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Principal Financial Group Inc. (PFG - Analyst Report) unveiled its capital deployment plan and its segments’ outlook for 2014.

Principal Financial expects net revenue growth at Retirement and Investor Services – Accumulation to be in the range of 5–7%, while at  Retirement and Investor Services – Guaranteed it is projected in the range of negative 2–2%. Solid improvement at Full Service Accumulation and Funds will drive growth at Retirement and Investor Services – Accumulation.

Net revenue growth at Principal Global Investors is estimated to be in the range of 7–10% in 2014. It estimates pre–tax margin in 2014 in the range of 26–28%. Management stated that it remains on track to achieve pretax margin of more than 30% by 2017.

Principal International expects to achieve net revenue growth between 16–18% in 2014. The guidance includes full year of Cuprum acquisition in 2014. However, management estimates fourth-quarter 2013 operating earnings to be lowered by $6 million due to a one-time reset of deferred tax liabilities, attributable to a change in tax provisions in Mexico.

Additionally, another $3 million is likely to impact fourth-quarter operating earnings of the segment attributable to an expected change in a straight-line amortization pattern of the intangible asset related to the 23-year partnership agreement with Banco do Brasil. The same will reduce the segment’s 2014 operating earnings by $9 million.

Management estimates encaje returns of 8.0% in Chile and 7.5% in Mexico in 2014.

At US Insurance Solution segment, premium and fee in 2014 for both Individual Life and Specialty Benefits is projected to increase in the range of 3–5%. Pretax operating margin at Life is estimated to be between 14–16% (low interest rate environment weighing on margin expansion) while at Specialty Benefits the same is estimated to be in the range of 10–12% for 2014.

Operating losses at Corporate and Other in 2014 is expected in the range of $130–$150 million.

Principal Financial estimates tax rate to be approximately 21–23%.

The company, over the past few years, has set aside capital for deployment in either strategic acquisitions or for enhancing shareholders’ value.  For 2014, the company intends to utilize $500–$700 million for quarterly dividends, strategic acquisitions and share buybacks as well as deleverage its balance sheet. Management has set aside $400–$600 million for quarterly dividends, share buybacks and acquisitions in 2013, of which $480 million has already been allocated.

Principal Financial expects shares outstanding at 2014-end to range between 297–300 million.

Principal Financial is aligning itself to focus more on the strategic opportunities in the growing asset accumulation and asset management businesses. Also, it is well positioned on the back of its extensive distribution footprint, best-in-class solutions and operational discipline. We believe these attributes will help it achieve its expectations going forward.

Principal Financial presently carries a Zacks Rank #2 (Buy). Some other stocks worth considering are Kohlberg Kravis Roberts & Co. L.P. (KKR - Snapshot Report), Virtus Investment Partners, Inc. (VRTS - Snapshot Report) and Ameriprise Financial, Inc. (AMP - Analyst Report). While Kohlberg Kravis Roberts and Virtus Investment sport a Zacks Rank #1 (Strong Buy), Ameriprise Financial holds the same Zacks Rank as Principal Financial.

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