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J.P. Morgan upgraded Principal Financial Group (NASDAQ:PFG) from Underweight to Neutral on favorable macro backdrop.
“PFG has a superior business mix that carries less tail risk and will generate a higher ROE and better free cash flow than other life insurers,” the analysts said.
The analysts said the trends in the asset management business are improving, marked by an expected recovery in net flows in both fixed income and equity funds.
“Meanwhile, the macro backdrop for the company’s business remains favorable given the strong equity market, higher rates, and the tight labor market,” JPM said.
The analysts expect PFG to report mixed net flows.
The analysts said in the longer-term, they remain wary of margin compression in the DC business due to competition, technology spending, and other negative secular trends such as a shift toward open architecture platforms and higher allocations to index and lower-fee funds.
Shares in the company were up 0.9%.