This was also taking into account its £1.4m contribution to the Financial Services Compensation Scheme, down from £5.2m in 2008.
It saw an increase in retail savings balances of 6.63% to £4,933.2m, with 104.1% of loans funded by customer deposits.
It also says secured loans subsidiary, Nemo Personal Finance, returned to profitability with house price falls stabilising and the increase in arrears abating.
Peter Griffiths, group chief executive of Principality, says: “Focused on our core principles of good value and outstanding service Principality has delivered a strong trading performance for 2009.
Trust and fairness lie at the heart of our mutual proposition and our trusted brand has continued to provide safety and security for members during one of the most turbulent economic periods on record.
Our balance sheet is in good shape with strong levels of capital, record levels of liquidity and improved profitability. We remain well placed to deal with future market challenges which will undoubtedly come our way again in 2010.”