| SECURITIES AND EXCHANGE COMMISSION |
| Washington, D.C. 20549 |
| ____________________ |
| FORM 8-K |
| CURRENT REPORT |
| Pursuant to Section 13 or 15(d) of the |
| Securities Exchange Act of 1934 |
| Date of Report:August 2, 2010 |
| (Date of earliest event reported) |
| PRINCIPAL FINANCIAL GROUP, INC. |
| (Exact name of registrant as specified in its charter) |
| Delaware 1-16725 &n bsp; 42-1520346 | ||
| (State or other jurisdiction | (Commission file number) (I.R.S. Employer | |
| of incorporation) | Identification Number) | |
| 711 High Street, Des Moines, Iowa 50392 | |
| (Address of principal executive offices) | |
| (515) 247-5111 | |
| (Registrant’s telephone number, including area code) | |
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the | |
| registrant under any of the following provisions: | |
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR |
| 240.14d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR |
| 240.13e-4(c)) | |
| ____________________ | |
| Page 2 | ||
| Item 2.02. Results of Operations and Financial Condition | ||
| On August 2, 2010, Principal Financial Group, Inc. publicly announced information regarding its | ||
| results of operations and financial condition for the quarter ended June 30, 2010. The text of the | ||
| announcement is included herewith as Exhibit 99. | ||
| Item 9.01 Financial Statements and Exhibits | ||
| 99 | Second Quarter 2010 Earnings Release | |
| SIGNATURE | ||
| Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly | ||
| caused this report to be signed on its behalf by the undersigned thereunto duly authorized. | ||
| PRINCIPAL FINANCIAL GROUP, INC. | ||
| By: /s/ Terrance J. Lillis | ||
| Name: Terrance J. Lillis | ||
| Title: Senior Vice President and Chief Financial | ||
| Officer | ||
| Date: August 2, 2010 | ||
| Page 3 | ||
| EXHIBIT 99 | ||
| RELEASE: | On receipt | |
| MEDIA CONTACT: | Susan Houser, 515-248-2268, houser.susan@principal.com | |
| INVESTOR RELATIONS CONTACT: | John Egan, 515-235-9500, investor-relations@principal.com | |
| PRINCIPAL FINANCIAL GROUP, INC. REPORTS SECOND QUARTER 2010 RESULTS | ||
| Des Moines, IA (August 2, 2010) – Principal Financial Group, Inc. (NYSE: PFG) today announced | ||
| results for second quarter 2010. The company reported net income available to common stockholders of $134.0 | ||
| million, or $0.42 per diluted share for the three months ended June 30, 2010, compared to $150.3 million, or | ||
| $0.52 per diluted share for the three months ended June 30, 2009. The company reported operating earnings of | ||
| $203.5 million for second quarter 2010, compared to $200.5 million for second quarter 2009. Operating | ||
| earnings per diluted share (EPS) for second quarter 2010 were $0.63 compared to $0.69 for the same period in | ||
| 2009. Operating revenues for second quarter 2010 were $2,321.0 million compared to $2,335.8 million for the | ||
| same period last year.1 | ||
| “The Principal’s second quarter results contributed to very solid financial performance for the first | ||
| half of 2010. Compared to 2009, we’ve delivered double-digit growth in assets under management, | ||
| operating earnings, net income and book value per share.2” said Larry D. Zimpleman, chairman, president | ||
| and chief executive officer. “This reflects not only ongoing improvement in credit and equity market | ||
| conditions, but also strong execution of our strategy, and ongoing discipline around expenses and the | ||
| investment portfolio.” | ||
| “Our asset management and accumulation growth engines continued to deliver strong results in the | ||
| second quarter,” said Zimpleman. “Principal International, Principal Global Investors and Principal Funds all | ||
| reported double digit earnings growth compared to the prior year quarter, improving 33 percent on a combined | ||
| basis. Full Service Accumulation’s operating earnings improved strongly, as well, up 21 percent adjusting for the | ||
| impact of equity market true-ups on deferred policy acquisition cost amortization expense. Principal International | ||
| also generated record net cash flows of $1.5 billion during the quarter, and our three largest U.S. accumulation | ||
| businesses3delivered a $650 million improvement in sales compared to the year ago quarter.” | ||
| “We continue to see signs of economic recovery,” said Terry Lillis, senior vice president and chief | ||
| financial officer. “During the second quarter, Full Service Accumulation recurring deposits improved from the | ||
| prior year period for the first time since third quarter 2008. Sales pipelines continue to build, and retirement plan | ||
| _______________________________ | ||
1Use of non-GAAP financial measures is discussed in this release after Segment Highlights. | ||
| 2Book value per share including accumulated other comprehensive income. | ||
| 3Full Service Accumulation, Principal Funds and Individual Annuities. | ||
| Page 4 |
| terminations4continue to decline, suggesting increasing stability among small and medium-sized businesses. And |
| in Specialty Benefits, premium and fees increased sequentially for the first time since fourth quarter 2008.” |
| Added Zimpleman, “As always, we remain committed to helping businesses, their employees and other |
| individuals rebuild their financial futures. While we believe there will be challenges ahead, we look to the future |
| with a continued focus on maintaining our financial strength; managing risks throughout the enterprise; and |
| serving customers and financial advisors the way they want to be served.” |
| Additional Highlights |
|
| Net Income |
| Net income available to common stockholders of $134.0 million for second quarter 2010 reflects net realized |
| capital losses of $69.5 million, which include: |
|
| Segment Highlights |
| U.S. Asset Accumulation |
| Segment operating earnings for second quarter 2010 were $129.0 million, compared to $137.4 |
| million for the same period in 2009, as higher earnings from the full service accumulation and mutual funds |
| businesses were offset by lower earnings from the individual annuities and investment only businesses. Full |
| service accumulation earnings increased $5.5 million from a year ago to $67.9 million for second quarter 2010, |
| reflecting a 19 percent increase in average account values partially offset by $17.0 million of higher deferred |
| policy acquisition cost (DPAC) amortization expense.6Principal Funds earnings increased $4.4 million from a |
| year ago to $10.3 million for second quarter 2010, primarily due to a 23 percent increase in average account |
| values. Individual annuities earnings decreased $12.5 million from a year ago to $22.6 million for second |
| ______________________________________________ |
| 4Plan sponsors shutting down retirement plans as opposed to moving them to another provider. |
| 5Excess capital includes cash at the holding company and capital at the life company above that needed to maintain a 350 percent |
| NAIC risk based capital ratio for the life company. |
| Page 5 |
| quarter 2010, primarily due to a $19.8 million increase in DPAC amortization expense.6Investment Only |
| earnings were $13.0 million for second quarter 2010, compared to $22.3 million for the same period a year ago. |
| The decline is primarily due to: a 19 percent drop in average account values, reflecting the company’s |
| continued scale back of its institutional GIC and funding agreement business; and $7.3 million of earnings in |
| second quarter 2009 from the opportunistic early redemption of medium-term notes with no corresponding |
| activity in second quarter 2010. |
| Operating revenues for the second quarter were $1,021.3 million compared to $991.3 million for |
| the same period in 2009. Higher revenues for the accumulation businesses,7which improved $61.3 million, |
| or 9 percent increase from a year ago, were partially offset by a $45.3 million decline in revenues for the |
| investment only business. |
| Segment assets under management were $157.9 billion as of June 30, 2010, compared to $145.3 |
| billion as of June 30, 2009. |
| Global Asset Management |
| Segment operating earnings for second quarter 2010 were $12.3 million, compared to $8.2 million in |
| the prior year quarter, primarily due to an 11 percent increase in average assets under management. |
| Operating revenues for second quarter were $114.3 million, compared to $103.3 million for the same |
| period in 2009, primarily due to higher management fees. |
| Unaffiliated assets under management were $71.2 billion as of June 30, 2010, compared to $67.3 |
| billion as of June 30, 2009. |
| International Asset Management and Accumulation |
| Segment operating earnings for second quarter 2010 were $35.0 million compared to $29.3 million |
| for the same period in 2009, primarily due to improved macroeconomic conditions and higher assets under |
| management. |
| Operating revenues were $188.2 million for second quarter, compared to $161.7 million for the same |
| period last year, primarily due to higher net investment income from inflation-linked investments in Chile, the |
| impact of foreign currency movements, and an increase in fees on higher assets under management. |
| Segment assets under management were a record $38.1 billion as of June 30, 2010, compared to |
| $28.7 billion as of June 30, 2009. This includes a record $3.4 billion of net cash flows over the trailing |
| twelve months, or 12 percent of beginning of period assets under management. |
| Life and Health Insurance |
| Segment operating earnings for second quarter 2010 were $54.6 million, compared to $57.7 |
| million for the same period in 2009. Specialty Benefits earnings were up slightly at $24.0 million in second |
| _________________________ |
| 6The variances in DPAC amortization expense for both full service accumulation and individual annuities primarily reflect the |
| impact of declining equity markets during second quarter 2010 compared to improving equity markets during second quarter 2009. |
| 7Full Service Accumulation, Principal Funds, Individual Annuities and Bank and Trust Services. |
| Page 6 |
| quarter 2010, compared to $23.7 million in the same period a year ago. Individual Life earnings were $26.0 |
| million compared to $28.3 million in second quarter 2009, as growth in the block of business was offset by the |
| impact of equity market performance true-ups on DPAC amortization expense. The Health division had |
| operating earnings of $4.6 million in second quarter 2010 compared to earnings of $5.7 million for second |
| quarter 2009, reflecting the decline from a year ago in group medical covered members. |
| Operating revenues for second quarter were $1,037.1 million, compared to $1,116.9 million for the |
| same period a year ago. The decline was primarily due to a 16 percent decline in Health division premiums, |
| which primarily reflects a decline in group medical covered members. |
| Corporate |
| Operating losses for second quarter 2010 were $27.4 million. This compares to operating losses of |
| $32.1 million in second quarter 2009, reflecting higher debt outstanding. |
| Forward looking and cautionary statements |
| This press release contains forward-looking statements, including, without limitation, statements as to |
| operating earnings, net income available to common stockholders, net cash flows, realized and unrealized |
| losses, capital and liquidity positions, sales and earnings trends, and management's beliefs, expectations, |
| goals and opinions. The company does not undertake to update or revise these statements, which are based |
| on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Future |
| events and their effects on the company may not be those anticipated, and actual results may differ materially |
| from the results anticipated in these forward-looking statements. The risks, uncertainties and factors that |
| could cause or contribute to such material differences are discussed in the company's annual report on Form |
| 10-K for the year ended December 31, 2009, and in the company’s quarterly report on Form 10-Q for the |
| quarter ended March 31, 2010, filed by the company with the Securities and Exchange Commission, as |
| updated or supplemented from time to time in subsequent filings. These risks and uncertainties include, |
| without limitation: adverse capital and credit market conditions that may significantly affect the company’s |
| ability to meet liquidity needs, access to capital and cost of capital; a continuation of difficult conditions in |
| the global capital markets and the general economy that may materially adversely affect the company’s |
| business and results of operations; the actions of the U.S. government, Federal Reserve and other |
| governmental and regulatory bodies for purposes of stabilizing the financial markets might not achieve the |
| intended effect; the risk from acquiring new businesses, which could result in the impairment of goodwill |
| and/or intangible assets recognized at the time of acquisition; impairment of other financial institutions that |
| could adversely affect the company; investment risks which may diminish the value of the company’s |
| invested assets and the investment returns credited to customers, which could reduce sales, revenues, assets |
| under management and net income; requirements to post collateral or make payments related to declines in |
| market value of specified assets may adversely affect company liquidity and expose the company to |
| counterparty credit risk; changes in laws, regulations or accounting standards that may reduce |
| company profitability; fluctuations in foreign currency exchange rates that could reduce company |
| profitability; Principal Financial Group, Inc.’s primary reliance, as a holding company, on dividends from its |
| subsidiaries to meet debt payment obligations and regulatory restrictions on the ability of subsidiaries to pay |
| such dividends; competitive factors; volatility of financial markets; decrease in ratings; interest rate changes; |
| inability to attract and retain sales representatives; international business risks; a pandemic, terrorist attack or |
| other catastrophic event; and default of the company’s re-insurers. |
| Use of Non-GAAP Financial Measures |
| The company uses a number of non-GAAP financial measures that management believes are useful to investors |
| because they illustrate the performance of normal, ongoing operations, which is important in understanding and |
| evaluating the company’s financial condition and results of operations. They are not, however, a substitute for |
| U.S. GAAP financial measures. Therefore, the company has provided reconciliations of the non-GAAP |
| measures to the most directly comparable U.S. GAAP measure at the end of the release. The company adjusts |
| Page 7 |
| U.S. GAAP measures for items not directly related to ongoing operations. However, it is possible these |
| adjusting items have occurred in the past and could recur in the future reporting periods. Management also uses |
| non-GAAP measures for goal setting, as a basis for determining employee and senior management |
| awards and compensation, and evaluating performance on a basis comparable to that used by investors |
| and securities analysts. |
| Earnings Conference Call |
| On Tuesday, August 3, 2010 at 10:00 A.M. (ET), Chairman, President and Chief Executive Officer Larry |
| Zimpleman and Senior Vice President and Chief Financial Officer Terry Lillis will lead a discussion of |
| results, asset quality and capital adequacy during a live conference call, which can be accessed as follows: |
- Via live Internet webcast. Please go towww.principal.com/investorat least 10-15 minutes prior to thestart of the call to register, and to download and install any necessary audio software.
- Via telephone by dialing 800-374-1609 (U.S. and Canadian callers) or 706-643-7701 (Internationalcallers) approximately 10 minutes prior to the start of the call. The access code is 4587874.
- Replays of the earnings call are available at:www.principal.com/investoror by dialing 800-642-1687(U.S. and Canadian callers) or 706-645-9291 (International callers). The access code is 4587874.
Replays will be available approximately two hours after the completion of the live earnings call throughthe end of day August 10, 2010.
| The company's financial supplement and additional investment portfolio detail for second quarter 2010 is |
| currently available atwww.principal.com/investor, and may be referred to during the call. |
| About the Principal Financial Group |
| The Principal Financial GroupÒ(The Principal®)8is a leader in offering businesses, individuals and |
| institutional clients a wide range of financial products and services, including retirement and investment |
| services, life and health insurance, and banking through its diverse family of financial services companies. A |
| member of the Fortune 500, the Principal Financial Group has $284.7 billion in assets under management9 |
| and serves some 18.9 million customers worldwide from offices in Asia, Australia, Europe, Latin America |
| and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the |
| ticker symbol PFG. For more information, visitwww.principal.com. |
| ### |
| 8"The Principal Financial Group" and “The Principal” are registered service marks of Principal Financial Services, Inc., a member of the |
| Principal Financial Group. |
| 9As of June 30, 2010. |
| *Operating earnings versus U.S. GAAP (GAAP) net income available to common stockholders |
| Management uses operating earnings, which excludes the effect of net realized capital gains and losses, as adjusted, and other after- |
| tax adjustments, for goal setting, as a basis for determining employee compensation, and evaluating performance on a basis |
| comparable to that used by investors and securities analysts. Segment operating earnings are determined by adjusting U.S. GAAP |
| net income available to common stockholders for net realized capital gains and losses, as adjusted, and other after-tax adjustments |
| the company believes are not indicative of overall operating trends. Note: it is possible these adjusting items have occurred in the |
| past and could recur in future reporting periods. While these items may be significant components in understanding and assessing |
| our consolidated financial performance, management believes the presentation of segment operating earnings enhances the |
| understanding of results of operations by highlighting earnings attributable to the normal, ongoing operations of the company’s |
| businesses. |
