Key Highlights for the Third Quarter:
- Record assets under management (AUM) of $392.2 billion are up 22 percent compared to the year ago quarter.
- Strong Retirement and Investor Services sales in the third quarter, with $2.7 billion for Full Service Accumulation, $4.5 billion for Principal Funds and $447 million for Individual Annuities.
- Net cash flows of $1.6 billion for Full Service Accumulation and a record $2.5 billion for Principal Funds.
- Record unaffiliated AUM of $97.8 billion for Principal Global Investors, including unaffiliated net cash flows of $2.2 billion.
- Reported record net cash flows of $2.7 billion and record AUM of $66.2 billion for Principal International (excluding $9.7 billion of AUM in our asset management joint venture in China, which are not included in reported assets under management).
- Individual Life sales of $48 million, up 17 percent over third quarter 2011.
- Specialty Benefits premium and fee growth of 5 percent over third quarter 2011.
- Strong capital position with an estimated risk based capital ratio of 440 percent at quarter-end and $2.2 billion of excess capital. 2
- Quarterly dividend of $0.21 per common share in the third quarter 2012 represents a 17 percent increase over the second quarter 2012 dividend.
- Repurchase of 2.7 million shares of common stock in the third quarter at an average price of $25.72, bringing the year-to-date total number of shares repurchased to 9.9 million.
- Book value per share, excluding AOCI 3 was $28.63, up 4 percent over third quarter 2011 and 2 percent sequentially.
Net IncomeNet income available to common stockholders of $179.7 million for third quarter 2012 reflects net realized capital gains of $88.8 million, which includes:
- A net gain of $141.2 million as a result of Catalyst Health Solutions, Inc.’s merger into a subsidiary of SXC Health Solutions Corp. (SXC), and our subsequent sale of our interest in SXC (now known as Catamaran Corporation);
- $30.7 million net loss from the change in our GMWB embedded derivative primarily from the impact on fair value due to the reduction of our own credit spread during the quarter;
- $22.3 million of net losses related to sales and permanent impairments of fixed maturity securities, including:
- $17.9 million of losses on commercial mortgage backed securities, which is down 24 percent from $23.5 million loss in third quarter 2011.
Retirement and Investor ServicesSegment operating earnings for third quarter 2012 were $137.5 million, compared to $129.6 million for the same period in 2011. Full Service Accumulation earnings were $71.7 million compared to $69.7 million in the year ago quarter, with growth in net revenues partially offset by a $3.4 million charge from the actuarial assumption review of deposits. Principal Funds earnings were $13.4 million compared to $12.5 million in third quarter 2011, also reflecting strong revenue growth. Individual Annuities earnings were $22.7 million compared to $17.5 million for third quarter 2011. Third quarter 2012 results reflect an $11.0 million charge from the actuarial assumption review of long-term interest rate assumptions. The year ago quarter results were negatively impacted by a $9.0 million DPAC amortization expense true up due to negative equity market returns. Bank and Trust Services operating earnings were $8.8 million, compared to $9.2 million for third quarter 2011. The guaranteed businesses, which consist of Investment Only and Full Service Payout, earned $20.9 million in the third quarter 2012 compared to $20.7 million in third quarter 2011.Operating revenues for the third quarter 2012 were $1,570.7 million compared to $996.0 million for the same period in 2011 driven by higher sales in the Full Service Payout business.