Dan Houston (Credit: Principal Financial)
Principal Financial Group Inc. is now assuming that interest rates will be lower than it had hoped, and take longer than it had hoped to climb back to a reasonable level.
Executives at the Des Moines, Iowa-based life insurer talked about the company's response to the recent interest rate rollercoaster Friday, during a conference call the company held to go over earnings with securities analysts.
Principal is reporting $277 million in net income for the third quarter on $4.5 billion in revenue, compared with $456 million in net income on $4.3 billion in revenue for the third quarter of 2018.
Here's how two major Principal units did in the latest quarter, when compared with results for the year-earlier quarter:
- The U.S. Retirement and Income Solutions unit is reporting $170 million in pretax operating earnings on $2.6 billion in revenue, compared with $184 million in pretax operating earnings on $2.4 billion in revenue.
- The U.S. Insurance Solutions unit is reporting $120 million in pretax operating earnings on $1.2 billion in revenue, compared with $126 million in pretax operating earnings on $1 billion in revenue.
Dan Houston, Principal's chief executive officer, acknowledged during the conference call that, even after adjustments, operating earnings were down about 10%.
"The decline reflects macroeconomic headwinds," Houston said.
Earnings were down partly because the third quarter of 2018 was a strong quarter, and partly because of increased investments in the business, Houston said.
But company executives said an adjustment to interest assumptions also affected earnings.
