Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Principal Financial Group Are Trading Higher Today

By Bram Berkowitz - Feb 22, 2021 at 3:12PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The insurance and wealth management company came to an agreement with one of its activist investors, and will take steps to increase shareholder value.

What happened

Shares of the investment management and insurance company Principal Financial Group (PFG -1.77%) traded as much as 9% higher this morning after Principal announced it would take steps to enhance shareholder value.

So what

Principal Financial traded higher today on news from Bloomberg that the company had come to an agreement with the activist investor Elliott Investment Management.

Activist investors tend to push companies for strategic change in order to increase profitability, or for a potential sale if that's the best way to maximize shareholder value.

Elliott has reportedly been pushing Principal to consider selling or spinning off its life insurance business in order to focus more closely on its wealth management business, which has been more profitable.

Line with arrow pointing upward on chart.

Image source: Getty Images.

As a result of the agreement, Principal will add two new independent directors to its board including Maliz Beams, who formerly served as the CEO of retirement solutions at Voya Financial. The other new director will be named later.

Principal will also conduct a review of its capital strategy including how it views organic growth versus acquisitions, and how it is returning capital to shareholders.

Now what

Activist investors are always looking for ways companies can maximize shareholder value, but the situation can be complicated if management disagrees with the views of activists.

Now that there is an agreement in place, it at least appears that executives from Principal and Elliott are on the same page, making it easier to actually accomplish shareholder value initiatives.

It also makes it more likely that Principal will consider selling its life insurance business. If that does happen, the unit could fetch a price that includes a premium, which often sends shares higher. Results from Principal's strategic review will be made public at the company's investor day.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Principal Financial Group, Inc. Stock Quote
Principal Financial Group, Inc.
PFG
$66.57 (-1.77%) $-1.20
Voya Financial, Inc. Stock Quote
Voya Financial, Inc.
VOYA
$59.36 (-2.22%) $-1.35

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
316%
 
S&P 500 Returns
112%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.