Principal Financial Counters 1Q Losses With Strong Investment Gains

By John Hilton

COVID-19 claims continued to bite into earnings at Principal Financial, but the Des Moines, Iowa-based insurer rebounded with growth in other sectors.

The company hosted analysts today for a first-quarter earnings call review of the numbers. Principal reported higher revenues across most of its business lines, lower expenses and higher assets under management (AUM).

Operating revenues declined nearly 30% year over year to $3.1 billion due to lower premiums and other considerations. Total expenses decreased 38.6% year over year to $2.6 billion due to lower benefits, claims and settlement expenses, dividends to policyholders as well as operating expenses.

Principal reported a record AUM of $820.3 billion, up 29.9% year over year.

“Our global, diversified, and integrated approach to financial security continues to differentiate Principal in the marketplace," CEO Dan Houston said. "Strong execution coupled with improving macroeconomic conditions drove growth in first quarter financial results. We’re optimistic about the opportunities that lie ahead as momentum has returned in many of our businesses."

COVID Loss Data

Principal took some heavy losses in the quarter, said Deanna Strable, executive vice president and chief financial officer. These included a $21 million impact from COVID-related claims and a $90 million impact from the integration of Wells Fargo’s Institutional Retirement & Trust business, which Principal acquired in July 2019.

"For the full year, we're now estimating a total of 275,000 U.S. Covid deaths, or about 75,000 in the remainder of the year," Strable said. "This is slightly lower than what was anticipated in our outlook due to the vaccine rollout."

At Principal's U.S. insurance solutions business, benefits, claims and settlement expenses increased by $102 million, to $771 million. Premiums increased $19 million to $702 million.

Principal sells annuities as part of its Retirement and Income Solutions unit, but executives did not mention annuities during the call. Pre-tax operating earnings in the RIS segment increased to $288 million on $1.2 billion in operating revenue, up from $205 million on $2.6 billion operating revenue in Q1 2020.

The insurer's U.S. Insurance Solutions unit includes life insurance. Revenues there grew 4.6% year over year to $1.2 billion driven by higher premiums and other considerations, net investment income, fees and other revenues.

Operating earnings of $95.2 million decreased 26.5% year over year, mainly due to poor performance at Specialty Benefits Insurance business.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.