01—Abstract
Summary
Summary of the 10-K filed February 16, 2011. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $318.8 billiona in assets under management and approximately 19.1 million customers worldwide as of December 31, 2010.
The company operates four reportable segments: Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions, plus a Corporate segment. It focuses on small and medium-sized businesses and states it is the leading provider of corporate defined contribution plans in the U.S. In 2010 it decided to exit the group medical insurance business, which led to a $43.6 millionb goodwill impairment in the Corporate segment. Net income attributable to Principal Financial Group, Inc. was $699.3 million in 2010, versus $622.7 million in 2009, and net income available to common stockholders was $666.3 million, or $2.06 diluted earnings per share.
Total revenues were $9,158.6 millionc and total assets were $145,631.1 million at year-end. Total stockholders' equity rose to $9,885.0 million from $8,016.4 million, and the company declared an annual dividend of $0.55 per share. Management attributed earnings growth primarily to higher fees from rising equity markets, which increased average account values and AUM.
Investors should note the continued sensitivity of the business to credit and interest rate conditions. The filing reports $633.7 milliond of problem, potential problem and restructured fixed maturities, 1.37% of total fixed maturities, and $360.9 million of problem, potential problem and restructured commercial mortgages.
Principal Life's financial strength ratings were A+ (A.M. Best), AA- (Fitch), Aa3 (Moody's) and A (S&P), and the company disclosed a $821.6 million excess capital position at the holding company level.
02—Key points
Key Highlights
- AUM of $318.8 billion and approximately 19.1 million customers worldwide as of December 31, 2010.
- Net income attributable to PFG rose to $699.3 million in 2010 from $622.7 million in 2009; diluted EPS was $2.06 versus $1.97.
- Total revenues increased to $9,158.6 million from $8,849.1 million, while total stockholders' equity rose to $9,885.0 million.
- The company announced on September 30, 2010 its decision to exit the group medical insurance business and recorded a $43.6 million pre-tax goodwill impairment in the Corporate segment.
- Principal Global Investors AUM reached $220.1 billion, up from $205.3 billion at year-end 2009, with net cash flow of $(7.0) billion in 2010.
- Problem, potential problem and restructured fixed maturities totaled $633.7 million, or 1.37% of total fixed maturities, compared with $553.2 million in 2009.
- Principal Life's insurer financial strength ratings include A+ from A.M. Best, AA- from Fitch, Aa3 from Moody's and A from Standard & Poor's, with S&P's outlook revised to positive.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 16, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $9.20B$8.85B | +3.9% |
| Net Income | $662.90M$622.70M | +6.5% |
| EPS (Basic) | $1.97$1.98 | −0.5% |
| EPS (Diluted) | $1.95$1.97 | −1.0% |
| Shares Outstanding (Basic) | 320.30M297.30M | +7.7% |
| Shares Outstanding (Diluted) | 323.00M298.90M | +8.1% |
05—Questions
Frequently Asked Questions
What drove the increase in PFG's 2010 earnings?
Management attributed higher net income available to common stockholders primarily to higher fees in the Retirement and Investor Services segment, which stemmed from increased average account values as equity markets improved since the latter half of 2009. Principal Global Investors and Principal International also reported higher profitability from higher average AUM and the strengthening of Latin American currencies against the U.S. dollar.
What is the impact of exiting the group medical insurance business?
The company decided on September 30, 2010 to exit the business and renewed coverage for customers through an agreement with United Healthcare Services, Inc. The exit led to a $43.6 million pre-tax goodwill impairment and severance accruals in the Corporate segment. The business does not yet qualify for discontinued operations treatment, so its results remain in continuing operations, and operating revenues associated with it were $1,403.9 million in 2010.
How much capital and liquidity does the holding company have?
As of December 31, 2010, the company reported $821.6 million of excess capital, consisting of cash and highly liquid assets in the holding companies available for debt maturities, interest and preferred dividend expenses and other holding company obligations. Total debt to equity excluding accumulated other comprehensive income was 18% at year-end 2010, compared with 19% in 2009.
What credit risks does the investment portfolio carry?
As of December 31, 2010, U.S. investment operations held $46.3 billion of fixed maturities, of which approximately 8.3% were below investment grade. Commercial mortgage loans totaled $9.6 billion, and 85% of commercial mortgage loans before valuation allowance had amortizing balloon payment maturities. Commercial mortgage lending in California accounted for 22%, or $2.1 billion, of the commercial mortgage loan portfolio.
What dividend did PFG pay and what restrictions apply to Principal Life's dividends?
The company declared an annual cash dividend of $0.55 per common share in November 2010, paid on December 3, 2010, compared with $0.50 per share in 2009. Under Iowa law, Principal Life could distribute approximately $509.7 million in 2011 based on 2010 statutory results without exceeding statutory limitations, which are the greater of 10% of policyholder surplus or the prior year's statutory net gain from operations.
06—Continue