Principal CEO Says Company Ready for Fiduciary Rule as 4Q Net Rises 25%
February 1, 2017 by Marie Suszynski,
DES MOINES, Iowa – Principal Financial Group posted a 25% jump in fourth-quarter 2016 earnings as its chief executive officer said the company balanced investments and growth with expense discipline.
Net income available to common shareholders during the fourth quarter jumped 25% to $318 million. For the full year, net income climbed 9% to $1.32 billion.
CEO Daniel J. Houston said the results were “compelling given a challenging start to the year.” Strong headwinds include equity markets in foreign currency, low interest rates and volatility and uncertainty around the United Kingdom’s vote to exit from the European Union, regulatory changes and the U.S. presidential election, he said.
Assets under management came in at $591.6 billion, up 12% on a trailing 12-month basis. Sales and client retention helped the company generate more than $19.4 billion in net cash flows during 2016.
“We go forward from a position of strength and excellent fundamentals and the benefit of broad diversification,” Houston said.
Although there’s speculation there will be potential delays to the U.S. Department of Labor’s fiduciary rule update under the new administration, Principal Financial is prepared for an April applicability date, he said.
The newly elected president of the National Association of Insurance Commissioners, Ted Nickel, said this month that regulatory rollbacks under President Donald Trump’s administration could include the fiduciary rule (Best’s News Service, Jan. 18. 2017).
The DOL rule would change the way insurance agents are regulated. Houston has said the DOL rule update was expected to cost Principal an additional $1 million a month over 18 to 24 months (Best’s News Service, Aug. 1, 2016). Once it’s fully implemented, the annual operational cost associated with it is expected to be in the $5 million to $10 million range, he said at the time.
The conference call was the last earnings call for Terry Lillis, Principal’s chief financial officer. Lillis announced last year he would be retire by the end of the first quarter in 2017 (Best’s News Service, Feb. 24, 2016).
The company named longtime employee Deanna Strable-Soethout to succeed him.
“This management team executes, and with Deanna transitioning into the CFO role in the coming weeks, I’m very excited about the possibility the company has heading into 2017,” Lillis said during the call. “I believe Principal is well-positioned for continued profitable growth well beyond 2017.”
Houston thanked Lillis for the “strong contributions” he made to the company and his role in guiding the company through difficult times.
Principal Life Insurance Co. and Principal National Life Insurance Co. have current Best’s Financial Strength Ratings of A+ (Superior).
On the afternoon of Jan. 31, shares of Principal Financial (NYSE: PFG) were $57.09, down 1.13% from the previous close.
(By Marie Suszynski, BestWeek Correspondent: Marie.Suszynski@ambest.com)