VOL. 123 | NO. 241 | Wednesday, December 10, 2008
Principal Financial to Cut 550 Jobs
By DAVID PITT | AP Personal Finance Writer
DES MOINES, Iowa (AP) - Insurance, banking, retirement and asset manager Principal Financial Group Inc. said Tuesday it is cutting 550 jobs, about 3.5 percent of its work force.
The Des Moines, Iowa-based company said the cuts are the result of continued deterioration of U.S. and global markets.
The cuts include 300 jobs at its Des Moines, Iowa, corporate headquarters and 250 in 45 other locations.
Most affected employees will leave Dec. 31, the company said in a statement. Those losing their jobs were told Tuesday morning and offered severance and job search assistance, said Ralph Eucher, a human resources executive vice president.
He said the steep stock market decline that began in October changed the company's revenue picture for 2009 and a review of expenses began. Other cost cuts were initiated first and included travel, corporate sponsorships, advertising and merit pay. In addition, vacant positions were left unfilled.
Current employment stands at about 16,300.
Spokeswoman Mary O'Keefe said the company went to each of its business segment managers and asked for cuts in expenses, but those cuts weren't sufficient, making the job cuts necessary.
"We've done everything else we could first to minimize the reduction in employees," she said. "The 3.5 percent of work force is very targeted to maintain customer service levels and minimize disruption to employees, as tough as it is for those affected employees."
She said the company's revenue has been affected heavily by the stock market decline and inaction would have been irresponsible.
Shares were up 81 cents, or 4.5 percent, at $18.65 in afternoon trading. Shares were trading around $50 as recently as September. They have traded in a 52-week range of $8.78 to $70.85.
Gov. Chet Culver said the state "stands ready to help Principal or any Iowa business, big or small, deal with this recession."
"My goal is to do whatever I can to prevent further job loss," he said. He didn't specify what sort of help the state could offer.
Principal operates health and life insurance divisions, has an online bank and is one of the nation's leading 401(k) providers. It also has a global asset management division.
As of Sept. 30, it reported $287.4 billion in assets under management.
Industry analysts have recently expressed concern about the company's ability to maintain adequate capital to operate in the current market and some have said Principal has risk of losing money from its commercial real estate investments. Many companies in the life insurance segment are major holders of commercial mortgage-backed securities and have had to write off millions of dollars in losses from the investments.
Principal's Chief Financial Officer Terrance Lillis filed documents with the Securities and Exchange Commission on Nov. 18 saying that all of the commercial mortgage loans in the company's $11 billion portfolio are performing on schedule. The company reported on Nov. 4 in the third-quarter results that defaults and losses are expected to increase over a period of several years, but Lillis said in the SEC filing that "we will have the ability to accommodate these losses going forward through the use of a number of capital management techniques."
Last month, Principal said it planned to apply to the U.S. Treasury for participation in the capital purchase program to capitalize its federal savings bank subsidiary, Principal Bank; support the ongoing organic growth needs of the company's operating units; and continue to serve its corporate and consumer markets.
The company said it has applied for and could participate up to $2 billion in the federal program, which would make Principal subject to oversight by the Office of Thrift Supervision.
Principal serves about 19 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States.
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