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Principal’s Q3 results show drop in net income

27th October 2020 - Author: Katie Baker

Principal Financial Group (PFG) has announced its Q3 results which show that net income has dropped to $236 million, compared to $277.1mn in the same period last year.

PFG’s non-GAAP operating earnings for the third-quarter of 2020 fell to $234.5 million, compared to $345.3 million for the third-quarter of 2019.

PFG notes that in Q3, net income reflected the results of the significant variances, including the annual actuarial assumption review, which actually dented net income by $187.3 million.

This includes a negative impact of $37.7 million from COVID-19 related claims and other impacts, as well as $12.2 million from Institutional Retirement & Trust (IRT) integration costs.

Additionally, PFG took a negative hit of $10.9 million from lower than expected variable investment income, and a negative hit of $8.3 million from its encaje performance and lower than expected inflation, both of which were in Latin America.

Dan Houston, chairman, president and chief executive officer of Principal said: “We came into this financial crisis well capitalised and with a strong, high quality balance sheet and that has not changed.

“We will continue to be prudent with regard to our capital deployment strategy, but at the same time, as we gain greater clarity around the global economic outlook and our own capital position, we will consider all capital deployment options to further increase long-term shareholder value.”

Other Q3 highlights include PFG’s assets under management (AUM), which totalled up to $731.3 billion, including $2.1 billion of net cash flow.

Strong Morningstar investment performance2, with 73% of Principal investment options above median on a one-year basis, 77% on a three-year basis, and 76% on a five-year basis. Additionally, 74% of fund level AUM had a 4- or 5-star rating.

RIS-Spread account values of $53.8 billion increased 8% over the prior year quarter. Third quarter sales were $1.6 billion, including $0.7 billion of opportunistic guaranteed investment contract (GIC) and medium-term note (MTN) issuances and $0.5 billion of pension risk transfer sales.

Principal Global Investors (PGI) had record PGI managed AUM of $468.4 billion and record PGI sourced AUM of $226.3 billion.

Principal International (PI) generated net cash flow of $1.8 billion, marking its 48th consecutive quarter of positive net cash flow.

Houston added: “I’m confident we have the right team, strategy, and financial foundation in place to continue to navigate the challenges and opportunities ahead – meeting the needs of our 32 million customers around the world.

“I continue to be extremely proud of our leadership, our employees and the overall resiliency of our diversified business strategy during these challenging times.

“We’ve started to transition the Institutional Retirement and Trust (IRT) business over to our platform and the strategic and cultural benefits are confirmed.

“The revenue and expense synergies will begin to emerge in the second half of 2021. Our position as a leading pension provider gives us new opportunities to expand our reach and accessibly more than ever before.”

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