thirdqter10.htm - Generated by SEC Publisher for SEC Filing

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: November 1, 2010

(Date of earliest event reported)

PRINCIPAL FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)


Delaware	1-16725	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)) __________________


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Item 2.02. Results of Operations and Financial Condition

On November 1, 2010, Principal Financial Group, Inc. publicly announced information regarding its
results of operations and financial condition for the quarter ended September 30, 2010. The text of the
announcement is included herewith as Exhibit 99.

Item 9.01 Financial Statements and Exhibits

99	Third 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: November 2, 2010


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	EXHIBIT 99
Release:	On receipt, November 1, 2010
Media contact:	Susan Houser, 515-248-2268, mail to: houser.susan@principal.com
Investor contact:	John Egan, 515-235-9500, mail to: egan.john@principal.com


Principal Financial Group, Inc. Announces Third Quarter 2010 Results

Third quarter 2010 operating earnings¹of $218.9 million, net income available to common stockholders of $142.2 million
Assets under management of $305.7 billion increased 9 percent compared to third quarter 2009
Book value per share, excluding AOCI²increased to a record high of $27.71, up 5 percent over third quarter 2009 and 1 percent sequentially
Operating revenues increased 1 percent to $1,986.7 million, compared to third quarter 2009

(Des Moines, Iowa) – Principal Financial Group, Inc. (NYSE: PFG) today announced results for third quarter

2010. The company reported operating earnings of $218.9 million for third quarter 2010, compared to $219.1

million for third quarter 2009. Operating earnings per diluted share (EPS) were $0.68 for the third quarter 2010 and

2009. The company reported net income available to common stockholders of $142.2 million, or $0.44 per diluted

share for the three months ended Sept. 30, 2010, compared to $184.7 million, or $0.57 per diluted share for the

three months ended Sept. 30, 2009. Operating revenues for third quarter 2010 were $1,986.7 million compared to

$1,961.0 million for the same period last year.

“The Principal^®continued to deliver strong financial results during the third quarter. Compared to 2009,

on a year-to-date basis, operating earnings are up 19 percent while average assets under management are up 12

percent. This reflects strong execution in an economic environment that is improving slowly. Importantly, we’re

seeing increasing signs of growth across our businesses. Highlights for the quarter include strong net cash flow

in Principal Funds, Principal Global Investors and Principal International,” said Larry D. Zimpleman, chairman,

president and chief executive officer of Principal Financial Group, Inc. “Our hybrid business model of asset

management and risk-based products, combined with our leadership position in the U.S. and strong presence in

select international markets, uniquely positions The Principal to help a growing middle income customer base

achieve financial security and success.”

“Despite the choppy economic recovery, our results in the third quarter demonstrate that our businesses

continue to grow and we are excited about our prospects going forward,” said Terry Lillis, senior vice president and

chief financial officer. “During the third quarter and now early into our second month of the fourth quarter, we are

seeing positive sales momentum and are confident we will finish 2010 with Full Service Accumulation sales 15-20

percent higher than 2009 year-end sales, resulting in positive cash flows. Overall, our diversified businesses and

geography mix, strong balance sheet and continued expense management have and will continue to serve us well.”

________________________

¹Use of non-GAAP financial measures is discussed in this release after Segment Highlights

²Accumulated Other Comprehensive Income

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Key Highlights

Principal International had record assets under management as of Sept. 30, 2010 of $42.3 billion and $1.0 billion in net positive cash flow in the third quarter.
Solid sales of the company’s three key U.S. retirement and investment products in the third quarter, with $864 million for Full Service Accumulation, $2.5 billion for Principal Funds and $364 million for Individual Annuities.
Record net cash flow in Principal Funds of $790 million in the third quarter.
Principal Global Investors had unaffiliated net cash flow of $800 million in third quarter.
Continued strong operating leverage, reflected in a 19 percent growth in operating earnings through nine months compared to 12 percent growth in average assets under management.
Strong capital and liquidity, with an estimated risk based capital ratio of 450 percent at quarter-end and $2.2 billion of excess capital.³

Net Income

Net income available to common stockholders of $142.2 million for third quarter 2010 reflects net realized

capital losses of $30.9 million, which include:

$29.1 million of losses related to credit gains and losses on sales and permanent impairments of fixed maturity securities, including $19.9 million of losses on commercial mortgage backed securities;
$7.2 million of losses on commercial mortgage whole loans;
$5.6 million of losses on residential mortgage loans; and
$7.7 million of gains from the appreciation of fixed maturities designated as trading.

Net income also reflects $48.5 million of one-time after-tax losses from planned severance and goodwill write-

off as a result of our exit from the medical insurance business.

Segment Highlights

U.S. Asset Accumulation

Segment operating earnings for third quarter 2010 were $147.4 million, compared to $154.6 million for

the same period in 2009, as higher earnings from the Full Service Accumulation business were more than offset by

lower earnings from the Investment Only and Individual Annuities Businesses. Full Service Accumulation

earnings increased 14 percent from a year ago to $80.3 million, reflecting a 9 percent increase in average account

values. Principal Funds earnings increased 20 percent from a year ago to $8.5 million, primarily due to a 12 percent

increase in average account values. Individual Annuities earnings were $31.9 million compared to $36.1 million

for third quarter 2009, mostly due to relatively less favorable DPAC⁴amortization equity market true-ups in the

current quarter. Investment Only earnings were $13.9 million for third quarter 2010, compared to $26.0 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 scale back of its Investment Only business. In the third quarter 2009, earnings benefitted by $10.8

million from the opportunistic early redemption of medium-term notes and an increase in the market value of a

receivable.

_________________________

³Excess 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.

⁴Deferred Policy Acquisition Costs

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Operating revenues for the third quarter 2010 were $997.0 million compared to $1,025.6 million for

the same period in 2009. Higher revenues for the accumulation businesses⁵, which improved $14.9 million, or 2

percent increase from a year ago, were more than offset by a $43.1 million decline in revenues for the Investment

Only business.

Segment assets under management were $168.8 billion as of Sept. 30, 2010, compared to $158.8

billion as of Sept. 30, 2009.

Principal Global Investors

Segment operating earnings for third quarter 2010 were $15.0 million, compared to $10.5 million in the

prior year quarter, primarily due to increased transaction fees and an increase in assets under management.

Operating revenues for third quarter were $118.0 million, compared to $111.3 million for the same

period in 2009, mostly due to higher management fees and a significant increase in transaction fees.

Unaffiliated assets under management were $76.2 billion as of Sept. 30, 2010, compared to $73.2 billion

as of Sept. 30, 2009.

Principal International

Segment operating earnings were $33.1 million in third quarter 2010 and 2009, as the increase in fees

on higher assets under management and improved macroeconomic conditions offset lower earnings resulting from

our reduced economic interest in the Brazilian joint venture.

Operating revenues were $200.1 million for third quarter, compared to $156.1 million for the same period

last year, primarily due to higher net investment income from inflation-linked investments in Latin America, the

impact of foreign currency movements, and an increase in fees on higher assets under management.

Segment assets under management were a record $42.3 billion as of Sept. 30, 2010, compared to

$31.4 billion as of Sept. 30, 2009. This includes a record $3.8 billion of net cash flows over the trailing twelve

months, or 12 percent of beginning of period assets under management.

⁵Full Service Accumulation, Principal Funds, Individual Annuities and Bank and Trust Services

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U.S. Insurance Solutions⁶

Segment operating earnings for third quarter 2010 were $47.3 million, compared to $56.2 million for

the same period in 2009. Individual Life earnings of $22.6 million were down compared to $29.8 million in

third quarter 2009, primarily due to updates to the DPAC model and assumptions. Specialty Benefits earnings

were $24.7 million in third quarter 2010, compared to $26.4 million in the same period a year ago, which is in

line with membership declines from a year ago.

Operating revenues for third quarter were $690.7 million, compared to $701.4 million for the same

period a year ago.

Corporate

Operating losses for third quarter 2010 were $23.9 million compared to operating losses of $35.3 million

in third quarter 2009. Results reflect higher investment returns on excess capital, which were partially offset by the

allocation of overhead expenses to Corporate from the medical insurance exit.

⁶Prior to third quarter 2010, amounts now reported in the U.S. Insurance Solutions segment and amounts for our group

medical business now reported in the Corporate segment were reported together in the Life and Health Insurance

segment. This change was made due to our decision to exit the group medical insurance business (insured and

administrative services only). Our segment results for 2009 have been restated to conform to the current segment

presentation.

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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 June 30,

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 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, Nov. 2, 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 to www.principal.com/investor at least 10-15 minutes prior to the start 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 (International callers) approximately 10 minutes prior to the start of the call. The access code is 16027050.

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	Replay of the earnings call via telephone is available by dialing 800-642-1687 (U.S. and Canadian callers) or
	706-645-9291 (International callers). The access code is 16027050. This replay will be available
	approximately two hours after the completion of the live earnings call through the end of day Nov. 9, 2010.
	Replay of the earnings call via webcast as well as a transcript of the call is available after the call at:
	www.principal.com/investor.

The company's financial supplement and additional investment portfolio detail for third quarter 2010 is

currently available at www.principal.com/investor, and may be referred to during the call.

2010 Investor Day and 2011 EPS guidance

The Principal will hold its Investor Day on Dec. 9, 2010 in New York. Details can be found at

www.principal.com/investor. In addition, The Principal plans to announce guidance prior to Investor Day

through a press release and a conference call.

About the Principal Financial Group

The Principal Financial Group^Ò(The Principal ^®)⁷is 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 $305.7 billion in assets under management⁸and 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, visit www.principal.com.

###

⁷“The Principal Financial Group^”and “The Principal” are registered service marks of Principal Financial Services,

Inc., a member of the Principal Financial Group.

⁸As of Sept 30, 2010

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*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.

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