Principal Financial Group, Inc.
Results:
(in millions) Three Months Ended,
Trailing Twelve Months, 3/31/17
3/31/16 3/31/17 3/31/16
Net income
available to common stockholders $
348.9 $ 368.0
$ 1,297.4 $
1,163.1 Net realized capital (gains) losses, as
adjusted 21.6
(81.7 ) 65.9 65.2
Other after-tax adjustments 0.0
0.0 52.0
2.1
Operating Earnings*
$ 370.5 $
286.3 $ 1,415.3
$ 1,230.4 Income taxes
102.3 70.0
369.9 325.6
Preferred stock dividends 0.0
0.0 0.0
8.3 Excess of redemption value over carrying
value of preferred shares redeemed 0.0
0.0 0.0
8.2
Pre-Tax Operating Earnings
$ 472.8 $
356.3 $ 1,785.2
$ 1,572.5
Segment Pre-Tax Operating Earnings (Losses):
Retirement and Income Solutions $ 244.2
$ 181.4 $ 857.3
$ 718.6 Principal Global Investors
100.0 79.7
464.1 375.6
Principal International 100.9
68.0 321.0
258.5 U.S. Insurance Solutions
86.2 80.5
366.9 428.1 Corporate
(58.5 ) (53.3 )
(224.1 ) (208.3 )
Pre-Tax
Operating Earnings $ 472.8
$ 356.3 $
1,785.2 $ 1,572.5
Per Diluted Share Three Months Ended, 3/31/17
3/31/16
Net income
$ 1.19 $ 1.25
Net realized capital (gains) losses, as adjusted
0.08 (0.28 )
Operating
Earnings $ 1.27
$ 0.97 Weighted-average diluted
common shares outstanding 292.4
294.3
*U.S. GAAP (GAAP) net income available to common stockholders
versus operating earnings
Management uses operating earnings, which is a non-GAAP
financial measure that excludes the effect of net realized capital
gains and losses, as adjusted, and other after-tax adjustments the
company believes are not indicative of overall operating trends,
for goal setting, as a basis for determining employee and senior
management awards and compensation, and evaluating performance on a
basis comparable to that used by investors and securities analysts.
Note: it is possible these adjusting items have occurred in the
past and could recur in future reporting periods. While these items
may be significant components in understanding and assessing our
consolidated financial performance, management believes the
presentation of operating earnings enhances the understanding of
results of operations by highlighting earnings attributable to the
normal, ongoing operations of the company’s businesses.
Selected Balance Sheet
Statistics
Period Ended, 3/31/17
12/31/16 Total assets (in billions) $ 235.5
$ 228.0 Stockholders’ equity (in millions) $ 10,684.9
$
10,293.8 Total common equity (in millions) $ 10,616.1 $ 10,227.3
Total common equity excluding accumulated other comprehensive
income (AOCI) other than foreign currency translation adjustment
(in millions) $ 10,040.8 $ 9,808.7 End of period common shares
outstanding (in millions) 288.1 287.7 Book value per common share $
36.85 $ 35.55 Book value per common share excluding AOCI other than
foreign currency translation adjustment $ 34.85 $ 34.09
Principal Financial Group, Inc. Reconciliation of
U.S. GAAP to Non-GAAP Financial Measures (in millions,
except as indicated) Period Ended,
3/31/17 12/31/16 Stockholders’
Equity, Excluding AOCI Other Than Foreign Currency Translation
Adjustment, Available to Common Stockholders:
Stockholders’ equity $ 10,684.9 $ 10,293.8 Noncontrolling interest
(68.8 ) (66.5 ) Stockholders’ equity
available to common stockholders 10,616.1 10,227.3 Net unrealized
capital (gains) losses (979.4 ) (827.0 ) Net unrecognized
postretirement benefit obligation 404.1
408.4 Stockholders’ equity, excluding AOCI other than
foreign currency translation adjustment, available to common
stockholders $ 10,040.8 $ 9,808.7
Book Value Per Common Share, Excluding AOCI
Other Than Foreign Currency Translation Adjustment: Book value
per common share $ 36.85 $ 35.55 Net unrealized capital (gains)
losses (3.40 ) (2.88 ) Net unrecognized postretirement benefit
obligation 1.40 1.42 Book
value per common share, excluding AOCI other than foreign currency
translation adjustment $ 34.85 $ 34.09
Principal Financial Group, Inc.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in millions)
Three Months Ended, Trailing Twelve
Months, 3/31/17 3/31/16
3/31/17 3/31/16 Income
Taxes: Total GAAP
income taxes $ 60.4 $ 70.6 $ 219.7 $ 219.2 Net realized capital
gains (losses) tax adjustments 19.4 (14.8 ) 40.8 48.4 Tax benefit
related to other after-tax adjustments - - 34.4 2.9 Income taxes
related to equity method investments and noncontrolling interest
22.5
14.2
75.0
55.1
Income taxes $ 102.3 $ 70.0
$ 369.9 $ 325.6
Net Realized Capital Gains (Losses): GAAP net realized
capital gains (losses) $ (16.6 ) $ 136.6 $ 17.9 $ 19.3
Recognition of front-end fee revenues (0.2 ) 0.3 (0.3 ) - Market
value adjustments to fee revenues - (0.7 ) (1.8 ) (0.7 ) Net
realized capital gains related to equity method investments 0.6 0.3
0.4 0.3 Derivative and hedging-related adjustments (17.6 ) (24.3 )
(87.4 ) (116.3 ) Sponsored investment fund adjustments 1.2 1.4 5.9
2.7 Amortization of DAC 7.0 (39.3 ) (19.9 ) (38.8 ) Capital gains
distributed – operating expenses (6.1 ) 26.5 (28.9 ) 32.4
Amortization of other actuarial balances 2.1 (7.0 ) (2.1 ) (5.5 )
Market value adjustments of embedded derivatives 1.8 2.4 49.4 3.1
Capital gains distributed – cost of interest credited (11.0 ) 0.6
(22.5 ) (3.9 ) Net realized capital gains (losses) tax adjustments
19.4 (14.8 ) 40.8 48.4 Net realized capital gains (losses)
attributable to noncontrolling interest, after-tax (2.2 ) (0.3 )
(17.4 ) (6.3 ) Net realized capital losses associated with exited
group medical insurance business, after-tax -
- -
0.1 Total net realized capital gains (losses)
after-tax adjustments (5.0 ) (54.9 ) (83.8 ) (84.5 )
Net
realized capital gains (losses), as adjusted $ (21.6 )
$ 81.7 $ (65.9 ) $ (65.2
)
Other After-Tax Adjustments: Exited group medical
insurance business: Pre-tax $ - $ - $ - $ (3.2 ) Tax - - - 1.1
Impact of a tax court ruling and related indemnification: Pre-tax -
- - (1.8 ) Tax - - - 1.8 Early extinguishment of debt: Pre-tax - -
(86.4 ) - Tax - -
34.4 - Total other
after-tax adjustments $ - $ -
$ (52.0 ) $ (2.1 )
Principal
Financial Group, Inc. Reconciliation of U.S. GAAP to
Non-GAAP Financial Measures (in millions)
Three Months Ended,
Trailing Twelve Months,
3/31/17 3/31/16
3/31/17 3/31/16 Principal Global
Investors Operating Revenues Less Pass-Through Commissions:
Operating revenues $
345.9 $ 309.5 $ 1,423.5 $ 1,324.1 Commission expense (39.6 )
(39.8 ) (162.8 )
(176.8 ) Operating revenues less pass-through
commissions $ 306.3 $ 269.7
$ 1,260.7 $ 1,147.3
Principal International Combined Net Revenue (at PFG
Share) Pre-tax operating earnings $ 100.9 $ 68.0 $ 321.0 $
258.5 Combined operating expenses (at PFG share) 126.8
116.7 513.7
502.7 Combined net revenue (at
PFG share) $ 227.7 $ 184.7
$ 834.7 $ 761.2
1 Use of non-GAAP financial measures is discussed in this
release after segment results. Operating earnings for total company
is after tax.
2 Represents the percentage of Principal mutual funds, separate
accounts and collective investment trusts (CITs) in the top two
Morningstar quartiles.
3 The company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measure at the
end of the release. The company has determined this measure is more
representative of underlying operating revenues growth for PGI as
it removes commissions that are collected through fee revenue and
passed through expenses with no impact to pre-tax operating
earnings.
4 Constant currency basis = prior period results translated
using foreign exchange rates from the current period.
5 Premium and fees = premiums and other considerations plus fees
and other revenues.
6 Pre-tax operating earnings = operating earnings before income
taxes and after noncontrolling interest.
7 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.
8 Pre-tax return on net revenue = pre-tax operating earnings
divided by net revenue.
9 Variable investment income includes certain types of
investment returns such as prepayment fees and income (loss) from
certain elements of our alternative asset classes, including
results of value-add real estate sales activity.
10 Pre-tax return on operating revenues less pass-through
commissions = pre-tax operating earnings, adjusted for
noncontrolling interest divided by operating revenues less
pass-through commissions.
11 Combined basis = all Principal International companies at 100
percent. The company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measure at the
end of the release. The company has determined combined net revenue
(at PFG share) is more representative of underlying net revenue
growth for Principal International as it reflects our proportionate
share of consolidated and equity method subsidiaries. In addition,
using this net revenue metric provides a more meaningful
representation of our profit margins.
12 Pre-tax return on premium and fees = pre-tax operating
earnings divided by premium and fees.
13 Principal, Principal and symbol design and Principal
Financial Group are trademarks and service marks of Principal
Financial Services, Inc., a member of the Principal Financial
Group.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170427006697/en/
Principal Financial GroupMedia Contact:Erica Jensen,
515-362-0049jensen.erica@principal.comorInvestor Contact:John Egan,
515-235-9500egan.john@principal.com
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