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Principal Financial (PFG) Q2 Earnings Beat, Revenues Lag

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Principal Financial Group, Inc.’s (PFG - Free Report) second-quarter 2020 operating net income of $1.46 per share beat the Zacks Consensus Estimate by 11.5%. However, the bottom line decreased 3.9% year over year.

Principal Financial witnessed lower revenues across most of its business lines, offset by lower expenses.

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

Behind the Headlines

Operating revenues decreased 20.5% year over year to nearly $3.2 billion, primarily due to lower premiums and other considerations, and net investment income. The top line missed the Zacks Consensus Estimate by nearly 17%.

Total expenses decreased 25.7% year over year to $2.6 billion due to lower benefits, claims and settlement expenses as well as reduced operating expenses.

Principal Financial’s AUM as of Jun 30, 2020 was a record $701.8 billion, up 0.8% year over year.

Segment Update

Retirement and Income Solution: Revenues decreased 31.5% year over year to about $1.5 billion.

Pretax operating earnings decreased 16.5% year over year to $213.9 million on account of poor performance at Retirement and Income Solution — Fee as well as Spread business.

Principal Global Investors: Revenues of $352.9 million were down 1.8% from the prior-year quarter.

Operating earnings declined 6.2% year over year to $108.4 million primarily due to lower transaction and borrower fees, and higher sales compensation, partially offset by lower operating expenses.

Principal International: Revenues decreased 32.8% year over year to $276.4 million in the quarter.

Operating earnings increased 1.4% year over year to $94.5 million primarily due to more favorable encaje performance, partially offset by foreign currency translation headwinds.

U.S. Insurance Solution: Revenues grew 0.1% year over year to $1.1 billion.

Operating earnings of $155 million increased 5.9% year over year, driven by strong performance at the Specialty Benefits Insurance business.

Corporate: Operating loss of $84 million was narrower than $98.1 million loss incurred a year ago, primarily due to expense management actions.

Financial Update

As of Jun 30, 2020, cash and cash equivalents were $3.1 billion, down 5% year over year.

At second-quarter end, debt was $4.2 billion, up 10.6% year over year.

As of Jun 30, 2020, book value per share (excluding AOCI other than foreign currency translation adjustment) was $44.47, up 1.6% year over year.

Capital Deployment

Principal Financial paid out $153.5 million in dividends.

The board of directors approved third-quarter dividend of 56 cents per share, up 3% 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, Affiliated Managers Group Inc. (AMG - Free Report) and BlackRock, Inc. (BLK - Free Report) beat the respective Zacks Consensus Estimate for earnings. However, SEI Investments Co. (SEIC - Free Report) missed the same.

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