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Principal Financial Group Inc. Reports Operating Results (10-Q)

November 03, 2010 | About:
10qk

10qk

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Principal Financial Group Inc. (PFG) filed Quarterly Report for the period ended 2010-09-30.

Principal Financial Group Inc. has a market cap of $8.76 billion; its shares were traded at around $27.5 with a P/E ratio of 9.9 and P/S ratio of 1. The dividend yield of Principal Financial Group Inc. stocks is 1.9%. Principal Financial Group Inc. had an annual average earning growth of 3.9% over the past 10 years.PFG is in the portfolios of Ronald Muhlenkamp of Muhlenkamp Fund, Bill Frels of Mairs & Power Inc. , Jim Simons of Renaissance Technologies LLC, Manning & Napier Advisors, Inc, David Dreman of Dreman Value Management, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

On November 1, 2010, our Board of Directors declared an annual common stock dividend of approximately $176.2 million, equal to $0.55 per share, payable on December 3, 2010, to common stockholders of record as of November 19, 2010.

As a result of our decision to exit the group medical insurance business, amounts for our group medical insurance business, which had previously been reported in the Life and Health Insurance segment, are now reported in the Corporate segment and the Life and Health Insurance segment has been renamed the U.S. Insurance Solutions segment. Our segment results for 2009 have been restated to conform to the current segment presentation. With the exception of corporate overhead, amounts related to our group medical insurance business previously included in segment operating earnings have been removed from operating earnings for all periods presented and are reported as other after-tax adjustments. The operating revenues associated with our exited group medical insurance business were $344.1 million and $396.0 million for the three months ended September 30, 2010 and 2009, respectively, and $1,050.2 million and $1,225.4 million for the nine months ended September 30, 2010 and 2009, respectively. The other after-tax adjustments associated with the after-tax earnings (losses) of our exited group medical insurance business were $(45.8) million and $19.5 million for the three months ended September 30, 2010 and 2009, respectively, and $1.0 million and $73.8 million for the nine months ended September 30, 2010 and 2009, respectively.

Foreign currency exchange rate fluctuations create variances in our financial statement line items. Our consolidated net income was positively impacted by $0.2 million and negatively impacted by $4.9 million for the three months ended September 30, 2010 and 2009, respectively, and positively impacted by $27.4 million and negatively impacted by $27.0 million for the nine months ended September 30, 2010 and 2009, 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 2010 annual pension benefit expense for substantially all of our employees and certain agents (excluding any curtailment gain recognized during the fourth quarter of 2010 that results from our decision to exit the group medical insurance business) is expected to be $110.4 million pre-tax, which is a $47.2 million decrease from the 2009 pre-tax pension expense of $157.6 million. This decrease is primarily due to actual asset returns in 2009 that were greater than expected, resulting in an actuarial gain and higher than expected plan assets as of December 31, 2009. The higher asset value increased the expected return on plan assets in 2010 and the actuarial gain reduced the previous actuarial loss and its amortization in 2010. For additional information, see Item 1. Financial Statements, Notes to Unaudited Consolidated Financial Statements, Note 7, Employee and Agent Benefits. Approximately $27.6 million and $82.8 million of pre-tax pension expense was reflected in the determination of net income for the three and nine months ended September 30, 2010, respectively. In addition, approximately $27.6 million of pre-tax pension expense (excluding any curtailment gain recognized during the fourth quarter of 2010 that results from our decision to exit the group medical insurance business) will be reflected in the fourth quarter of 2010. The expected long-term return on plan assets and the discount rate used to develop the 2010 expense remained at the same 8.0% and 6.0% rates, respectively, used to develop the 2009 expense.

Fees for the International Asset Management and Accumulation segment increased $6.5 million primarily due to higher investment management fees driven by higher average AUM as a result of market performance and net customer cash flows. In addition, fees for the U.S. Insurance Solutions segment increased $6.5 million primarily due to growth in the universal life and variable universal life insurance lines of business.

Fees for the U.S. Asset Accumulation segment increased $91.4 million, primarily due to higher fee income stemming from an increase in average account values as a result of the improved equity markets during the latter half of 2009. In addition, fees for the U.S. Insurance Solutions segment increased $25.9 million primarily due to growth in the universal life and variable universal life insurance lines of business.

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