Earnings at Des Moines-based Principal Financial Group slip with stock market

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Principal Financial Group’s earnings fell last quarter amid investor worries about a looming recession, according to the company’s latest report, released Thursday.

The Des Moines-based financial services giant reported a profit of about $427 million for the quarter that ended Sept. 30, down 7% from the $458 million it earned during the same period last year. Problems in the company’s investment arm led to the decline.

CEO Dan Houston blamed declines in the stock and bond markets as well as swings in currency rates. The S&P 500 Index dropped about 13% during the quarter, cutting into Principal’s ability to earn fees on customers’ profits. Meanwhile, the U.S. dollar has swung up in value relative to other currencies, hurting some foreign exchange businesses.

Still, Principal managed to pleasantly surprise experts Thursday. The company reported earnings of $1.69 per share, beating the consensus expectation of $1.44, according to FactSet.

“While we’re diligently managing expenses with pressured revenues, we’re continuing to invest for the long-term in our growth drivers of retirement, global asset management, and benefits and protection,” Houston said in a statement Thursday.

But the company’s investment group has struggled, reporting $142 million in operating income, before taxes. That’s down 25% compared to last year.

In a presentation released Thursday, executives blamed the fall on fewer fees from managing clients’ money as well as fewer fees from earnings for those customers. Principal reported that it was managing about $449 billion last quarter, down 16% from the $535 billion it managed last year.

The company’s international offices took a hit as well, reporting $66.7 million in operating income, down 18% from last year. Executives blamed the poor performance in part on “foreign currency headwinds.”

Principal’s insurance arm earned $135.7 million, a 10% drop from last year. The company announced last year it would exit the commercial life insurance business.

The company’s specialty benefits division, which sells several types of insurance to small and medium-sized businesses, earned $86.6 million, a 24% improvement. Executives said employees have managed to sell more insurance packages this year.

Principal’s retirement business, meanwhile, improved by 15%, with the company earning $278.6 million.

The company’s stock closed at $81.84 a share Thursday afternoon, when the financial report was released. Principal’s stock is up about 12% on the year. The S&P 500, by contrast, is down about 20%.

Tyler Jett covers jobs and the economy for the Des Moines Register. Reach him at tjett@registermedia.com, 515-284-8215, or on Twitter at @LetsJett.

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