01—Abstract
Summary
Summary of the 10-K filed February 12, 2021. Cited figures are marked; the original filing is the authoritative source.
Principal Financial Group, Inc. (PFG) reported $806.6 billiona in assets under management (AUM) as of December 31, 2020, up from $735.3 billion at year-end 2019.
Net income attributable to Principal Financial Group, Inc. was $1,395.8 millionb in 2020, compared with $1,394.2 million in 2019, an increase of $1.6 million. Total revenues rose to $14,741.7 million from $16,222.1 million, driven mainly by lower premiums and other considerations, which fell to $6,037.4 million from $7,866.6 million, partly offset by higher net realized capital gains of $302.6 million versus a loss of $52.8 million in 2019. Diluted earnings per share were $5.05, compared with $4.96 in 2019.
The company operates four reportable segments: Retirement and Income Solutions, Principal Global Investors, Principal International and U.S. Insurance Solutions. Retirement and Income Solutions pre-tax operating earnings rose to $966.9 millionc, supported by the Acquired Business (the Institutional Retirement & Trust business of Wells Fargo Bank, N.A., acquired July 1, 2019). Total stockholders' equity increased to $16,617.3 million from $14,685.8 million.
Stockholder dividends declared were $2.24d per common share, and the company returned $921.5 million to stockholders through dividends and share repurchases. The filing notes ongoing uncertainty from the COVID-19 pandemic, a negative outlook from A.M.
Best, Fitch and Moody's on the U.S. life insurance industry for 2021, and a pending agreement announced January 28, 2021, to sell its India investment and retirement operations to Sundaram Mutual. Risk factors highlighted in the filing include sensitivity of fee revenue to equity markets, exposure to low interest rates, the transition away from LIBOR, a commercial mortgage loan portfolio with 22% of its U.S. loans in California, and credit ratings that could affect surrenders and new sales.
02—Key points
Key Highlights
- Assets under management were $806.6 billion as of December 31, 2020, up from $735.3 billion in 2019.
- Net income attributable to Principal Financial Group, Inc. was $1,395.8 million in 2020, essentially flat versus $1,394.2 million in 2019.
- Total revenues were $14,741.7 million, down from $16,222.1 million, mainly because premiums and other considerations fell to $6,037.4 million from $7,866.6 million.
- Net realized capital gains were $302.6 million in 2020, compared with a loss of $52.8 million in 2019.
- Diluted earnings per share were $5.05, up from $4.96 in 2019; dividends declared were $2.24 per share.
- Retirement and Income Solutions pre-tax operating earnings were $966.9 million, versus $874.0 million in 2019, reflecting the Wells Fargo IRT acquisition.
- Total stockholders' equity was $16,617.3 million at year-end 2020, versus $14,685.8 million in 2019.
03—One dollar
04—Financials
Financial Highlights
Figures from 10-KFY2020filed February 12, 2021Financial Statements
FY2020 against FY2019
| Line item | FY2020FY2019 | Change |
|---|---|---|
| Revenue | $14.74B$16.22B | −9.1% |
| Net Income | $1.40B$1.39B | +0.1% |
| EPS (Basic) | $5.08$5.00 | +1.6% |
| EPS (Diluted) | $5.05$4.96 | +1.8% |
| Shares Outstanding (Basic) | 274.70M278.60M | −1.4% |
| Shares Outstanding (Diluted) | 276.60M281.00M | −1.6% |
05—Questions
Frequently Asked Questions
How did Principal's assets under management change in 2020?
Total AUM rose to $806.6 billion as of December 31, 2020, from $735.3 billion as of December 31, 2019. The filing attributes the increase to positive market returns and net cash flow. Principal Global Investors' AUM alone rose to $502.1 billion from $458.6 billion.
Why did total revenues decline while net income held steady?
Total revenues fell to $14,741.7 million from $16,222.1 million, mainly because premiums and other considerations dropped by $1,829.2 million, largely from lower single premium group and individual annuity sales with life contingencies in Retirement and Income Solutions. Net income attributable to Principal was $1,395.8 million, up $1.6 million, helped by a $355.4 million swing in net realized capital gains.
What is the status of the Wells Fargo Institutional Retirement & Trust acquisition?
Principal acquired the IRT business on July 1, 2019, for $1.2 billion in cash plus a possible earn-out of up to $150.0 million, which was estimated at $0.0 million as of December 31, 2020. Migration of customers began in late 2020 and will continue in 2021, with Wells Fargo continuing to service unmigrated customers under a transition services agreement.
How did the company return capital to shareholders in 2020?
Principal paid $614.5 million in common stock dividends and repurchased $307.0 million of common stock, for total cash returned to stockholders of $921.5 million. The company had $650.0 million of dividends paid by Principal Life to its parent in 2020, and a remaining $900.0 million share repurchase authorization, which has no expiration.
What are the main risks flagged in the filing?
The filing highlights sensitivity of fee revenue to equity and bond market levels, low or falling interest rates that can squeeze spreads, the transition away from LIBOR, credit concentration in California commercial mortgages (22% of the U.S. portfolio before valuation allowance), and the potential effect of a rating downgrade on policy surrenders and new sales. It also notes that A.M. Best, Fitch and Moody's maintain negative 2021 outlooks for U.S. life insurers.
06—Continue