Principal Financial Profit Tumbles but Tops Forecasts

Principal Financial Group said on Monday that earnings tumbled nearly 45 percent in the second quarter, hurt by capital losses tied to impaired fixed-income investments.

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Principal, one of the largest sellers of 401(k) retirement plans in the United States, said net income available to common shareholders fell to $168.3 million, or 64 cents a share, from $303.8 million, or $1.12 a share, in the year-earlier quarter.

Operating earnings, excluding investments and other items, dropped to $253.7 million from $282.9 million.

On that basis, Principal earned 97 cents a share, beating analysts' average expectations of 94 cents, according to Reuters Estimates.

Principal , a provider of mutual funds and annuities, recorded capital losses of $85.4 million in the quarter, compared with capital gains of about $21 million in the same period a year ago.

Included in the losses were $23 million from impairments to fixed-income securities, including some Alt-A and subprime-related mortgages. It also recorded losses on equity investments, and interest rate swaps.

Total revenue fell more than 6 percent to $2.65 billion, while total assets under management rose 9 percent to $308 billion at the end of June.

The stock rose 2.2 percent, or 92 cents, to close at $42.90 on the New York Stock Exchange on Monday, and edged up to $43.50 in aftermarket trading.

Principal Financial's shares have fallen about 37 percent since January, underperforming the Dow Jones Life Insurance Index , which has lost about 18.5 percent over the same period.