01—Abstract
Summary
Summary of the 10-K filed February 11, 2015. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $519.3 billiona in assets under management and approximately 19.7 million customers worldwide as of December 31, 2014.
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 attributable to Principal Financial Group, Inc. was $1,144.1 millionb in 2014, up from $912.7 million in 2013, and net income available to common stockholders was $1,111.1 million, or $3.65 diluted earnings per share, compared with $2.95 in 2013. Total revenues rose to $10,477.6 million from $9,289.5 million, and total assets reached $219,087.0 million.
The filing attributes the earnings growth primarily to double-digit earnings growth in all segments, lower net realized capital losses, and gains on fixed maturities, partly offset by an increase in net deferred tax liabilities from Chilean tax legislation enacted in the third quarter of 2014 and a court ruling on uncertain tax positions in the second quarter. Retirement and Investor Services operating earnings rose to $828.1 millionc from $694.4 million, driven by higher fees on growing account values. Stockholders' equity was $10,232.0 million at year-end, and the company returned $599.3 million to common stockholders through dividends of $376.6 million and share repurchases of $222.7 million.
Dividends declared per common share rose to $1.28d from $0.98. The filing also flags material risks, including adverse capital and credit market conditions, a sustained low interest rate environment that compresses spreads, exposure to equity market declines that affect asset-based fees, and pending regulatory changes such as the NAIC's Actuarial Guideline 48 and principles-based reserving.
Principal Life's financial strength ratings were affirmed in 2014 (A.M. Best A+, Fitch AA-, S&P A+, Moody's A1), and the company announced an acquisition of AXA's Hong Kong MPF and ORSO pension business for approximately $335.0 million, expected to close in the third quarter of 2015.
02—Key points
Key Highlights
- Assets under management reached $519.3 billion at December 31, 2014, up from $483.2 billion in 2013, with approximately 19.7 million customers worldwide.
- Net income attributable to Principal Financial Group, Inc. rose to $1,144.1 million in 2014 from $912.7 million in 2013; diluted earnings per share were $3.65 versus $2.95.
- Total revenues increased to $10,477.6 million from $9,289.5 million, led by fee revenues of $3,482.1 million and premiums of $3,722.9 million.
- Retirement and Investor Services operating earnings grew to $828.1 million from $694.4 million, driven by higher fees from increased average account values.
- Dividends declared per common share increased to $1.28 from $0.98, and total cash returned to common stockholders was $599.3 million.
- Total stockholders' equity was $10,232.0 million at year-end 2014, and total debt was $2,559.2 million against equity excluding AOCI of $10,133.6 million.
- Principal Life's insurer financial strength ratings were affirmed in 2014, with A.M. Best at A+ and S&P at A+ (both stable), and Fitch at AA- and Moody's at A1.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2014filed February 11, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $10.48B$9.29B | +12.8% |
| Net Income | $1.14B$912.70M | +25.4% |
| EPS (Basic) | $3.70$2.99 | +23.7% |
| EPS (Diluted) | $3.65$2.95 | +23.7% |
| Shares Outstanding (Basic) | 294.70M294.60M | 0.0% |
| Shares Outstanding (Diluted) | 298.70M298.20M | +0.2% |
05—Questions
Frequently Asked Questions
What drove the increase in net income in 2014?
The filing states that net income available to common stockholders increased primarily due to double-digit earnings growth in all segments, lower net realized capital losses associated with derivatives not designated as hedging instruments, and gains on fixed maturities. These gains were partially offset by an increase in net deferred tax liabilities from Chilean tax legislation enacted in the third quarter of 2014 and an impact from a court ruling on uncertain tax positions in the second quarter.
What are the main risks highlighted for investors?
The filing highlights adverse capital and credit market conditions, a sustained low interest rate environment that may compress spreads and increase reserves, and declines in equity, bond, or real estate markets that could reduce AUM and fee revenues. It also cites risks from a possible downgrade in financial strength ratings, potential losses from commercial mortgage loans with balloon maturities, and regulatory changes such as principles-based reserving and AG 48, which limits affiliated reinsurance financing starting January 1, 2015.
How much capital did the company return to shareholders in 2014?
Total cash returned to stockholders was $599.3 million in 2014, consisting of $376.6 million in common stock dividends and $222.7 million in share repurchases, with 4.7 million shares repurchased. The Board authorized a new repurchase program of up to $200.0 million in February 2014.
What notable acquisitions or transactions were announced?
On November 7, 2014, the company announced it would acquire AXA's Hong Kong MPF and ORSO pension business for approximately $335.0 million, with a 15-year distribution agreement, expected to close in the third quarter of 2015 subject to regulatory approvals. In September 2014, the company acquired an additional 24.65% interest in Columbus Circle Investors, bringing its ownership to 95 percent.
How did the Retirement and Investor Services segment perform?
The segment's operating earnings increased to $828.1 million in 2014 from $694.4 million in 2013, and its total operating revenues rose to $5,523.3 million from $4,847.6 million. The filing attributes the growth primarily to higher fees from increased average account values, which resulted from positive equity market performance and business growth.
06—Continue