Principal Financial (PFG) is expected to see slower operating income growth over the next 12 months following a sharp expansion in its valuation multiple, with the stock now trading near the upper end of its historical valuation range, BofA Securities said in a Wednesday note.

The analyst said it expects Principal's operating income growth to slow to the mid-single-digit range from the current low-double-digit pace, while shareholder return conversion remains healthy at 75% to 80%, albeit below recent levels.

BofA said strong equity markets have likely boosted asset management fee growth but warned the trend may be hard to sustain, leading it to expect earnings momentum to moderate despite forecasts remaining above consensus.

The bank added that Principal's asset management business warrants a premium to life insurers, but noted that the stock is trading near traditional asset manager valuations, historically the upper end of its range.

BofA downgraded the stock to underperform from neutral and lowered its price target to $95 from $98.

Principal Financial shares were down more than 4% in Wednesday trading.

Price: 107.65, Change: -4.71, Percent Change: -4.19