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Principal Financial Group Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: February 16, 2011 12:24PM
Principal Financial Group Inc. (PFG) filed Annual Report for the period ended 2010-12-31. Principal Financial Group Inc. has a market cap of $10.28 billion; its shares were traded at around $32.08 with a P/E ratio of 11.6 and P/S ratio of 1.3. The dividend yield of Principal Financial Group Inc. stocks is 1.7%. Principal Financial Group Inc. had an annual average earning growth of 3.9% over the past 10 years.Hedge Fund Gurus that owns PFG: Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors, Steven Cohen of SAC Capital Advisors. Mutual Fund and Other Gurus that owns PFG: Bill Frels of Mairs & Power Inc. , Bill Frels of Mairs & Power Inc. , David Dreman of Dreman Value Management, Jeremy Grantham of GMO LLC.
Highlight of Business Operations:
We offer our full service accumulation products and services to employer-sponsored pension plans, including qualified and nonqualified defined contribution plans and defined benefit plans. Our primary target market is plans sponsored by small and medium-sized businesses, which we believe remains under-penetrated. According to Spectrem Group, in 2009, only 20% of businesses with between 10 and 49 employees, 46% of businesses with between 50 and 99 employees, 54% of businesses with between 100 and 249 employees and 61% of businesses with between 250 and 500 employees offered a 401(k) plan. The same study indicates that 73% of employers with between 500 and 1,000 employees, 84% of employers with between 1,000 and 5,000 employees and 95% of employers with 5,000 or more employees offered a 401(k) plan in 2009.
Variable Deferred Annuities. Individual variable deferred annuities are savings vehicles through which the customer makes one or more deposits of varying amounts and intervals. Customers have the flexibility to allocate their deposits to investment sub-accounts managed by the Principal Global Investors segment or other third-party asset managers. As of December 31, 2010, 78% of our $5.5 billion in variable annuity account balances was allocated to investment sub-accounts and our general account, which are managed by the Principal Global Investors segment and 22% was allocated to investment sub-accounts managed by third-party asset managers. Generally speaking, the customers bear the investment risk and have the right to allocate their assets among various separate investment sub-accounts. The value of the annuity fluctuates in accordance with the experience of the investment sub-accounts chosen by the customer. Customers have the option to allocate all or a portion of their account to our general account, in which case we credit interest at rates we determine, subject to contractual minimums. Customers may also elect an enhanced death benefit guarantee (commonly known in the industry as a guaranteed minimum death benefit, or "GMDB") and/or a living benefit guarantee (commonly known in the industry as a guaranteed minimum withdrawal benefit, or "GMWB"). We bear the GMDB and GMWB investment risk. We attempt to hedge the GMWB investment risk through the use of sophisticated risk management techniques. As of December 31, 2010, $2.3 billion of the $5.5 billion of variable annuity account value had the GMWB rider. Our major source of revenue from variable annuities is mortality and expense fees we charge to the customer, generally determined as a percentage of the market value of the assets held in a separate investment sub-account.
We sell our individual annuity products through our affiliated financial representatives, who accounted for 43%, 34% and 20% of annuity sales for the years ended December 31, 2010, 2009 and 2008, respectively. The remaining sales were made through banks, brokerage general agencies, mutual fund companies, Principal Connection and unaffiliated broker-dealer firms. Affiliated financial representatives continued to be the primary distribution channel of our variable deferred annuities. The majority of overall annuity sales, however, were from non-affiliated distribution channels, as a result of focused efforts to increase fixed annuity sales through non-affiliated distribution channels.
Stocks Discussed: PFG,