Principal Financial slumps with insurance sector

Principal Financial drops with broader insurance sector as concerns spread on economic woes

Associated Press
October 9, 2008 3:54 pm ET

NEW YORK (AP) -- Shares of Principal Financial Group Inc. hit an all-time low Thursday, joining other insurance stocks in a downward slide as investors worried about the impact of broader economic problems on the sector.

The concerns reflect another move to help American International Group Inc., which received a loan of nearly $38 billion from the Federal Reserve Bank of New York late Wednesday, and troubles for Hartford Financial Services Group Inc. and MetLife Inc., both of which have said the market's recent downturn has hurt their investments.

Goldman Sachs Group analysts Thomas V. Cholnoky and Christopher M. Neczypor, in a note to investors Thursday, said the insurance sector has traditionally been considered a safe haven in difficult markets, but this slump is different. The stalled credit markets, deteriorating mortgages and other issues pulling down the markets appear to be hurting insurers too, they said, naming Principal Financial as one of the companies that has been hard hit.

The analysts cut their third-quarter profit forecast for the Des Moines-based retirement, insurance and financial company to 87 cents per share from 98 cents per share. That's well below the average 95 cents per share projected by analysts polled by Thomson Financial.

The cut reflected lower fee and investment income, Cholnoky and Neczypor said. They also cut their full-year 2008 estimate to $3.60 per share from $3.80, compared with the consensus estimate of $3.79, and shaved their forecasts for 2009 and 2010.

Shares of Principal Financial fell $6.44, or 29.6 percent, to $15.30 in late afternoon trading, their lowest point since the stock debuted on the New York Stock Exchange seven years ago.

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