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In a release on November 2, the Company noted that the company reported operating earnings of $238.7 million for third quarter 2009, compared to $251.2 million for third quarter 2008. Operating earnings per diluted share (EPS) for third quarter 2009 were $0.74 compared to $0.96 for the same period in 2008.1 The decline in operating earnings from a year ago reflects a number of items, including lower average assets under management (AUM), higher costs for employee pension and other post-retirement benefits,2 lower investment income and unfavorable foreign currency movements. These items were substantially offset by the company's expense management activities and lower deferred policy acquisition cost (DPAC) amortization expense. The decline in per share results also reflects the company's May 11, common stock offering, which increased weighted average shares outstanding from 261.0 million for the quarter ending September 30, 2008, to 321.5 million for the quarter ending September 30.
"Improved market conditions, and the positive impact of actions by management over the past several quarters, contributed to a strong sequential increase in assets under management and operating earnings," said Larry D. Zimpleman, chairman, president and chief executive officer.
Added Terry Lillis, senior vice president and chief financial officer, "We also achieved strong improvement in net income during the third quarter, our best result in two years. Since year-end 2008, book value per share has nearly tripled, as narrowing credit spreads have driven down net unrealized losses by more than $6 billion pre-tax. This improvement reaffirms the quality and diversification of our portfolio, the discipline of our asset/liability management, and the strength of our capital and liquidity positions."
Highlights comparing third quarter 2009 to second quarter 2009:
- Assets under management improved 9 percent, or $22.7 billion, to $280.4 billion as of September 30.
- Operating earnings improved 19 percent, reflecting double-digit improvement across all operating segments.
- Net income available to common stockholders improved 23 percent, reflecting higher operating earnings and a comparable level of net realized capital losses.
- GAAP book value per share improved 35 percent, or $5.66 to $21.85.
"While confidence in the capital markets improved again in the third quarter, we expect the economic recovery will be more protracted, and that near-term, business activity will remain muted," said Zimpleman. "In this environment, we continue to manage all our resources with care, as we focus on positioning the company for sustainable, profitable growth as the recovery takes hold over time.
"Although businesses and institutional investors remain cautious, which has impacted sales and net cash flows, we're seeing some early signs of progress. Full service accumulation sales quote activity was 30 percent higher in September than January. And recently, we're seeing signs of increased search activity from institutional investors. While it will take several quarters for pipeline to turn into sales and then deposits, we are cautiously optimistic about sales and flows as we move into 2010."
Net income available to common stockholders of $184.7 million for third quarter 2009 reflects net realized capital losses of $53.5 million, which includes: $69.7 million of losses related to sales and permanent impairments of fixed maturity securities, partially offset by $25.2 million of gains related to sales of fixed maturity securities; $22.3 million of losses on commercial mortgage loans; $7.9 million of losses on derivatives and related hedge activities; $11.3 million of gains related to deferred policy acquisition costs; and $10.2 million of gains on mark to market of fixed maturity securities held as trading.
The Principal Financial Group offers businesses, individuals and institutional clients a 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.
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