Principal Provides 2011 Outlook - Analyst Blog

Principal Financial Group Inc. (PFG) guided full year 2011 operating earnings in a range of $2.80 to $3.00 per share. The Zacks Consensus Estimate for 2011 at $2.83 per share falls within the guidance.

The company also expects an average S&P 500 Index of 1,250 in 2011, driving 9%–10% year-over-year increase in average assets under management in 2011. It still expects operating losses of $100 million to $120 million at the Corporate segment in 2011. Principal Financial estimates weighted average number of common shares outstanding at around 315–319 million for full year 2011.

Principal Financial ended third-quarter 2010 with assets under management of $305.7 billion, up 9% year over year and shares outstanding of 320 million. Operating losses at the Corporate segment totaled $23.9 million in the reported quarter, narrower than a loss of $35.3 million in the year-ago quarter.

Principal Financial's third-quarter 2010 operating earnings of 68 cents per share surpassed the Zacks Consensus Estimate, largely attributable to strong performance at the Global Asset Management, International Asset Management and Accumulation segments. However, earnings were in line with prior-year results.

On the third quarter conference call, Principal Financial guided full year 2010 Full Service Accumulation sales to be higher by 15% to 20% from the 2009 level that would lead to positive cashflows.

The Zacks Consensus Estimate for fourth-quarter 2010 is 66 cents per share while it is $2.63 for full year 2010.

Lincoln National Corporation (LNC), competing with Principal Financial, posted operating earnings way behind the Zacks Consensus. Results were largely affected by the company's annual comprehensive review of actuarial assumptions and model work, which resulted in a net charge of $72 million or 22 cents per share. Also, the current low interest rate environment has added to the adverse results.

Based on higher delinquencies in its commercial mortgage portfolio as well as persistently high unemployment levels that restrict participation in the existing employee benefit plans, we maintain our “Neutral” recommendation on Principal Financial. The quantitative Zacks #3 Rank (short-term Hold rating) indicates no clear directional pressure on the shares over the near term.

Based in Des Moines, Iowa, Principal Financial Group Inc. provides an expansive range of retirement savings, investment and insurance products and services through its various subsidiaries.

 
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