Principal Financial Group 101

Principal Financial Group®

November 2014

Use of Non‐GAAP Financial Measures

A non‐GAAP financial measure is a numerical measure of performance, financial position, or cash flows that includes adjustments from a comparable financial measure presented in accordance with U.S. GAAP.

The company uses a number of non‐GAAP financial measures that management believes are useful to investors because they illustrate the performance of the company’s normal, ongoing operations which is important in understanding and evaluating the company’s financial condition and results of operations. While such measures are also consistent with measures utilized by investors to evaluate performance, they are not, however, a substitute for U.S. GAAP financial measures. Therefore, at the end of the presentation, the company has provided reconciliations of the non‐GAAP financial measures to the most directly comparable U.S. GAAP financial measure. The company adjusts U.S. GAAP financial measures for items not directly related to ongoing operations. However, it is possible these adjusting items have occurred in the past and could recur in future reporting periods. Management also uses non‐GAAP financial measures for goal setting, as a basis for determining employee and senior management awards and compensation, and evaluating performance on a basis comparable to that used by investors and securities analysts.

The company also uses a variety of other operational measures that do not have U.S. GAAP counterparts, and therefore do not fit the definition of non‐GAAP financial measures. Assets under management is an example of an operational measure that is not considered a non‐GAAP financial measure.

2

Forward Looking Statements

3

Certain statements made by the company which are not historical facts may be considered forward‐looking statements, including, without limitation, statements as to operating earnings, net income available to common stockholders, net cash flows, realized and unrealized gains and losses, capital and liquidity positions, sales and earnings trends, and management'sbeliefs, expectations, goals and opinions. The company does not undertake to update these statements, which are based on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Future events and their effects on the company may not be those anticipated, and actual results may differ materially from the results anticipated inthese forward‐looking statements. The risks, uncertainties and factors that could cause or contribute to such material differences are discussed in the company's annual report on Form 10‐K for the year ended Dec. 31, 2013 and in the company’s quarterly report on Form 10‐Q for quarter ended Sept. 30, 2014 filed by the company with the Securities and Exchange Commission, as updated or supplemented from time to time in subsequent filings. These risks and uncertainties include, without limitation: adverse capital and credit market conditions may significantly affect the company’s ability to meet liquidity needs, access to capital and cost of capital; conditions in the global capital markets and the economy generally; continued volatility or further declines in the equity, bond or real estate markets; changes in interest rates or credit spreads; the company’s investment portfolio is subject to several risks that may diminish the value of its invested assets and the investmentreturns credited to customers; the company’s valuation of securities may include methodologies, estimations and assumptions that are subject to differing interpretations; the determination of the amount of allowances and impairments taken on the company’s investments requires estimations and assumptions that are subject to differing interpretations; gross unrealized losses may be realized or result in future impairments; competition from companies that may have greater financial resources,broader arrays of products, higher ratings and stronger financial performance; a downgrade in the company’s financial strength or credit ratings; inability to attract and retain sales representatives and develop new distribution sources; international business risks; the company’s actual experience could differ significantly from its pricing and reserving assumptions; the company’s ability to pay stockholder dividends and meet its obligations may be constrained by the limitations on dividends ordistributions Iowa insurance laws impose on Principal Life; the pattern of amortizing the company’s DAC and other actuarial balances on its universal life‐type insurance contracts, participating life insurance policies and certain investment contracts may change; the company may need to fund deficiencies in its “Closed Block” assets that support participating ordinary life insurance policies that had a dividend scale in force at the time of Principal Life’s 1998 conversion into a stock life insurance company; the company’s reinsurers could default on their obligations or increase their rates; risks arising from acquisitions ofbusinesses; changes in laws, regulations or accounting standards; a computer system failure or security breach could disrupt the company’s business, and damage its reputation; results of litigation and regulatory investigations; from time to time thecompany may become subject to tax audits, tax litigation or similar proceedings, and as a result it may owe additional taxes,interest and penalties in amounts that may be material; fluctuations in foreign currency exchange rates; and applicable laws and the company’s certificate of incorporation and by‐laws may discourage takeovers and business combinations that some stockholders might consider in their best interests.

A Leading Financial Services CompanyFortune 500 company; 135 year history; 19.5 million customers

Assets Under Management by Source$513.5 billion

as of Sept. 30, 2014

Retirement &Investor Services Accumulation

47%

Corporate1%

U.S. Insurance Solutions

4%

PrincipalInternational

23%

PrincipalGlobal

Investors 22%

Operating Earnings$1,424.0 million*Sept. 30, 2014

Retirement &Investor Services Accumulation

49%


16% PrincipalInternational

19%PrincipalGlobal

Investors 8%

*Trailing Twelve Months. After‐tax. Results exclude Corporate.

4

COMPANY OVERVIEW

RISGuaranteed

8%

RISGuaranteed

3%

Organizational Structure

Principal Financial GroupZimpleman CEO – 43/43 yrs*

Lillis CFO – 32/32 yrs

Retirement & Investor Services

Houston ‐ President30/30 yrs

Principal Global Investors

McCaughan – President40/12 yrs

Principal International

Valdes – President26/23 yrs


Houston – President30/30 yrs

Corporate

Full Service Accumulation

Principal Funds

Individual Annuities

Bank & Trust

Full Service Payout

Investment Only

Life

Specialty Benefits

*Years of experience: Industry/The Principal as of year end 2014.5

COMPANY OVERVIEW

PRINCIPAL FINANCIAL GROUPHeadquartersDes Moines, Iowa

MexicoPensionsLife InsuranceAnnuitiesMutual FundsIAM

ChileAnnuities / PensionsResidential MortgagesMutual FundsIAM

Pensions - Mandatory

BrazilPensionsAnnuitiesIAMMutual Funds

IndiaMutual FundsAsset Management

MalaysiaMutual FundsAsset ManagementIslamic Institutional Asset Management

Hong KongPensions,Mutual FundsAsset Management

ChinaMutual FundsPensionsAsset Management

Principal Financial Group Global Presence

GermanyAsset Management

IrelandMutual Funds

UKAsset Management Japan

Asset Management

AustraliaAsset Management

SingaporeAsset Management

ThailandMutual Funds Asset Management

IndonesiaMutual Funds, Asset Management

NetherlandsAsset Management

UAEAsset Management

6

COMPANY OVERVIEW

135 Years of Experience

1879Life Assoc

1911Mutual Life Co

1936Mortgage Banking/

Commercial Mortgage

1941Group

Health & Pension

1968Mutual Funds

1985Principal Financial Group

1998Principal Bank;

Mutual Holding Co

2001IPO;

Spectrum

1990Principal

Intl

1970sDefined

Contribution

1999Principal Global

Investors; BrasilPrev JV; Principal Asset Mgmt Co (India)

2002Benefit

Consultants Inc; Total Retirement

Suite

2006Washington

Mutual Funds; WM Advisors

2008CIMB‐Principal

IslamicAsset Mgmt

2007Morley

2011HSBC Afore;Finisterre;Origin

1995Principal Chile

1996Principal Hong Kong

1997Principal Mexico

2003Post

Advisory Group

2005CCB

Principal; Columbus Circle

JV – Joint VentureIPO – Initial Public Offering

2010BrasilPrev

JV extension

2012Claritas; Cuprum

2013Liongate

7

COMPANY OVERVIEW

Name Age* Title (Industry/PFG)*

Larry D. Zimpleman 63 Chairman, President & CEO 43/43Daniel J. Houston 53 President ‐ Retirement, Insurance and Financial Svcs 30/30James P. McCaughan 61 President ‐ Global Asset Management 40/12Luis E. Valdes 57 President ‐ Principal International 26/23Timothy M. Dunbar 57 Executive VP & Chief Investment Officer 33/28 Ralph C. Eucher 62 Executive VP 30/20Terrance J. Lillis 62 Executive VP & Chief Financial Officer 32/32Gary P. Scholten 57 Executive VP & Chief Information Officer 34/34Karen E. Shaff 60 Executive VP, General Counsel & Secretary 32/32Rex Auyeung 62 Senior VP & President, Principal Financial Group – Asia 37/20David Blake 48 Senior Executive Director & Head of PGI Fixed Income 25/14Elizabeth Brady 54 Senior VP & Chief Marketing Officer 30/1 Ned A. Burmeister 55 Senior VP & COO – Principal International 35/35Gregory J. Burrows 52 Senior VP ‐ Retirement & Investor Svcs 28/28Gregory B. Elming 54 Senior VP & Chief Risk Officer 32/32Nora M. Everett 55 Senior VP ‐ Retirement & Investor Svcs 23/23Pat Halter 55 Senior Executive Director – Principal Real Estate Investors 30/30Julia M. Lawler 54 Senior VP ‐ Investment Services 32/30Barbara McKenzie 54 Senior Executive Director & COO – Boutique Operations 30/30Timothy J. Minard 51 Senior VP ‐ Distribution 28/28Jerry Patterson 48 Senior VP ‐ Retirement & Investor Svcs 26/13Beth Raymond 48 Senior VP & Chief Human Resources Officer 23/14Angela R. Sanders 51 Senior VP & Controller 25/25Ellen Shumway 51 Senior Executive Director – Strategy & Boutique Operations 24/9Deanna D. Strable 46 Senior VP ‐ U.S. Insurance Solutions 25/25Roberto Walker 49 Senior VP & President, Principal Financial Group – LatAm 25/18

*As of 12/20148

Experienced Management TeamCOMPANY OVERVIEW

Retirement and Investor Services•A leading provider of DC plans1•#1 provider of DB plans2•#1 provider of ESOP plans3•#5 manager of Target Date Funds4

Industry Leadership

Sources: 1 PLANSPONSOR Recordkeeping Survey, June 2014, 2 PLANSPONSOR, July 2014; 3 PLANSPONSOR Recordkeeping Survey, June 2014; 4 In the United States. Strategic Insight Lifecycle fund data report 6/30/14; 5Pensions & Investments, “The Best Places to Work in Money Management among companies with our size category”, PFG recognition 12/09/2013. 6 Managers ranked by total worldwide real estate assets (net of leverage), as of June 30, 2014. “Largest Real Estate Managers”, PENSIONS & INVESTMENTS, October 27, 2014.; 7Managers ranked by U.S. institutional, tax‐exempt assets managed internally, as of 12/31/13, “Largest Money Managers”, Pensions & Investments, Online Research Center. 8Commercial Property ExecutivePublished March 2014 “2014 Greenest CRE Companies” list”. 9Quantum, 12/2012; 10SP (Superintendencia de Pensiones), 1/2013; 11Lipper. Percentage of market share as of 07/2013; 12Lipper. Based on AUM as of 03/2013; 13CONSAR & PROCESAR, May 2013; 14PLANSPONSOR NQDC Buyer’s Guide, July 2014; 15LIMRA 2013 survey: Non‐medical based on fully insured employer contracts in force. 16 LIMRA 2014 survey: Individual Disability Insurance (IDI) rank based on in‐force policies

Principal Global Investors•Best Place to Work in Money Management 5•Top 10 manager Real Estate 6•13th largest manager High Yield7•#3 Greenest CRE Company8

Principal International•#1 net deposits – Brazil (Brasilprev)9•#1 APV – Chile10•#2 asset management – Malaysia11•Top ten MPF provider – Hong Kong12•#5 AFORE – Mexico13

U.S. Insurance Solutions•#2 Non‐qualified deferred

compensation14•#4 Non‐medical coverages15•#5 IDI coverages16

9

COMPANY OVERVIEW

Financial Strength:

Current Ratings(as of October 2014)

• Moody's Investors Service'A1', Good – fifth highest of 21 rating levels.Outlook: Stable Rating as of November 2013

• FitchRatings'AA‐‘, Very Strong ‐ fourth highest of 21 rating levels.Outlook: StableRating as of June 2014

• Standard & Poor's ‘A+’, Strong ‐ fifth highest of 21 rating levels.Outlook: StableRatings as of March 2014

• A.M. Best'A+', Superior ‐ second highest of 16 rating levels.Outlook: Stable Rating as of December 2013

Ratings related to Principal Life Insurance Company and Principal National Life Insurance Company.10

COMPANY OVERVIEW

Platform ContinuumAcross markets | Across life stages

INDIVIDUAL

EMPLOYER

INVESTMENT MANAGEMENT

Full Service Accumulation

Principal FundsInvestment

Only

Bank

Annuities

Full Service Payout

11

RETIREMENT AND INVESTOR SERVICES

Customer‐Centric Business Model

12

Full Service AccumulationRETIREMENT AND INVESTOR SERVICES

Principal Total Retirement SuiteSMSTILL A DIFFERENTIATOR

All rankings sourced from PLANSPONSOR magazine as follows – Defined Benefit: DB Administration Survey 07/14; Defined Contribution and ESOP: Recordkeeping Survey 06/14; Nonqualified Deferred Compensation: PLANSPONSOR NQDC Buyer’s Guide, July 2014

Defined Benefit#1 DB provider(by # of clients)

Defined Contribution#2 DC plan recordkeeper

(by # of plans)

Employee Stock Ownership Plan

#1 ESOP plan recordkeeper(by # of plans)

Nonqualified Plans#2 Deferred Comp provider

(by # of plans)

13


1.7 2.03.2 2.9 2.7

0.91.7

2.31.8 1.40.9

1.5

2.72.6

1.83.2

3.3

3.3

3.0

0

2

4

6

8

10

12

14

2010 2011 2012 2013 2014

$ Billion

s

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

Balanced Sales Approach

14 *Full‐Service Accumulation

6.7

8.5

11.5

10.3

5.9


6.0 4.8 5.0 6.0 6.8 7.4

3.64.1 5.0

5.7 5.8 5.93.6 3.8

4.3

5.6 6.3 5.73.8 5.8

6.0

6.56.3

0

5

10

15

20

25

30

2009 2010 2011 2012 2013 2014

$ B

illio

ns

1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

People making a deferral +18%*Avg deferral per member +8%*People receiving a match +27%*

15

17.018.5

20.3

24.325.2

The Power of Payroll Deduction

* 4Q10 compared to 4Q13.

19.0


FSA Account Value by Manager

16

60.4% 58.4% 58.3% 56.6% 55.8% 56.1% 58.0%

12.7% 12.8% 11.1% 10.0% 10.3% 10.2% 10.5%

20.1% 22.3% 23.3% 26.5% 26.9% 26.6% 23.7%

6.9% 6.6% 7.3% 6.9% 7.1% 7.1% 7.8%

0%

20%

40%

60%

80%

100%

2009

2010

2011

2012

2013

3Q14

3Q14

Dep

osits

PGI managed Sub-advised Non-proprietary ER Securities

*Full‐Service Accumulation


Our Disciplined Execution Delivers Positive Results

17

Profit Margin*Industry Avg vs. The Principal

Principal Industry Avg

* Profit 2000 Benchmark Study, Sterling Resources, Inc. (2013)


Revenue sourced from FSA platform

FSAFSA

Other PFG businesses

Other PFG businesses

2013 2018E

Multiple Businesses Leverage FSA Success

Principal Funds, PGI, Bank & Trust, Individual Annuities, Individual Life and Full Service Payout are all beneficiaries

$500MILLION

$350MILLION

$0

$2B

18

RETIREMENT AND INVESTOR SERVICESFull Service Accumulation

4.6%

1.9%

4.5% 4.2%

6.0% 6.7%

18.1%

12.5%

2010 2011 2012 2013

Industry net flows Principal Funds net flows

0.8% 1.0%0.8%

0.2%0.6%

3.5%

6.3%

1.7%

2010 2011 2012 2013

401k Industry net flows Principal FSA net flows

Full Service Accumulation (FSA)

Net cash flows as % of beginning of year assets 2010‐2013. Sources of industry data: 401(k) industry – Department of Labor & CerulliAssociates 2013 (for 2013, industry 401(k) is an estimate); Funds – Strategic Insight Mutual Fund Industry Review (long‐term funds). Principal Funds net flows represent long‐term funds only.

Net Cash Flow Consistently Outpaces Industry

Principal Funds

19


TOP SELLING FUNDS TTM3Q14

Global Diversified Income $3.1B

MidCap Fund $2.4B

SAM Combined Funds $1.4B

Preferred Securities $1.4B

Diversified Real Asset $1.1B

TOTAL FOR TOP 5 $9.4B

ASSET ALLOCATION LEADERSHIP• #5 largest lifecycle fund manager*• Target date & target risk• Multi‐manager solutions

• Portfolio construction strategies:

*Based on $41.6B in assets Strategic Insight 6/30/14 Lifecycle Report

Needs‐Driven Investment SolutionsBroad and unique asset allocation strategies

20

RETIREMENT AND INVESTOR SERVICESPrincipal Funds

Account Values – Then & Now

30%

44%100%

26% Affiliated Distribution

Third PartyBroker/Dealers

DCIO/RIA

16%

44%100%

40%Affiliated Distribution

Third PartyBroker/Dealers

DCIO/RIA

Multiple Distribution ChannelsSALES – Then & Now

2006$3.8B

YTD 3Q14$9.2B

2006$14.7B

3Q14$70.9B

21 DCIO = Defined Contribution Investment Only. RIA = Registered Investment Advisor


A Diversified Family of Mutual Funds

11%4%

71%47%

3%3%

16%

38%

30%

TTM 3Q14 09/30/2014

Equity

Fixed Income

Index

Asset Allocation

Other

Net Cash Flow

Assets Under Management

22

‐23%


Driving Industry Recognitionand Advisor Engagement

16th largest advisor-sold fund family(1)

Best Global Real Estate Fund Over the 5-Year Period

23 (1) Strategic Insights Mutual Fund Management Companies Rankings and Analysis, September 2014

#5 for DC Investment Manager


READY TO RETIRE

Individual Investor Strategy

• Portfolio allocation• Participant education

RETIREMENT INCOME

SOLUTIONS

• Education and guidance• Portfolio construction strategies

• Income annuities

ENROLLMENT OPTIMIZATION

• Simplify process• Improve experience• Maximize participation and influence behavior

24


Individual Investor Strategy Captures Additional Assets

$0.8$1.0

$1.2$1.5

$1.7$0.2

$0.2

$0.3

$0.3

$0.4

2010 2011 2012 2013 2014E

Assets Captured in Billions

Roll‐ins into FSA plans Retail sales to participants

25


Innovative Solutions:

Solving Income Needs

ACCUMULATION

OUR APPROACH:• Education• Planning assistance (RetireSecure®)

• Full array of options• Innovative solutions

MULTI‐PRODUCT SOLUTION SET

•“Through Retirement” Lifecycle Funds•Mutual Funds that:‒Generate income‒Preserve capital‒Protect against inflation‒Address market volatility

•Annuities to provide: ‒Fixed returns ‒Guaranteed income‒Protection against volatility

•Bank products•Full Service Payout‒Defined Benefit plan terminations

RETIREMENT INCOME

26


INDIVIDUAL LIFE•Non‐Qualified Plans 12.4% #2

•Total Life New Sales Premium 1.4% #18

SPECIALTY BENEFITS•Total Group In‐Force Contracts 7.1% #4

‐ Life 8.9% #4‐ Disability 7.0% #6‐ Dental 6.0% #7

• Individual Disability In‐force Premium 8.5% #5

• Individual Disability New Sales Premium 15.8% #2

Success Reflects Expertise Serving SMB Market 2013

Industry Rank

2013 Market Share

27 Nonqualified Plans ranking from PLANSPONSOR Recordkeeping Survey, June 2014. All other rankings are from LIMRA 2013.

U.S. INSURANCE SOLUTIONS

ER/NQ21%

BOES36%

Individual43%

Individual Life Leadership:

FOCUS ON THE BUSINESS MARKET

Business owners’ financial challenges•Exiting the business•Business transition•Retaining key employees•Retirement planning

Solutions for key employees•Retirement income•Survivor income•Business protection

2013 Sales

BOES = Business Owner/Executive Solutions ER/NQ = Employer/Non‐qualified

SOLUTIONS FOR BUSINESS, BUSINESS OWNERS AND KEY EXECUTIVES

28


3.4%

10.4%

2.4% 2.0%

Group Benefits Individual DI

The Principal Industry

Dental/ Vision48% Group

Life27%

Balanced PortfolioplusAbove Industry Premium Growth

2013 Total Premium & Fees

3 Year In‐Force Premium Growth(2010 – 2013 CAGR)

Group Benefits 83%Individual

Disability 17%

Group Disability 25%

29


•Stable loss ratios•Attractive margins•ROE of 14% +

U.S. Distribution Overview

PRINCIPAL CONNECTION

• 70 counselors with focus on education

CAREER

• 1,000 agents • Sell all products• Career places 80‐85% of sales within The Principal family products

BANKSINSURANCE-ORIENTED

INVESTMENT-ORIENTED

• Wirehouses• Regional

Broker/Dealers• Planners

• Insurance Producers

• Banks• Broker/

Dealers• Marketers

THIRD PARTYPROPRIETARY

ALLIANCE MANAGEMENT GROUP (AMG)Select 3rd party distributors with dedicated support

STRENGTHENS RELATIONSHIPS AND FUELS SALES GROWTH

All supported by DEDICATED SERVICE TEAMS providing education, training, counseling and retention

11 WHOLESALE CHANNELSGroup Benefits

Retirement Investment Solutions

Annuities NQDC Disability Insurance

Retail Life

AMG WorksiteESOP Wellness

30

DISTRIBUTION

National Presence with Local Employees

OUR VALUE TO ADVISORS:

● Solutions‐based selling

● Point of sale support

● Ongoing service and education support

● Pipeline development

● Practice management

● Advisor education

121 Total Offices

NOTE: Approximate view as of March 2012. Check www.principal.com for actual locations.31

DISTRIBUTION

Expanding Distribution Partnerships Have Generated Strong Sales Growth

3.1 3.8 3.77.6 6.6

2.85.7 6.5

10.514.5

1.2

1.5 1.4

2.5

3.3

0.9

1.5 1.4

1.7

2.0

2009 2010 2011 2012 2013

Individual Annuities

Separately Managed Accounts

Mutual Funds

Full Service Accum

$8.0BTotal: +35%CAGR:

$12.5B $13.0B $22.3B

32

$26.4B

DISTRIBUTION

Broad and Deep DistributionProprietary provides foundation; 3rd party provides accelerated growth

Rankings and percentages as of 12/31/2013

Product Line New Sales 1st 2nd 3rd Top 3

represent

NQ Life 39%

Retail Life Career LifeMark 55%

Individual Disability Career Plus Group 38%

Group Benefits Gallagher 13%

Fixed Annuities Santander Securities 41%

Variable Annuities Career Principal Connection

KeyCorp Ins. Agency 96%

Mutual Funds Career 24%

FSA – New Sales Assets 30%

FSA – New Sales Case Counts

Career Edward D. Jones 33%

33

DISTRIBUTION

• Serve clients in over 70 countries, including several major central banks and sovereign wealth funds

• Network of specialized investment boutiques managing assets for a broad range of investors around the world, including some of the world’s largest and most respected retirement funds

• Manages:

– 59% of Full Service Accumulation assets

– 75% of Principal Funds assets– 100% of Principal Life general account

assets

As of 9/30/14.

Principal Global InvestorsAssets Under Management

$307BBy Asset Class

34

Fixed Income$129B

Equity$111B

Real Estate$53B

Alternatives$14B

PRINCIPAL GLOBAL INVESTORS

At a Glance

Our Current Boutiques(AUM as of 9/30/14)

Principal Global Equities$78.2B

Principal Global Fixed Income

$77.3B

Private Real Estate$34.3B

CMBS$7.1B

Origin Asset Management

$3.2B

Edge Asset Management1

$19.5B

Fixed IncomeEquities

REITs$8.0B

Principal Enterprise Capital$5.1B

CIMB – Principal Islamic Asset Mgmt.

$0.66B3

Morley Financial Services$17.3B

Spectrum Asset Management

$17.1B

Macro Currency Group$9.1B

Post Advisory Group$9.5B

Multi‐Asset Advisors$0.712B2

Real EstateAsset Allocation/ Alternatives

Finisterre Capital$2.5B

Columbus Circle Investors$16.8B

Liongate Capital Management

$0.5B

35

1 Edge Asset Management advises on an additional $7.6B across asset classes for Retirement and Investor Services.2 Responsible for allocation decision‐making and implementation across a range of products and client portfolios, and for providing macro economic perspectives to guide allocations. Multi‐Asset Advisors advise on an additional $30B managed by multiple PGI boutiques.3 Total CIMB AUM is $1.6B with $1B sub‐advised to Principal Global Equities


Asset Management Expertise Wins Mandates

$82.4

$98.2 $109.4 $113.9

2011 2012 2013 3Q14

Principal Global InvestorsUnaffiliated AUM

(in billions)• Best Global Real Estate Fund over the 5‐year period (1)

• Top 10 Manager of Real Estate(2)

• 13th Largest Manager of High Yield(3)

• PFG ranked No.1 company among the Best Places to Work in Money Management(4)

Sources: (1) The Principal Real Estate Investors portfolio management team subadvises the Principal Global Real Estate Securities Fund‐Class l, which received the award from Lipper, Inc. for the second year in a row, March 2014. (2) Managers ranked by total worldwide real estate assets (net of leverage), as of June 30, 2014, “Largest Real Estate Managers”, PENSIONS & INVESTMENTS, October 27, 2014. (3) Managers ranked by U.S. institutional, tax‐exempt assets managed internally, as of 12/31/13. “Largest Money Managers”, Pensions & Investments, Online Research Center. (4) Pensions & Investments, “The Best Places to Work in Money Management among companies with our size category”, PFG recognition 12/09/2013.(5) Managers ranked by total assets under management. America’s Top 300 Money Manager, Institutional Investor, July 2014, data as of 12/31/2013.

36


Strong Investment Performance

Represents $159 billion AUM of which 74% managed by PGI boutiques

Morningstar Rankings Percentage of Principal Funds in the top two quartiles

58%

80%

67%66%

78%72%

85% 85% 88%

1‐Year 3‐Year 5‐Year

Sept. 30, 2013 Dec. 31, 2013 Sept. 30, 2014

37Principal “I” shares; if no “I” share class then “A” share class; separate accounts use “R6” rate level; Includes Principal mutual funds, separate accounts and collective investment trusts (CITs); Excludes money market, stable value and U.S. Property separate account.


PRINCIPAL FINANCIAL

GROUPMexico (1993)• Annuities, Mutual

Funds, Pensions, Asset Management

• AUM of $12.7B• Wholly owned

Chile (1995)• Annuities, Mutual Funds, Asset

Management, Mandatory Pensions, Voluntary Pensions

• AUM of $41.0B• Wholly owned• Cuprum – a 97.60% owned joint

ventureAUM of $35.5BTransaction closed 2/4/2013

Brazil (1999)• Annuities, Pensions,

Mutual Funds, Asset Management

• Brasilprev – a 25% owned joint venture with Banco do Brasil

AUM of $43.4B• Claritas – 62.73%

indirectly owned mutual fund company

AUM of $1.3B

India (2000)• Asset Management,

Mutual Funds• AUM of $0.6B• 70% owned joint venture

with Punjab National

Malaysia (2003)• Conventional & Islamic Asset

Management, Mutual Funds, Pensions

• AUM of $11.9B• CIMB‐Principal – 40% owned

joint venture with CIMB Group

China (2005)• Asset Management, Mutual

Funds • AUM of $13.8B• CCB‐Principal – a 25%

owned joint venture with China Construction Bank

Hong Kong (1996)• Asset Management, Mutual

Funds, Pensions• AUM of $3.8B• Wholly owned

Thailand (2010)• Asset Management, Mutual Funds• AUM of $1.1B• Wholly owned subsidiary of Malaysian JV

Indonesia (2007)• Asset Management,

Mutual Funds • AUM of $0.3B• Wholly owned

subsidiary of Malaysian JV

Singapore (2006)• Asset Management• AUM of $1.6M• Wholly owned subsidiary

of Malaysian JV

AUM as of 9/30/2014

PRINCIPAL INTERNATIONAL

38

We’re in the Right Countries

SOURCE: IMF, Standard Chartered Research.

TEN LARGEST ECONOMIES BY DECADECurrent Principal International locations: Asia Latin America

39

1990US$trn

1 U.S. 5.9

2 Japan 3.1

3 Germany 1.7

4 France 1.2

5 Italy 1.1

6 UK 1.0

7 Canada 0.6

8 Spain 0.5

9 Brazil 0.5

10 China 0.4

2000US$ trn

U.S. 10.3

Japan 4.7

Germany 1.9

UK 1.5

France 1.3

China 1.2

Italy 1.1

Canada 0.7

Brazil 0.6

Mexico 0.6

2010US$trn

U.S. 15.0China 5.9

Japan 5.5

Germany 3.3

France 2.5

UK 2.3

Italy 2.0

Brazil 2.1

Canada 1.6

Russia 1.5

2020EUS$ trn

U.S. 23.5China 21.9

Japan 6.1

Germany 5.1

India 4.5

Brazil 3.9

France 3.9

UK 3.7

Italy 2.7

Russia 2.6

2030EUS$ trn

China 53.8

U.S. 38.5

India 15.0

Japan 9.3

Germany 7.4

Brazil 6.3

UK 5.8

France 5.7

Indonesia 4.7

Russia 4.6


Joint Venture Partner Partner’s Industry Ranking Partner’s Distribution Reach

Banco do BrasilLargest bank in Latin America1

5,362 branches3

58.6 million customers3

2nd largest listed bank in world2

14,121 branches4

440 million retail customers4

5th largest universal banking group in ASEAN5

1,080 branches5

13.5 million retail customers5

2nd largest Nationalized bank in India6

6,075 branches7

82 million retail customers7

SOURCE: 1Global Finance 2013 in terms of AUM; 2Relbanks.com 2013 based on market capitalization 3Banco do BrasilAnnual Report 2012, 4CCB 2012 annual report – customers based on retail debit cards; 5CIMB Group 2012 Annual report –ranking in term of AUM,, 6Indian Banks’ Association 2013 in terms of assets 7Pnbindia.in 2013

Leveraging Strong Marquee Partners with Outstanding Distribution

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Pensions Mutual Funds

Asset Mgmt Annuities

Brazil

Chile

Mexico

China

Hong Kong

India

Malaysia/SE Asia

Our Markets and Product Offering

= Where we have a product offering today

TargetedMarkets

= Targeted expansion

= 10% of market share or Top 25% of providers

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Emerging Markets: The PI StoryWe are in the right markets

8% +

4%

Infla

tion

GDP

3%

“Low Inflation/Strong Growth”“Low Inflation/Slow Growth”

“High Inflation/Slow Growth ” “High Inflation/Strong Growth”

0

0

6% +

+Mexico

2.2% GDP Growth

Mature Economies

India

Indonesia

Hong Kong

Brazil

Chile

Malaysia

China

Thailand

(8.9% inflation)

(7.5% GDP)

Source: IMF. 2014 Estimates.

Singapore

Brasilprev – an outlier:Grew NCCF market share

in a volatile market

+


BRAZIL MEXICO CHILE

Brasilprev: #1 in net deposits

5th largest AFORE (by AUM)

#1 APV: PI Chile and Cuprum

PRINCIPAL IS 2ND LARGEST PENSION PROVIDERIN LATIN AMERICA

Proven Strength & Success

43Brazil source: Quantum. 12/12. Mexico source: CONSAR & PROCESAR. 5/13. Chile source: SP (Superintendencia de Pensiones) 12/12. Principal is 2nd largest pension provider in Latin America by AUM among multi‐country pension providers.

Latin AmericaPRINCIPAL INTERNATIONAL

CUPRUM: A “One‐Stop Shop”

44 ERM = Enterprise Risk Management

ChilePRINCIPAL INTERNATIONAL

HONG KONG

Among Top TenMPF* Providers

Building a Strong Foundation

MALAYSIA

#2 in PRS

CHINA

Top Ten for Mutual Funds

INDIA

1st mover in advisory services business

45*Mandatory Provident Fund. Malaysia source: Lipper. Percentage of market share as of 7/13. Hong Kong source: Lipper. Based on AUM as of 3/13. China source: Z‐Ben Advisors. Based on AUM as of 1/13. India source: Company data/media tracking at launch 11/12

PRINCIPAL INTERNATIONALAsia

Corporate Public Bonds

29%

Corporate Private Bonds

18%

Commercial Mortgages

15%CMBS

6%Cash2%

MBS6%

ABS5%

Government, Agency, State & Political

9%

Other*10%

Diversified Portfolio

$69.4 Billion

* Other includes Equity Securities, Residential Mortgages, Real Estate, Policy Loans, Investment in Equity Method subs, Direct Finance Leases and Other Investments

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Invested Assets & CashAs of 09/30/14GAAP carrying value

INVESTMENTS

• Liability‐driven investment approach

• Active asset/liability management• Optimized risk adjusted yields and

returns• High quality, well‐diversified

portfolio• Global collaboration and best

practices• Portfolio responsibility remains at

local country

Investment Philosophy & Strategy

REMAINS THE SAME

Assets & Liabilities Performed as Expected

‐$600

‐$400

‐$200

$0

$200

$400

$600

$800Jan‐12

Feb‐12

Mar‐12

Apr‐12

May‐12

Jun‐12

Jul‐1

2Au

g‐12

Sep‐12

Oct‐12

Nov

‐12

Dec‐12

Jan‐13

Feb‐13

Mar‐13

Apr‐13

May‐13

Jun‐13

Jul‐1

3Au

g‐13

Sep‐13

Oct‐13

Nov

‐13

Dec‐13

Jan‐14

Feb‐14

Mar‐14

Apr‐14

May‐14

Jun‐14

Jul‐1

4Au

g‐14

Sep‐14

In m

illions

Actual net assets & liabilities Modeled net assets & liabilities

47

INVESTMENTS

Power of our Fee‐Based Model

OPERATING EARNINGS

Continual shift in mix of business leading to a higher ROE and more free cash flow

62%16%

22%

Current

70%

15%

15%

2018E

Fee Spread Risk

48Fee includes Full Service Accumulation, Mutual Funds, Principal Global Investors, Principal International. Spread includes Individual Annuities, Bank and Trust Services, Investment Only, Full Service Payout. Risk includes U.S. Insurance Solutions.

30%

40%

30%

2001

FINANCIALS

40%

30%

30%

33%

33%

34%

Returning Capital to Shareholders

2007 Current 2018E

• Less capital needed to support organic growth• Moving to higher dividend payout ratio• Diligently pursuing active acquisition pipeline• Opportunistically buying back shares

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(Acquisitions & share buybacks)Organic Growth Dividends Available Capital

25%

25%50%

FINANCIALS

Driving ROE Growth

OCI = Other Comprehensive Income.

As Reported 2007 TTM 9/30/14

Operatingearnings $1.1B $1.28B

Average equity (x‐OCI) $6.5B $9.07B

Return on equity (x‐OCI) 16.4% 14.1%

EARNINGS

+ 4‐5% for market performance

+ 4‐5% for growth from sales/NCF

+ 1‐2% operational efficiency

EQUITY Fee‐based growth Dividend growth Opportunistic

share repurchases

ROE =50‐80 bps average annual

ROE improvement

FINANCIALS

50

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OpportunityYear

Announced Rationale

2013 Expand alternative asset class capabilities

2012 Complete offering in Chile with

marquee pension and savings franchise

2012 Entry into Brazil mutual fund and asset management market

2011 Enhance global equity investment capabilities

2011 Establish leadership in emerging markets fixed income investing

AFORE 2011 Solidify position as a leader in Mexican Afore market

BrasilPrev 2010 23 year extension of successful JV with Banco do Brasil

We’ve Played Offense Since

Recession

Emerged from financial crisis in a position of

strength and flexibility

Executing on our strategy to increase our global footprint and fee‐

based earnings

FINANCIALS

Merger & Acquisition Criteria

• Mid‐teens IRR• More accretive than buyback over time

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STRATEGIC

ABILITY TO ONBOARD

DISCIPLINED PRICING

• Aligns with our core competencies• Blend local talent with Principal expertise

• Synergies with multiple lines of business preferred

• Adds scale or a new niche

Have a diligent M&A process that optimizes long‐term results

52 IRR = Internal Rate of Return.

FINANCIALS

Strategic Acquisitions:$350M

OpportunisticShare Repurchases:

$550M

2011 2012Over $1.1 billion in total Allocated $2.1 billion

Quarterly Common Stock Dividends $230M

(70 to 78 cents, 11% increase)

Opportunistic Share Repurchases: $300M

Strategic Acquisitions:$1,595M

2013Allocated $480 million

Anti-dilution & Opportunistic Share

Repurchases: $150M(~$55M remaining)

Strategic Acquisition:$44M

YTD Quarterly Common Stock Dividends ~$288M

(23 cents for 1Q13 & 2Q13,26 cents for 3Q13 & 4Q13)

Annual Common Stock Dividends $215M

(27% increase over 2010)

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FINANCIALS

Capital Deployment

• More than $855M announced so far in 2014

$375M in common stock dividends

o Paid 3Q14 dividend of 32-cents per share

o Announced 4Q14 dividend of 34-cents per share

$200M authorized share repurchase program

o $72M in share repurchases in 3Q14

o $50M remains from current authorization

Redeemed $100M surplus note in 1Q14

$180M* for increased ownership in Columbus Circle Investors

• Active M&A pipeline

• Long term we expect to deploy 65-70 percent of our net income with

volatility in any given year

Capital Deployment

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FINANCIALS

*With expectation of an additional $40M spend over the next two years.

5‐Year 2014E

Accumulation

Net revenue growth 6‐8% 5‐7%

Pre‐tax RONR 28‐32% 30‐32%

Guaranteed

Net revenue growth 6‐8% (2)‐2%

Pre‐tax RONR 75‐80% 78‐80%

Net revenue = operating revenues less benefits, claims & settlement expenses less dividends to policyholders.RONR = Return on Net Revenue. Pre-tax operating margin = pre-tax operating earnings / premium and fees.*Combined basis includes all Principal International companies at 100%.

Retirement & Investor Services

U.S. Insurance Solutions5‐Year 2014E

IndividualLife

Premium & fee growth 4‐8% 3‐5%

Pre‐tax operating margin 16‐21% 14‐16%

SpecialtyBenefits

Premium & fee growth 8‐10% 3‐5%

Pre‐tax operating margin 8‐12% 10‐12%

Loss ratio 65‐71% 65‐71%

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Key Business Drivers Outlook

5‐Year 2014E

Revenue growth 14‐17% 7‐10%

Pre‐tax margin 30+% 26‐28%

Principal Global Investors

Principal International

5‐Year 2014E

Combined* net revenue growth 15‐20% 16‐18%

Combined pre‐tax RONR 55‐60% 50‐52%

Principal’s share of combined pre‐tax earnings N/A 36%

Estimated After-tax operating losses for Corporate of $130-$150 million in 2014

(1) Excludes discontinued operations. (2) Diluted. (3) Operating return on average equity excluding other comprehensive income, based on trailing 12 month period.

2001 2013 CAGR (’01-’13)

YTD 3Q13

YTD 3Q14 Change

OperatingEarnings(1) ($M)

$433 $1,060 8% $774 $994 28%

Earnings Per Share(2) $1.20 $3.55 9.5% $2.60 $3.33 28%

Assets Under Management ($B)

$98 $483 14% $466 $514 10%

ROE (TTM)(3) 6.9% 12.1% +520 bps 11.9% 14.1% +220 bps

Book Value Per Share (x‐OCI)

$17.81 $30.35 5% $29.79 $32.00 7%

S&P 500 1,148 1,848 4% 1,682 1,972 17%

Results Demonstrate Relative Strength of Our Business Model

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Exhibit 1 Principal Financial Group, Inc.Non-GAAP Financial Measure Reconciliations

(in millions, except as indicated)

Three Months Ended, Nine Months Ended,30-Sep-14 30-Jun-14 31-Mar-14 31-Dec-13 30-Sep-13 30-Sep-14 30-Sep-13

Stockholders' Equity x-OCI Available to Common Stockholders:Retirement and Investor Services 3,194.4$ 3,247.1$ 3,291.4$ 3,358.7$ 3,493.5$ 3,194.4$ 3,493.5$ Principal Global Investors 638.1 457.3 463.7 488.7 507.8 638.1 507.8 Principal International 3,430.9 3,483.2 3,407.9 3,385.3 3,361.4 3,430.9 3,361.4 U.S. Insurance Solutions 2,342.7 2,115.1 2,195.8 2,066.8 2,144.9 2,342.7 2,144.9 Corporate (211.8) (42.3) (274.7) (340.5) (753.5) (211.8) (753.5) Total stockholders' equity x-OCI available to common stockholders: 9,394.3 9,260.4 9,084.1 8,959.0 8,754.1 9,394.3 8,754.1 Net unrealized capital gains (losses) 1,088.4 1,122.1 919.3 700.6 695.5 1,088.4 695.5 Foreign currency translation (563.1) (373.9) (405.1) (361.5) (266.1) (563.1) (266.1) Net unrecognized postretirement benefit obligations (145.2) (148.8) (152.4) (155.9) (447.1) (145.2) (447.1) Preferred stock, at par 0.1 0.1 0.1 0.1 0.1 0.1 0.1 Paid in capital - preferred stock 541.9 541.9 541.9 541.9 541.9 541.9 541.9 Noncontrolling interest 52.6 57.5 70.0 92.8 95.0 52.6 95.0 Total stockholders' equity 10,369.0$ 10,459.3$ 10,057.9$ 9,777.0$ 9,373.4$ 10,369.0$ 9,373.4$

Book Value Per Common Share x-OCI:Book value x-OCI 32.00$ 31.52$ 30.81$ 30.35$ 29.79 32.00 29.79 Net unrealized capital gains (losses) 3.70 3.82 3.12 2.37 2.37 3.70 2.37 Foreign currency translation (1.92) (1.27) (1.37) (1.22) (0.91) (1.92) (0.91) Net unrecognized postretirement benefit obligations (0.49) (0.51) (0.52) (0.53) (1.52) (0.49) (1.52) Book Value Per Common Share including OCI 33.29$ 33.56$ 32.04$ 30.97$ 29.73$ 33.29$ 29.73$

Operating Earnings (Losses):Retirement and Investor Services 204.3$ 212.1$ 216.5$ 179.2$ 172.9$ 632.9$ 515.2$ Principal Global Investors 25.3 27.4 26.9 30.2 23.1 79.6 72.4 Principal International 73.8 68.0 63.3 61.6 50.7 205.1 153.6 U.S. Insurance Solutions 83.3 49.0 43.4 59.7 54.0 175.7 136.9 Corporate (33.0) (33.4) (33.0) (44.7) (31.5) (99.4) (104.2) Total operating earnings (losses) 353.7 323.1 317.1 286.0 269.2 993.9 773.9 Net realized capital gains (losses) (55.2) 30.8 (22.9) (52.3) (22.8) (47.3) (126.8) Other after-tax adjustments (57.8) (47.6) (0.5) (0.3) (0.7) (105.9) (0.8) Net Income (Loss) Available to Common Stockholders 240.7$ 306.3$ 293.7$ 233.4$ 245.7$ 840.7$ 646.3$

Operating Revenues:Retirement and Investor Services 1,324.7$ 1,265.1$ 1,261.2$ 1,460.0$ 1,136.5$ 3,851.0$ 3,387.6$ Principal Global Investors 173.6 173.2 171.1 236.4 160.9 517.9 482.8 Principal International 294.5 357.3 300.4 324.1 303.3 952.2 825.9 U.S. Insurance Solutions 821.0 811.4 804.4 787.8 767.6 2,436.8 2,318.6 Corporate (61.1) (64.4) (37.8) (66.7) (52.5) (163.3) (149.1) Total operating revenues 2,552.7 2,542.6 2,499.3 2,741.6 2,315.8 7,594.6 6,865.8 Net realized capital gains (losses), net of related revenue adjustments (68.2) 64.3 (21.1) (66.6) (76.7) (25.0) (253.4) Exited group medical insurance buisness (0.2) (0.2) 0.4 (2.4) 0.5 - 4.5 Total GAAP Revenues 2,484.3$ 2,606.7$ 2,478.6$ 2,672.6$ 2,239.6$ 7,569.6$ 6,616.9$

1

Exhibit 2 Principal Financial Group, Inc.Non-GAAP Financial Measure Reconciliations

(in millions, except as indicated)

Three Months Ended, Nine Months Ended,

30-Sep-14 30-Jun-14 31-Mar-14 31-Dec-13 30-Sep-13 30-Sep-14 30-Sep-13Operating Earnings ROE (x-OCI):Retirement and Investor Services 24.3% 23.6% 22.4% 20.6% 19.7% 24.3% 19.7%Principal Global Investors 19.2% 18.9% 19.0% 17.6% 16.7% 19.2% 16.7%Principal International 7.9% 7.2% 7.1% 8.3% 7.5% 7.9% 7.5%U.S. Insurance Solutions 10.5% 9.7% 9.4% 9.4% 9.8% 10.5% 9.8%Corporate N/M N/M N/M N/M N/M N/M N/MTotal operating earnings ROE (x-OCI) 14.1% 13.3% 13.0% 12.1% 11.9% 14.1% 11.9%Net realized capital gains (losses) -1.1% -0.8% -1.7% -2.0% -1.5% -1.1% -1.5%Other after-tax adjustments -1.2% -0.5% 0.0% 0.0% -0.3% -1.2% -0.3%Net income ROE available to common stockholders (x-OCI) 11.8% 12.0% 11.3% 10.1% 10.1% 11.8% 10.1%Net unrealized capital gains (losses) -1.1% -1.1% -1.1% -1.0% -1.1% -1.1% -1.1%Foreign currency translation 0.5% 0.3% 0.2% 0.2% 0.2% 0.5% 0.2%Net unrecognized postretirement benefit obligation 0.4% 0.4% 0.3% 0.3% 0.4% 0.4% 0.4%Net Income ROE Available to Common Stockholders (including OCI) 11.6% 11.6% 10.7% 9.6% 9.6% 11.6% 9.6%

Net Realized Capital Gains (Losses):Total net realized capital gains (losses) (55.2)$ 30.8$ (22.9)$ (52.3)$ (22.8)$ (47.3)$ (126.8)$ Certain derivative and hedging-related adjustments 21.9 22.7 21.8 23.2 25.6 66.4 70.7

Amortization of deferred acquisition costs and other actuarial balances 3.6 13.5 9.7 (2.3) (26.7) 26.8 (44.8) Certain market value adjustments of embedded derivatives (5.7) 0.1 (0.4) - (18.7) (6.0) (18.4) Capital gains distributed 8.8 6.2 3.1 14.7 0.2 18.1 11.1 Noncontrolling interest capital gains (losses) 0.1 0.1 - - 0.2 0.2 0.2 Tax impacts (19.8) 13.6 (10.6) (26.7) (8.9) (16.8) (74.7) Recognition of front-end fee revenues (0.1) (0.2) (0.1) 0.1 0.2 (0.4) 0.8 Net realized capital gains (losses) associated with exited group medical insurance business - - - - - - - Certain market value adjustments to fee revenues - - - - - - - GAAP Net Realized Capital Gains (Losses) (46.4)$ 86.8$ 0.6$ (43.3)$ (50.9)$ 41.0$ (181.9)$

Other After-Tax Adjustments:Exited group medical insurance business 0.3$ (0.1)$ (0.5)$ (0.3)$ (0.7)$ (0.3)$ (0.8)$ Impact of a court ruling on some uncertain tax positions - (47.5) - - - (47.5) - Impact of enactment of tax legislation in Chile (58.1) - - - - (58.1) - Contribution to Principal Financial Group Foundation, Inc. - - - - - - - Early extinguishment of debt - - - - - - - Total Other After-Tax Adjustments (57.8)$ (47.6)$ (0.5)$ (0.3)$ (0.7)$ (105.9)$ (0.8)$

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Principal Financial Group 101

Investor Relations

Transcript of Principal Financial Group 101