Principal Financial Group Inc. reported a net loss of $7.5 million, or 3 cents per share, for the fourth quarter and a sharp decrease in annual earnings for 2008.

For the year ending Dec. 31, Principal reported net income available to common stockholders of $425.1 million, or $1.63 per share, compared with $827.3 million, or $3.09 per share, for the 12 months ended Dec. 31, 2007. The company’s fourth-quarter loss of $7.5 million compared with net income of $34.1 million, or 13 cents per share, for the comparable quarter in 2007.

“Given the difficult business environment, The Principal delivered very solid operating results for the fourth quarter and the year, demonstrating the value of revenue and earnings diversification, and strong business fundamentals,” Larry Zimpleman, Principal’s president and CEO, said in a press release. “In addition, we continued to focus on effectively managing risks in a challenging market by building on our liquidity position and focusing capital on our longer-term growth opportunities.”

Despite a 21 percent drop in assets under management in 2008 due to market conditions, 2008 operating revenues declined only 4 percent compared to 2007 on the strength of record revenues for the Global Asset Management and International Asset Management and Accumulation segments.

The year-end earnings results reflect net realized capital losses of $505.3 million, which include $267.2 million of losses related to sales and permanent impairment of fixed-maturity securities (including $58.1 million related to Lehman Brothers Holdings Inc. and $45.3 million related to Washington Mutual Inc.), as well as $68 million of net losses related to hedging activities, plus losses related to “mark to market” writedowns of various investments.

Among other operating highlights, Principal’s life and health earnings improved by $49.3 million, or 22 percent, in 2008 to $270.4 million, driving a 250 basis point improvement in segment return on equity. Principal International earnings improved $15.6 million, or 14 percent, in 2008, to a record $126.3 million.