The chief executive of Principal Financial Group Inc. said his company sees “clear signs the economy is recovering,” as Principal announced improved first-quarter earnings yesterday.

“First quarter was a very solid start to the year, as we continue to position the company for sustainable, profitable growth as the recovery builds over time,” Larry Zimpleman, Principal’s chairman, president and CEO, said in a press release.

The company reported net income of $190.8 million, or 59 cents per share, for the three months ended March 31, a 69 percent increase from first-quarter 2009 net income of $112.8 million, or 43 cents per share. First-quarter net income includes $7.8 million of losses related to after-tax adjustments, reflecting the tax impact of federal health-care reform legislation, and net realized capital losses of $57 million related to sales and permanent impairments of fixed maturity securities and losses on commercial mortgages.

Principal’s three largest U.S. asset accumulation businesses recorded combined sales of $4.3 billion in the first quarter, generating more than $900 million of positive cash flows. However, those revenues remain below 2007 levels.

“Job losses have slowed, but small business confidence levels are still low and we’ve yet to see consistent signs of employment growth in the small business segment, which is critical to driving growth in the U.S. economy,” said Terry Lillis, senior vice president and chief financial officer. However, he said, “in our customer base of small and medium businesses, we continue to see a number of positive trends, with membership declines slowing and employers beginning to restore 401(k) matching contributions. We’re also seeing sales pipelines build.”

Life and health insurance earnings for the first quarter were $69.8 million, compared with $71.8 million for the same period in 2009. Individual life earnings were $30.5 million in the first quarter of 2010, compared with $22.8 million a year earlier, reflecting growth in the block of business and ongoing expense management. Health division earnings were $25.7 million in the first quarter of 2010, compared with $31.9 million in the first quarter of 2009. The change primarily reflects a decline in insured medical covered members from a year ago.

To hear a replay of this morning’s earnings call, visit www.principal.com/investor

or call (800) 642-1687. The access code is 66747663. Replays will be available approximately two hours after the completion of the live earnings call through the end of day on May 11.