The fund industry, and the broader financial world, continues to adjust to the recent market turmoil. On Friday Principal Financial
spokeswoman Susan Houser confirmed that the Des Moines, Iowa-based insurer is "temporarily reducing salaries for employees, management and the Board of Directors" by two to ten percent. Principal's mutual fund unit will be affected.
"This impacts all business units," Houser told MFWire
Houser stressed that the expense reduction (which also includes a reduction in paid time off) is unrelated to Moody's downgrading
earlier this week of Principal's life insurance operation.
"This action is not unique to Principal ... [The Moody's] action reflects the negative outlook that all four U.S. rating agencies have on the entire North American life insurance sector," House stated. "The Principal continues to demonstrate strong fundamentals, including: a diversified business mix ... strong capital and liquidity positions ... [and] limited exposure to certain product lines, such as variable annuity with guarantee riders, which can create capital stress in dysfunctional equity markets."
According to Houser, Principal's expense reductions "are very meaningful in reducing the revenue gap."
The move follows staff reductions Principal made in December (see MFwire, 12/10/2008).
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