Principal financial 2Q profit falls on lower fees

Associated Press
August 3, 2009

DES MOINES, Iowa (AP) -- Principal Financial Group Inc. said Monday profit fell on lower fee income, the result of a 16 percent drop in assets under management. Negative market performance increased pension and other post-retirement benefit costs.

The Des Moines-based insurance, retirement and financial services company said net income fell to $150.3 million, or 52 cents per share, from $168.3 million, or 64 cents per share a year ago.

That included losses of $80.6 million from sales and other than temporary impairment of fixed maturity securities, $36.5 million from hedging activities and $16 million on commercial mortgage loans. Those were partially offset by $72.6 million of gains related to deferred policy acquisition costs and $11.8 million of gains on mark to market of fixed maturity securities.

Operating earnings, the measure used by Wall Street analysts, were $200.5 million, or 69 cents per share compared with $254.1 million, or 97 cents per share a year ago.

Analysts surveyed by Thomson Reuters expected 63 cents per share.

Principal shares rose $1.74, or 7 percent, to $25.44. The company reported results after the market closed. In aftermarket trading, shares fell 92 cents.

In the second quarter, the company raised $1.15 billion from equity and $750 million from long-term debt.

The company, a leading provider of 401(k) retirement plans, said fewer plan sponsors changed providers because of economic conditions. In addition, institutional investors continued to delay funding because of market volatility, said Chief Financial Officer Terry Lillis.

He said rising unemployment is reducing the number of participants in existing employee benefit plans and investment income has declined.

"We expect these pressures to ease over the next several quarters, but in the meantime, we continue to focus on managing expenses and reducing risk in the investment portfolio," he said.

Revenue fell to $2.16 billion from $2.66 billion a year ago. Analysts expected $2.47 billion.

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