01—Abstract
Summary
Summary of the 10-K filed February 15, 2012. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $335.0 billiona in assets under management and approximately 18.0 million customers worldwide as of December 31, 2011.
The company focuses on small and medium-sized businesses and operates four reportable segments: Retirement and Investor Services, Principal Global Investors, Principal International, and U.S. Insurance Solutions, plus a Corporate segment. Net income available to common stockholders was $682.0 millionb in 2011, up from $666.3 million in 2010, and diluted earnings per share were $2.15 versus $2.06. Total revenues were $8,709.6 million, down from $9,158.6 million, largely because group medical premiums fell as the company exited that business.
Total stockholders' equity rose to $10,013.0 millionc at year-end 2011, and total assets were $148,298.0 million. Net cash provided by operating activities was $2,713.3 million. The company returned $770.1 million to stockholders in 2011, including $556.4 million of share repurchases and $213.7 million of common dividends ($0.70 per share).
Retirement and Investor Services account values reached $183.3 billiond, and Principal Global Investors AUM reached $227.8 billion. Investors should note several risk items disclosed in the filing: $1,523.9 million of gross unrealized losses on U.S. available-for-sale fixed maturities, $524.4 million of problem, potential problem and restructured fixed maturities (1.12% of total fixed maturities), and $2.8 billion of variable annuity account value carrying GMWB riders. The company also expects its adoption of new deferred acquisition cost guidance on January 1, 2012 to reduce retained earnings by approximately $640.0 million and to reduce 2012 net income by between $35.0 million and $45.0 million.
02—Key points
Key Highlights
- Assets under management of $335.0 billion and approximately 18.0 million customers worldwide as of December 31, 2011, up from $318.8 billion in 2010.
- Net income available to common stockholders of $682.0 million in 2011 versus $666.3 million in 2010; diluted EPS of $2.15 versus $2.06.
- Total revenues fell to $8,709.6 million from $9,158.6 million, driven by a $770.3 million decline in Corporate segment premiums as the group medical business was exited.
- Stockholders' equity of $10,013.0 million at year-end 2011; the company returned $770.1 million to stockholders through $556.4 million of repurchases and $213.7 million of dividends.
- Credit exposure includes $1,523.9 million of gross unrealized losses on U.S. available-for-sale fixed maturities and $524.4 million of problem, potential problem and restructured fixed maturities (1.12% of total).
- Adoption of new DAC guidance effective January 1, 2012 is expected to reduce retained earnings by about $640.0 million and reduce 2012 net income by $35.0 million to $45.0 million.
- Principal Life's statutory capital and surplus was $4,218.2 million at year-end 2011, and its statutory net income was $326.8 million.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 15, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $8.67B$9.20B | −5.7% |
| Net Income | $638.30M$662.90M | −3.7% |
| EPS (Basic) | $1.92$1.97 | −2.5% |
| EPS (Diluted) | $1.91$1.95 | −2.1% |
| Shares Outstanding (Basic) | 314.50M320.30M | −1.8% |
| Shares Outstanding (Diluted) | 317.60M323.00M | −1.7% |
05—Questions
Frequently Asked Questions
How did PFG's profitability change in 2011?
Net income available to common stockholders rose to $682.0 million from $666.3 million, and diluted EPS rose to $2.15 from $2.06. The filing attributes the increase mainly to a realized capital gain on the partial sale of Catalyst Health Solutions, lower net impairment losses on fixed maturities, and higher earnings in U.S. Insurance Solutions, Principal International and Principal Global Investors, partly offset by a court ruling on uncertain tax positions.
Why did total revenues decline in 2011?
Total revenues decreased to $8,709.6 million from $9,158.6 million. The filing explains that premiums fell $770.3 million in the Corporate segment due to lower average covered medical members in the exited group medical insurance business, partly offset by higher fee revenues in U.S. Insurance Solutions, Retirement and Investor Services, and Principal Global Investors.
What capital did PFG return to shareholders in 2011?
The company returned $770.1 million in total, consisting of $213.7 million in common dividends ($0.70 per share) and $556.4 million in share repurchases, which covered 21.1 million shares. The Board authorized and completed several repurchase programs during 2011.
What credit and investment risks does the filing highlight?
The filing discloses $46.7 billion of U.S. fixed maturities, of which about 7.3% were below investment grade, and $1,523.9 million of gross unrealized losses on available-for-sale fixed maturities. It also reports $9.4 billion of commercial mortgage loans, with 22% concentrated in California, and $524.4 million of problem, potential problem and restructured fixed maturities.
What accounting change will affect future results?
The FASB guidance on deferred policy acquisition costs, effective January 1, 2012 with retrospective adoption, is expected to reduce the opening retained earnings balance by approximately $640.0 million. PFG estimates that net income available to common stockholders and operating earnings will decrease by between $35.0 million and $45.0 million for 2012.
06—Continue