Principal Financial Group Inc. (PFG) filed Quarterly Report for the period ended 2009-09-30.
The Principal Financial Group is a leading provider of retirement savings investment and insurance products and services. In addition they offer a broad range of individual life and disability insurance group life and health insurance and residential mortgage loan origination and servicing in the United States. Principal Financial Group Inc. has a market cap of $8.03 billion; its shares were traded at around $25.17 with a P/E ratio of 8.5 and P/S ratio of 0.8. The dividend yield of Principal Financial Group Inc. stocks is 1.8%. Principal Financial Group Inc. had an annual average earning growth of 12.2% over the past 5 years.
Highlight of Business Operations:
Post Advisory Group, LLC. Effective January 1, 2009, we sold certain fixed income asset management contracts within our Post Advisory Group, LLC subsidiary, at which time we realized benefits from the cancellation of deferred compensation agreements. The assets under management associated with this sale totaled $3.8 billion. The total cash proceeds of $50.0 million are expected to be received over a four year time period. The initial $2.2 million cash down payment was received in the second quarter of 2009.
As a result of our decision to terminate our commercial mortgage securities issuance operation, amounts previously included in our Global Asset Management segment operating earnings related to our commercial mortgage securities issuance operation have been removed from operating earnings for all periods presented and are reported as other after-tax adjustments. Our commercial mortgage securities issuance operation had operating revenues of $(0.6) and $(5.1) million for the three months ended September 30, 2009 and 2008, respectively, and $(0.7) million and $(24.0) million for the nine months ended September 30, 2009 and 2008, respectively. Our commercial mortgage securities issuance operation had after-tax operating losses of $0.5 and $4.8 million for the three months ended September 30, 2009 and 2008, respectively, and $0.8 million and $22.3 million for the nine months ended September 30, 2009 and 2008, respectively.
Foreign currency exchange rate fluctuations create variances in our financial statement line items. Our consolidated net income was negatively impacted by $4.9 million and positively impacted by $5.2 million for the three months ended September 30, 2009 and 2008, respectively, and negatively impacted by $27.0 million and positively impacted by $11.4 million for the nine months ended September 30, 2009 and 2008, respectively, as a result of fluctuations in foreign currency to U.S. dollar exchange rates. For a discussion of our approaches to managing foreign currency exchange rate risk, see Item 3. “Quantitative and Qualitative Disclosures About Market Risk — Foreign Currency Risk.”
The 2009 annual pension benefit expense for substantially all of our employees and certain agents is expected to be $157.6 million pre-tax, which is a $145.3 million increase from the 2008 pre-tax pension expense of $12.3 million. This increase is primarily due to lower than estimated returns on plan assets and a decrease in discount rate. Approximately $39.4 million and $118.2 million of pre-tax pension expense were reflected in the determination of net income for the three and nine months ended September 30, 2009, respectively. In addition, approximately $39.4 million of pre-tax pension expense will be reflected in the fourth quarter of 2009. The discount rate used to develop the 2009 expense was 6.0%, down from the 6.3% discount rate used to develop the 2008 expense. The expected long-term return on plan assets assumption was 8.0%, down from the 8.25% used to develop the 2008 expense.
Premiums decreased $86.8 million for the U.S. Asset Accumulation segment, primarily due to a decrease in sales of annuities with life contingencies in our individual annuities and full service payout businesses. In addition, premiums and other considerations decreased $51.1 million for the Life and Health Insurance segment primarily due to a reduction in average covered medical members in our health insurance business and due to the expected continued decline from our decreasing block of individual traditional life insurance business. Partially offsetting these decreases was a $20.8 million increase for the International Asset Management and Accumulation segment primarily due to higher sales of single premium annuities with life contingencies in Chile.
Fees for the U.S. Asset Accumulation segment decreased $35.6 million, primarily due to lower fee income stemming from a decrease in account values as a result of the declining equity markets from 2008 to 2009. In addition, fees for the Global Asset Management segment decreased $28.4 million due to a decrease in AUM as a result of declining market conditions and the sale of certain asset management contracts within Post Advisory Group, LLC. Partially offsetting these decreases was an $11.6 million increase for the Corporate segment primarily due to a decrease in inter-segment eliminations included in this segment, which was offset by a corresponding change in total expenses.
PFG is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund, Chris Davis of Davis Selected Advisers, David Dreman of Dreman Value Management.
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