Tags: Principal | Financial | rates | PFG

Principal Financial Hit by Low Rates

By    |   Wednesday, 07 Dec 2011 04:33 PM

The share value of financial services provider Principal Financial Group (PFG) remains at depressed levels since bottoming during the 2008 through 2009 financial crisis. As the company works to rebuild, those profits are now reduced by the low interest rate environment.

Principal Financial provides retirement planning, investment and insurance products for businesses and individuals. As of the 2011 third quarter, the company had $320 billion of assets under management.

Business lines are divided into Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions. The retirement and investor services division generates approximately half of operating earnings.

For the first nine months of 2011, Principal Financial Group reported operating earnings of $661 million or $2.06 per share, up from $630 million and $1.95 per share.

For the third quarter operating earnings of $192 million were down 12 percent from $219 million a year earlier. The 61 cents per share operating earnings for the quarter missed the Wall Street consensus estimate by 10 cents.

For the 2011 fourth quarter the company is forecast to earn 74 cents per share compared to 66 cents for the final quarter of 2010.

Rates squeeze margins

The main reason for the drop in profits for the third quarter was the ongoing low interest rate environment. Both sales and book value were up for Principal Financial for the quarter. The company has a significant book of retirement plan insurance assets with guaranteed minimum rates and currently $7 billion of those assets are at the minimum and another $12 billion is close.

If Principal Financial earns less than the minimum it must pay on customer accounts, the impact on earnings can be significant.

The Principal has a different dividend policy than is typical for U.S. corporations. The company makes an annual distribution and the amount is significant. The 70 cents per share dividend for 2011 was 27 percent higher than for 2010 and represents a dividend yield of 3 percent at $22 per share.

The most recent analyst comment on PFG was a reiteration of a neutral rating by the analysts at UBS.

The company next reports on Feb. 6.

© 2017 Newsmax Finance. All rights reserved.

 
1Like our page
2Share
Companies
The share value of financial services provider Principal Financial Group (PFG) remains at depressed levels since bottoming during the 2008 through 2009 financial crisis. As the company works to rebuild, those profits are now reduced by the low interest rate...
Principal,Financial,rates,PFG
355
2011-33-07
Wednesday, 07 Dec 2011 04:33 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved