Monday, February 4, 2008
Insurance services provider Principal Financial Group Inc. (PFG) Monday reported a sharp decline in fourth quarter earnings, hurt by substantial capital losses amounting to nearly $211 million. However, revenues for the quarter increased from last year on continuing strength of the company's major business segments. Principal Financial reaffirmed its earnings forecast growth for fiscal 2008. Additionally, the company repurchased 1.1 million shares of its common stock for $70 million, during the quarter.
Net income available to common shareholders for fourth quarter fell to $34.1 million or $0.13 per share from $284.1 million or $1.04 per share in the fourth quarter of the previous year. Quarterly operating income, excluding capital losses and other adjustments, decreased to $225.8 million or $0.86 per share from $252.0 million or $0.93 per share in the fourth quarter of fiscal 2006. Thirteen Wall Street analysts polled by First Call/Thomson had a consensus earnings estimate of $1.01 per share.
The company said its income from continuing operations for the recent quarter plunged to $21.8 million from $262.4 million in the year ago quarter.
The Des Moines, Iowa-based company recorded total GAAP revenues of $2.564 billon for the fiscal quarter, higher than $2.560 billion in the prior year quarter. Non-GAAP operating revenues for the quarter were $2.902 billion, compared to $2.537 billion in the year ago quarter. The Street expected fourth quarter revenues of $2.89 billion.
Net investment income for the quarter advanced to $1.038 billion from $924.1 million in the same quarter last year.
Operating revenues from the U.S Asset Accumulation segment for the fourth quarter increased to $1.300 billion from $1.085 billon in the last year quarter. Global Asset Management revenues for the quarter advanced to $174.1 million from $149.5 million in the comparable quarter last year. The company posted International Asset Management and Accumulation revenues of $255.4 million for the quarter, compared to $128.6 million in the comparable quarter of the prior year. Operating revenue from the Life and Health Insurance segment improved to $1.222 billion from $1.210 billion in the fourth quarter of 2006.
Results for the quarter included net realized/unrealized capital losses of $211.5 million, including $134.8 million of losses related to impairments of fixed maturity securities, $33.5 million of impairments on equity securities, unrealized capital losses of $26.3 million and $21.3 million of realized capital losses related to derivative positions.
Barry Griswell, Chairman of Principal Financial commented, “In 2007, our three key growth engines - U.S. Asset Accumulation, Principal Global Investors and Principal International - continued to demonstrate strong fundamentals. Total company assets under management (AUM) increased $54 billion, or 21 percent, including nearly $20 billion of net cash flows, and each of our three asset management and accumulation segments delivered record earnings, improving $111 million or 15 percent for the year on a combined basis.”
On January 23, 2008, analysts at Credit Suisse downgraded Principal Financial shares to “Underperform” from “Neutral” and lowered its price target to $57 from $69. The brokerage reduced its 2008 EPS estimate for the company to $4.25 from $4.45.
During fourth quarter, Principal Financial repurchased 1.1 million shares of its common stock for $70 million, completing the previously announced share repurchase authorization of up to $250 million.
For third quarter, the company reported net income of $240.5 million, compared to $259.2 million for the year-ago quarter. Net income available to common shareholders for the third quarter was $232.3 million or $0.87 per share, compared to $251.0 million or $0.92 per share in the prior year quarter.
Excluding special items, operating earnings for third quarter were $312.9 million or $1.17 per share, compared to $254.7 million or $0.94 per share in the third quarter of last year.
Total operating revenues for third quarter increased 20% to $2.94 billion from $2.46 billion in the same quarter last year.
For fiscal 2007, the company reported net income available to common shareholders of $827.3 million or $3.09 per share, compared to $1.031 billion or $3.74 per share in the previous year. Operating income for the year rose to $1.058 billion or $3.95 per share from $972.1 million or $3.74 per share a year earlier. Analysts expected the company to earn $4.10 per share for the year.
GAAP revenues for the year grew to $10.907 billion from $9.87 billion in fiscal 2006. On a non-GAAP basis, the company posted annual operating revenues of $11.250 billion, compared to $9.826 billion in 2006. Wall Street analysts were looking for annual revenues of $11.23 billion.
Looking ahead, Principal Financial reaffirmed its projection for fiscal 2008 earnings growth between 11% and 13%, while annual operating ROE is still estimated to grow by nearly 50 basis points.
Amongst others in the market, investment services provider Nationwide Financial Services Inc. (NFS) is scheduled to release its fourth quarter financial results on Thursday. Analysts expect NFS to post earnings of $1.12 per share for fourth quarter. Insurance services provider Manulife Financial Corp. (MFC) will be announcing its fourth quarter results on February 14, 2008, with analysts expecting earnings of $0.73 per share.
Posted by Directory Insurance at 4:26 PM