Principal Financial Group Inc. Stock Underperforms Monday

Principal Financial Group Inc. (PFG) shares underperformed on Monday, February 4, 2025, compared to its competitors, as the stock gained only 0.8% in the past year, lagging behind the industry's growth of 11% and the S&P 500 composite's rise of 14.4%. This underperformance can be attributed to several factors that have impacted the company's financial performance and competitive position.

One of the primary factors contributing to PFG's underperformance is the increase in expenses since 2013. The company has experienced a rise in benefits, claims, and settlement expenses, as well as operating expenses, which have weighed on its margins. In the second quarter of 2024, PFG's net margin contracted by 280 basis points to 8.1%. This trend has negatively impacted the company's profitability and may have contributed to its underperformance on Monday.



Another factor contributing to PFG's underperformance is the missed earnings estimates in the last two reported quarters of 2024. The company's earnings per share (EPS) failed to meet the consensus estimate, indicating that its financial performance has not met the expectations of analysts and investors. This may have led to a decline in investor confidence and contributed to the stock's underperformance on Monday.

PFG's stock price performance has also been a factor in its underperformance. The stock closed at $79.30 on Tuesday, February 4, 2025, which is almost 10.1% below its 52-week high of $88.26. This decline in stock price may have contributed to the company's underperformance compared to its competitors.



To improve its performance and regain market share, Principal Financial Group can take several steps. First, the company should focus on controlling its expenses and improving its margins by implementing a more disciplined approach to expense management. This can be achieved by negotiating better terms with vendors and service providers, streamlining internal processes, and implementing cost-saving technologies and automation.

Second, PFG should focus on improving its revenue growth across its segments to offset the increasing expenses. This can be achieved by increasing premiums and other considerations, fees, and other revenues, improving net investment income, boosting single-premium annuity sales in the Principal International segment, and enhancing sales and retention in the Specialty Benefits Insurance business.

Third, PFG can leverage its extensive distribution footprint and strategic buyouts to enhance assets under management growth. By acquiring or partnering with complementary businesses, PFG can expand its product offerings and customer base, maintain operational discipline, and ensure efficient use of resources.

Fourth, PFG should focus on managing claims more effectively and maintaining strong customer retention to improve its margins. This can be achieved by implementing better risk management strategies, offering competitive pricing, and providing superior customer service.

Finally, PFG can drive positive net cash flow through strong institutional flows across equities, real estate, and specialty fixed income. By diversifying its distribution channels and maintaining a strong capital position, PFG can support growth and investment opportunities.

In conclusion, Principal Financial Group Inc. has underperformed its competitors on Monday due to increasing expenses, missed earnings estimates, and a decline in stock price. To improve its performance and regain market share, PFG should focus on controlling expenses, improving revenue growth, leveraging its distribution footprint, managing claims effectively, and driving positive net cash flow. By addressing these challenges, PFG can better compete within the industry and improve its financial performance.