Based on the improved investment position, Fitch Ratings upgraded the rating outlook to stable from negative on Principal Financial Group Inc. (PFG) and its subsidiaries. The rating agency also affirmed the ‘AA-‘ financial strength ratings on the company’s primary life insurance company subsidiaries and the ‘A-‘ rating on its holding company senior debt rating.

The rating agency noted that Principal Financial has improved its gross unrealized investment loss over the past few quarters. Also, it is continuously delivering solid operating earnings.

Principal Financial reported first quarter operating earnings of 71 cents per share, modestly surpassing the Zacks Consensus Estimate by a penny. Results were ahead of 69 cents per share earned in the prior-year quarter. Principal Financial delivered a strong quarter on the heels of double-digit earnings growth from Principal Global Investors, Principal Funds, Individual Annuities and U.S. Insurance Solutions.

Over the last 7 days, none of the analysts covering the stock revised their estimates for the first quarter of 2011. However, over the past one month, 2 out of 18 analysts covering the stock raised their estimates while another 2 lowered the same. For 2011, 3 out of 19 analysts raised their estimates while 2 analysts tweaked the estimates downward. For 2012, 1 out of 18 analysts raised the estimate while 2 analysts lowered the same.

Principal’s strong franchise within the pension sector, aided by its diversification in both products and geography, positions it to benefit from the gradual recovery of the credit market. Decent capital levels and cost containment measures also augur well.

We maintain our Neutral rating on Principal Financial. The quantitative Zacks #3 Rank (short term Hold rating) on the stock indicates no clear directional pressure on the shares over the near term.

Based in Des Moines, Iowa, Principal Financial Group Inc. provides an expansive range of retirement savings, investment and insurance products and services through its various subsidiaries. It competes with Lincoln National Corporation (LNC).

 
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PRINCIPAL FINL (PFG): Free Stock Analysis Report
 
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