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Rating:This Insurer Now Offers the 15th Largest Advisor-Sold Mutual Fund Family Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, July 28, 2014

This Insurer Now Offers the 15th Largest Advisor-Sold Mutual Fund Family

Reported by Neil Anderson, Managing Editor

Principal Funds [profile] is on the rise, though it's still a small piece of its parent's pie.

On Thursday Des Moines, Iowa-based Principal Financial Group released its second quarter earnings report [see the earnings release] [see the financial supplement]. Friday, on an earnings call, Principal chairman, president and CEO Larry Zimpleman told analysts that Principal Funds is now the 15th largest advisor-sold mutual fund shop, up from 19th a year ago [see Seeking Alpha's transcript of the earnings call].

"Principal Funds continues to gain market share as a result of strong investment performance in asset classes that are in demand. 60% of Principal Fund assets are in 4 and 5 stars Morningstar rated funds," Zimpleman said, according to the transcript. "The percent of Principal Funds in the top half of Morningstar rankings on a 1, 3 and 5 year basis are 79%, 88% and 89% respectively, which is one of our most competitive performances ever."

Earlier in his remarks, Zimpleman noted that Principal Funds sold $4.7 billion worth of funds last quarter (ended June 30, 2014), netting $1.8 billion in inflows.

"This is Principal Fund's 18th straight quarter of positive net cash flows reflecting strong investment performance and our ability to offer solutions that financial advisors and retail investors seek," Zimpleman said on the call. "Principal Fund's operating earnings were $26 million for the quarter, a 49% increase from the year-ago quarter."

In Principal's Q2 2014 financial supplement, the insurer revealed that Principal Funds brought in $213.1 million in revenue last quarter, up 3.75 percent from Q1 2014, and up 11.9 percent from Q2 2013. The unit's net income rose to $25.5 million for Q2 2014, up 3.24 percent from Q1 2014 and up 49.1 percent from Q2 2013.

Putting those results in perspective, the whole Retirement and Investor Services division -- which includes retirement plan recordkeeping, individual annuities and bank and trust services, as well as Principal Funds -- had Q2 2014 revenues of $1.2651 billion and net income of $194.4 million. And the entirety of Principal Financial Group had Q2 2014 operating revenues of $2.5426 billion and net income of $306.3 million. So Principal Funds accounts for 16.8 percent of revenues and 13.1 percent of net income for the RIS division, and 8.4 percent of revenues and 8.3 percent of net income for all of Principal.

Principal overall had operating earnings of $1.08 per diluted share and operating revenues of $2.5426 billion. MarketWatch reports that analysts polled by Thomson Reuters expected operating earnings of $1.01 per share and revenue of $2.51 billion, so Principal exceeded expectations on both counts.

To dig deeper into Principal Funds', and Principal Financial Group's, results, see the earnings release, the financial supplement, Seeking Alpha's transcript of the earnings call, and the slides that accompanied the earnings presentation. 

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