Revenues and earnings are on the rise in a publicly traded insurer's multinational asset management business, despite continuing outflows.

Kamal Bhatia Principal Asset Management President and CEO

Principal Global Investors (PGI, dba Principal Asset Management [profile]) brought in $126.9 million in pre-tax operating earnings in the second quarter of 2024, according to the Q2 2024 earnings report that the team at Principal AM's parent, Principal Financial Group, released last week. That's up 1.5 percent year-over-year. (By comparison, all of Principal Financial Group brought in $353.1 million in net income last quarter.)

PGI brought in $379.2 million in Q2 2024 operating revenues less pass-through expenses, up 5.5 percent Y/Y. The asset manager's operating margin dipped slightly Y/Y, from 34.9 percent in Q2 2023 to 34.5 percent in Q2 2024.

On June 30, 2024, PGI had $513.2 billion in AUM. That's up 5.6 percent Y/Y but down 0.1 percent quarter-over-quarter.

The fund firm suffered $2.3 billion in net Q2 2024 outflows, up 21.1 percent Q/Q but down by 56.5 percent Y/Y. For the trailing 12 months ending June 30, 2024, PGI suffered $11.6 billion in net outflows, up more than three-fold from the prior 12 months.

Kamal Bhatia, president of Principal AM, and Dan Houston, president and CEO of Principal Financial Group, discussed the outflows last Friday (July 26) on Principal's Q2 2024 earnings call. Houston, who is also the insurer's chairman, noted that the PGI team sees "continued strong retail for [their] suite of mutual funds and ETF offerings."

"The net outflows was driven by a large lower-fee fixed-income redemption from a corporate client, as well as stable value products outflows," Houston told analysts on the call. "We expect the second half of the year to improve, as investors are increasingly looking to move out of cash and into risk-based assets across both public and private markets."

Later on the call, Jimmy Bhullar, equity research analyst at J.P. Morgan, asked further about PGI's flows. Bhatia elaborated.

"We had almost a $900 million outflow in a single mandate, a long-duration, fixed-income mandate ... These were always low fee," Bhatia told Bhullar on the call. "I think our durable sources of net cash flow remain quite strong, in particular, almost $500 million of real estate flows, which are very high revenue and high margin for us."

Bhatia also highlighted that PGI brought in $150 million in net inflows into private credit, which is "both high revenue and high margin as well."

"We do feel good about the mix of our business with respect to the assets we are bringing in or in asset classes that have a durable trend and higher revenue," Bhatia said. "And ... the mandates we did lose were in lower revenue mandates." 

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