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The Principal Financial Group 101
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- 5. Organizational Structure Principal Financial Group Houston CEO ‐31/31 yrs* Lillis CFO – 33/33 yrs Retirement & Investor Services Everett ‐ President 24/24 yrs Principal Global Investors McCaughan –President 41/13 yrs Principal International Valdes – President 27/24 yrs U.S. Insurance Solutions Strable – President 26/26 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 2015. **Structural changes announced Feb 2015 will align Principal Funds & Principal Trust with Principal Global Investors. 5 COMPANY OVERVIEW
- 6. PRINCIPAL FINANCIAL GROUP Headquarters DesMoines, Iowa Mexico Pensions Annuities Mutual Funds Asset Management Chile Pensions – Mandatory Pensions – Voluntary Annuities Mutual Funds Asset Management Brazil Pensions Annuities Asset Management Mutual Funds India Mutual Funds Advisory Service Asset Management Malaysia Mutual Funds Asset Management Islamic Institutional Asset Management Pensions Hong Kong Pensions, Mutual Funds Asset Management China Mutual Funds Asset Management Principal Financial Group Global Presence Germany Asset Management Ireland Mutual Funds UK Asset Management Japan Asset Management Australia Asset Management Singapore Asset Management Thailand Mutual Funds Asset Management Indonesia Mutual Funds Asset Management Netherlands Asset Management UAE Asset Management 6 COMPANY OVERVIEW Malta Asset Management
- 7. 136 Years of Experience 1879 Life Assoc 1911 Mutual Life Co 1936 Mortgage Banking/ Commercial Mortgage 1941 Group Health & Pension 1968 Mutual Funds 1985 Principal Financial Group 1998 Principal Bank; Mutual Holding Co 2001 IPO; Spectrum 1990 Principal Intl 1970s Defined Contribution 1999 Principal Global Investors; BrasilPrev JV; Principal Asset Mgmt Co (India) 2002 Benefit Consultants Inc; Total Retirement Suite 2006 Washington Mutual Funds; WM Advisors 2008 CIMB‐Principal Islamic Asset Mgmt 2007 Morley 2011 HSBC Afore; Finisterre; Origin 1995 Principal Chile 1996 Principal Hong Kong 1997 Principal Mexico 2003 Post Advisory Group 2005 CCB Principal; Columbus Circle JV –Joint Venture IPO – Initial Public Offering 2010 BrasilPrev JV extension 2012 Claritas; Cuprum 2013 Liongate 7 COMPANY OVERVIEW 2014 AXA Hong Kong Pension
- 8. Name Age* Title(Industry/PFG)* Daniel J. Houston 54 President & Chief Executive Officer 31/31 Nora M. Everett 56 President ‐ Retirement & Investor Services 24/24 James P. McCaughan 62 President ‐ Global Asset Management 41/13 Deanna D. Strable 47 President ‐ U.S. Insurance Solutions 26/26 Luis E. Valdes 58 President ‐ International Asset Management and Accumulation 27/24 Timothy M. Dunbar 58 Executive VP & Chief Investment Officer 34/29 Terrance J. Lillis 63 Executive VP & Chief Financial Officer 33/33 Gary P. Scholten 58 Executive VP & Chief Information Officer 35/35 Karen E. Shaff 61 Executive VP, General Counsel & Secretary 33/33 Rex Auyeung 63 Chairman ‐ Principal Financial Group – Asia 38/21 David M. Blake 49 Senior Executive Director & Head Global Fixed Income 26/15 Elizabeth S. Brady 55 Senior VP & Chief Marketing Officer 31/2 Ned A. Burmeister 56 Senior VP & COO – Principal International 36/36 Gregory J. Burrows 53 Senior VP ‐ Retirement & Investor Services 29/29 Gregory B. Elming 55 Senior VP & Chief Risk Officer 33/33 Amy C. Friedrich 45 Senior VP – Specialty Benefits Division 18/15 Patrick G. Halter 56 Senior Executive Director – Principal Real Estate Investors 31/31 Julia M. Lawler 55 Senior Executive Director ‐ Multi Asset Allocation 33/31 Gregory A. Linde 59 Senior VP – Individual Life 36/23 Barbara A. McKenzie 55 Senior Executive Director & COO – Boutique Operations 31/31 Dennis J. Menken 52 Senior VP & Chief Investment Officer – Principal Life 21/21 Gerald W. Patterson 49 Senior VP ‐ Retirement & Investor Services 27/14 Elizabeth L. Raymond 49 Senior VP & Chief Human Resources Officer 24/15 Angela R. Sanders 52 Senior VP & Controller 26/26 Ellen W. Shumway 52 Senior Executive Director – Strategy & Boutique Operations 25/10 Roberto A. Walker 50 Senior VP & President, Principal Financial Group – LatAm 26/19 *As of 12/2015 8 Experienced Management Team COMPANY OVERVIEW
- 9. Retirement and Investor Services •#3 provider of DC plans1 •#1 provider of DB plans2 •#1 provider of ESOP plans3 •#6 manager of Target Date Funds4 Industry Leadership Sources: 1 PLANSPONSOR Recordkeeping Survey, June 2015, 2 PLANSPONSOR Defined Benefit Administration Survey, May 2015; 3 PLANSPONSOR Recordkeeping Survey, June 2015; 4In the United States. Strategic Insight Lifecycle FlowWatch report July 2015; 5Pensions & Investments, “The Best Places to Work in Money Management among companies with our size category”, PFG recognition 12/08/2014. 6 Managers ranked by total worldwide real estate assets (net of leverage), as of June 30, 2015. “Largest Real Estate Managers”, PENSIONS & INVESTMENTS, October 19, 2015.; 7Managers ranked by U.S. institutional, tax‐exempt assets managed internally, as of 12/31/14, “Largest Money Managers”, Pensions & Investments, May 2015. 8Commercial Property Executive Published April 2015 “2015 Greenest CRE Companies” list”. 9Fenaprevi, March 2015; 10Asociacion de Administradóras de Fondos Mutuos De Chile, 10/2014; 11Lipper. Percentage of market share as of 12/2014; 12Towers Watson. Based on AUM as of 09/2014; 13CONSAR & PROCESAR, October 2014; 14PLANSPONSOR NQDC Buyer’s Guide, July 2015; 15LIMRA 2015 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 •15th largest manager High Yield7 •#4 Greenest CRE Company8 Principal International •#1 market share – Brazil (Brasilprev)9 •#1 APV – Chile10 •#2 asset management – Malaysia11 •Top ten MPF provider – Hong Kong12 •#5 AFORE – Mexico13 U.S. Insurance Solutions •#1 Non‐qualified deferred compensation14 •#4 Non‐medical coverages15 •#5 IDI coverages16 9 COMPANY OVERVIEW
- 10. Financial Strength: Current Ratings (as of October 2015) • Moody's Investors Service 'A1', Good –fifth highest of 21 rating levels. Outlook: Stable • FitchRatings 'AA‐‘, Very Strong ‐ fourth highest of 19 rating levels. Outlook: Stable • Standard & Poor's ‘A+’, Strong ‐ fifth highest of 24 rating levels. Outlook: Stable • A.M. Best 'A+', Superior ‐ second highest of 16 rating levels. Outlook: Stable Ratings related to Principal Life Insurance Company and Principal National Life Insurance Company.10 COMPANY OVERVIEW
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- 14. 1.7 2.0 3.2 2.92.7 2.8 0.9 1.7 2.3 1.8 1.4 1.6 0.9 1.5 2.7 2.6 1.8 1.53.2 3.3 3.3 3.0 2.8 0 2 4 6 8 10 12 14 2010 2011 2012 2013 2014 2015 $ Billions 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 5.9 Balanced Sales Approach 14 6.7 8.5 11.5 10.3 8.7 Full Service Accumulation RETIREMENT AND INVESTOR SERVICES
- 15. 4.8 5.0 6.5 6.87.4 8.1 4.1 5.0 5.7 5.8 5.9 6.43.8 4.3 5.6 6.3 5.7 5.9 5.8 6.0 6.5 6.3 6.0 0 5 10 15 20 25 30 2010 2011 2012 2013 2014 2015 $Billions 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 20.4 People making a deferral +39%* Avg deferral per member +10%* People receiving a match +53%* 15 18.5 20.3 24.3 25.2 The Power of Payroll Deduction * 3Q10 compared to 3Q15. 25.0 Full Service Accumulation RETIREMENT AND INVESTOR SERVICES
- 16. Account Value by Manager 16 60.4% 58.4% 58.3%56.6% 55.8% 56.6% 57.1% 62.8% 12.7% 12.8% 11.1% 10.0% 10.3% 9.9% 9.2% 10.6% 20.1% 22.3% 23.3% 26.5% 26.9% 26.4% 26.4% 22.6% 6.9% 6.6% 7.3% 6.9% 7.1% 7.1% 7.3% 4.0% 0% 20% 40% 60% 80% 100% 2009 2010 2011 2012 2013 2014 3Q15 3Q15 YTD Deposits PGI managed Sub-advised Non-proprietary ER Securities Full Service Accumulation RETIREMENT AND INVESTOR SERVICES
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- 19. 1.9% 4.5% 4.2% 3.1% 6.7% 18.1% 12.5% 8.5% 2011 20122013 2014 Industry net flows Principal Funds net flows 1.0% 0.7% 0.3% -0.9% 3.5% 6.3% 1.7% 0.4% 2011 2012 2013 2014 401k Industry net flows Principal FSA net flows Full Service Accumulation (FSA) Net cash flows as % of beginning of year assets 2011‐2014. Sources of industry data: 401(k) industry – Department of Labor & Cerulli Associates 2014 (for 2014, 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 RETIREMENT AND INVESTOR SERVICES
- 20. TOP SELLING FUNDS TTM 3Q15 MidCap Fund$3.1B Global Diversified Income $2.9B Preferred Securities $2.1B High Yield Fund $1.8B Sam Portfolio Combined $1.5B TOTAL FOR TOP 5 $11.3B ASSET ALLOCATION LEADERSHIP • #6 largest lifecycle fund manager* • Target date & target risk • Multi‐manager solutions • Portfolio construction strategies: *Based on $41.4B in assets Strategic Insight 6/30/15 Lifecycle Report Needs‐Driven Investment Solutions Broad and unique asset allocation strategies 20 RETIREMENT AND INVESTOR SERVICES Principal Funds
- 21. Account Values – Then & Now 33% 45% 100% 22% Affiliated Distribution Third Party Broker/Dealers DCIO/RIA 17% 44% 100% 39% Affiliated Distribution Third Party Broker/Dealers DCIO/RIA Multiple Distribution Channels SALES –Then & Now 2006 $3.8B TTM 3Q15 $22.6B 2006 $14.7B 3Q15 $76.0B 21 DCIO = Defined Contribution Investment Only. RIA = Registered Investment Advisor RETIREMENT AND INVESTOR SERVICES Principal Funds
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- 23. Driving Industry Recognition and Advisor Engagement 16th largest advisor-soldfund family(1) Best Global Real Estate Fund Over the 5-Year Period 23 (1) Strategic Insights Mutual Fund Management Companies Rankings and Analysis, September 2015 #3 for Small Plan Investment Options with Strong Performance RETIREMENT AND INVESTOR SERVICES Principal Funds 2014 Best Mutual Fund Families: #5 Ranking
- 24. 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 RETIREMENT AND INVESTOR SERVICES
- 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 25 RETIREMENT AND INVESTOR SERVICES
- 26. INDIVIDUAL LIFE •Non‐Qualified Plans* 13.9%#1 •Total Life New Sales Premium 1.7% #19 SPECIALTY BENEFITS •Total Group In‐Force Contracts 7.1% #4 ‐ Life 9.5% #3 ‐ Disability 7.1% #5 ‐ Dental 5.0% #8 •Individual Disability In‐force Premium 8.4% #5 •Individual Disability New Sales Premium 15.8% #3 Success Reflects Expertise Serving SMB Market 2014 Industry Rank 2014 Market Share 26 Nonqualified Plans ranking from PLANSPONSOR Buyers Guide Survey, July 2015. All other rankings are from LIMRA 2013/2014. *Excludes governmental 457 plans. U.S. INSURANCE SOLUTIONS
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- 28. 5.0% 9.4% 3.1% 1.9% Group Benefits Individual DI The Principal Industry Dental/ Vision 47%Group Life 27% Balanced Portfolio plus Above Industry Premium Growth 2014 Total Premium & Fees 3 Year In‐Force Premium Growth (2011 – 2014 CAGR) Group Benefits 83%Individual Disability 17% Group Disability 26% 28 U.S. INSURANCE SOLUTIONS •Stable loss ratios •Attractive margins •ROE of 14% + Industry source: LIMRA 2011‐2014
- 29. 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 CHANNELS Group Benefits Retirement Investment Solutions Annuities NQDC Disability Insurance Retail Life AMG WorksiteESOP Wellness 29 DISTRIBUTION
- 30. 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. 30 DISTRIBUTION
- 31. Expanding Distribution Partnerships Have Generated Strong Sales Growth 3.1 3.8 3.7 7.66.6 7 2.8 5.7 6.5 10.5 14.5 14.4 1.2 1.5 1.4 2.5 3.3 2.4 0.9 1.5 1.4 1.7 2.0 2.0 2009 2010 2011 2012 2013 2014 Individual Annuities Separately Managed Accounts Mutual Funds Full Service Accum $8.0BTotal: +26% CAGR: $12.5B $13.0B $22.3B 31 $26.4B DISTRIBUTION $25.8B
- 32. Broad and Deep Distribution Proprietary provides foundation; 3rd party provides accelerated growth Rankings and percentages as of 12/31/2014 Product Line NewSales 1st 2nd 3rd Top 3 represent NQ Life 33% Retail Life 59% Individual Disability Plus Group 39% Group Benefits Gallagher 14% Fixed Annuities 52% Variable Annuities KeyCorp Ins. Agency 94% Mutual Funds 23% FSA – New Sales Assets 35% FSA – New Sales Case Counts Edward D. Jones 33% 32 DISTRIBUTION Principal Advisor Network Principal Advisor Network Principal Advisor Network Principal Advisor Network Principal Advisor Network Principal Advisor Network Principal Advisor Network Principal Advisor Network
- 33. • 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 •Manages: – 61% of Full Service Accumulation assets – 75% of Principal Funds assets – 100% of Principal Life general account assets • Office locations in major financial markets worldwide • Long‐standing commitment to corporate stewardship As of 09/30/2015 Principal Global Investors Assets Under Management $324.3B By Asset Class 33 Fixed Income $141B Equity $108B Real Estate $61B Alternatives $14B PRINCIPAL GLOBAL INVESTORS At a Glance
- 34. Our Current Boutiques (AUM as of 09/30/15) Principal Global Equities $63.3B Principal Global Fixed Income $86.5B Private Real Estate $37.6B CMBS $7.4B Origin Asset Management $3.3B Edge Asset Management1 $20.6B Fixed IncomeEquities REITs $10.1B Principal Enterprise Capital $6.2B Morley Financial Services $16.9B Spectrum Asset Management $19.4B Macro Currency Group $7.8B Post Advisory Group $10.7B Multi‐Asset Advisors $0.9B2 Real Estate Asset Allocation/ Alternatives Finisterre Capital $3.2B Columbus Circle Investors $14.4B 34 Principal Portfolio Strategies advised on $86.5B of AUM as of 09/30/2015. Most of that AUM is listed in the boutique values above. CIMB AUM moved to Principal International as of 06/30/2015. Liongate Capital Management AUM not included. 1 Edge Asset Management advises on an additional $8.2B across asset classes for Retirement and Investor Services. 2Responsible 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 $27.5B managed by multiple PGI boutiques. PRINCIPAL GLOBAL INVESTORS Aligned Investors $15.8B
- 35. Asset Management Expertise Wins Mandates $82.4 $98.2 $109.4 $114.0 $120.2 2011 20122013 2014 3Q15 Principal Global Investors Unaffiliated AUM (in billions) • Best Global Real Estate Fund over the 5‐year period (1) • Top 10 Manager of Real Estate (2) • 15th 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 third year in a row, March 2015. (2) Managers ranked by total worldwide real estate assets (net of leverage), as of June 30, 2015, “Largest Real Estate Managers”, PENSIONS & INVESTMENTS, October 19, 2015. (3) Managers ranked by U.S. institutional, tax‐exempt assets managed internally, as of 12/31/14 “Largest Money Managers”, Pensions & Investments, May 2015. (4) Pensions & Investments, “The Best Places to Work in Money Management among companies with our size category”, PFG recognition 12/08/2014.(5) Managers ranked by total assets under management. America’s Top 300 Money Manager, Institutional Investor, July 2015, data as of 12/31/2014. 35 PRINCIPAL GLOBAL INVESTORS
- 36. Strong Investment Performance Morningstar Rankings Percentage of Principal Funds in the top two quartiles 85% 85% 88% 87% 87% 91% 86% 91%91% 1‐Year 3‐Year 5‐Year Sep. 30, 2014 Jun. 30, 2015 Sep. 30, 2015 36 Represents $164 billion of assets under management of which 75% is managed by Principal Global Investors. Principal “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 GLOBAL INVESTORS
- 37. PRINCIPAL FINANCIAL GROUP Mexico (1993) •Annuities, Mutual Funds, Pensions, Asset Management • AUM of $10.5B • Wholly owned Chile (1995) • Annuities, Mutual Funds, Asset Management, Mandatory Pensions, Voluntary Pensions • AUM of $37.8B • Wholly owned • Cuprum – a 98% owned joint venture AUM of $32.6B Brazil (1999) • Annuities, Pensions, Mutual Funds, Asset Management • Brasilprev – a 25% owned joint venture with Banco do Brasil AUM of $35.3B • Claritas – 71% indirectly owned mutual fund company AUM of $0.9B India (2000) • Asset Management, Mutual Funds • AUM of $0.7B • 79% owned joint venture with Punjab National Malaysia (2003) • Conventional & Islamic Asset Management, Mutual Funds, Pensions • AUM of $11.4B • CIMB‐Principal – 40% owned joint venture with CIMB Group; 50% owned Islamic company with CIMB China (2005) • Asset Management, Mutual Funds • AUM of $41.5B • CCB‐Principal – a 25% owned joint venture with China Construction Bank Hong Kong (1996) • Asset Management, Mutual Funds, Pensions • AUM of $7.1B • AXA – Transaction closed on 9/1/2015 adding AUM of $3.1B • Wholly owned Thailand (2010) • Asset Management, Mutual Funds • AUM of $2.2B • 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 $1.8M • Wholly owned subsidiary of Malaysian JV AUM as of 09/30/2015 PRINCIPAL INTERNATIONAL 37
- 38. We’re in the Right Countries SOURCE: IMF, Standard Chartered Research. TEN LARGEST ECONOMIES BY DECADE Current Principal International locations: Asia Latin America 38 1990 US$ 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 2000 US$ 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 2010 US$ trn U.S. 15.0 China 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 2020E US$ trn U.S. 23.5 China 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 2030E US$ 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 PRINCIPAL INTERNATIONAL
- 39. Joint Venture Partner Partner’s Industry Ranking Partner’s Distribution Reach Banco do Brasil Largest bank in Latin America1 5,524 branches2 61 million customers2 2nd largest listed bank in world3 14,650 branches4 632 million retail customers4 5th largest banking group in ASEAN5 1,057 branches6 13 million retail customers5 3rdlargest Nationalized bank in India7 6,081 branches8 89 million retail customers8 SOURCE: 1Relbanks.com December 2014 in terms of AUM; 2Banco do Brasil Annual Report 2014; 3Relbanks.com December 2014 in terms of AUM; 4CCB 2014 annual report – customers based on retail debit cards; 5CIMB Group 2014 Annual report – ranking in terms of AUM; 6CIMB Group 2013 4Q Analyst Presentation; 7Indian Banks’ Association 2014 in terms of assets; 8PNBIndia.com in 2014 Leveraging Strong Marquee Partners with Outstanding Distribution 39 PRINCIPAL INTERNATIONAL
- 40. 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 Targeted Markets = Targeted expansion = 10% of market share or Top 25% of providers 40 PRINCIPAL INTERNATIONAL
- 41. 41 Emerging Markets: The PI Story We are in the right markets8% +4% Inflation 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 + PRINCIPAL INTERNATIONAL
- 42. BRAZIL MEXICO CHILE Brasilprev: #1 in net deposits and total market share 5th largest AFORE (by AUM) #1 APV: PI Chile and Cuprum PRINCIPAL IS 2ND LARGEST PENSION PROVIDER IN LATIN AMERICA Proven Strength & Success 42 Brazil source: Fenaprevi. 3/15. Mexico source: CONSAR & PROCESAR. 11/14. Chile source: Asociacionde Administradóras de Fondos Mutuos De Chile. 10/14. Principal is 2nd largest pension provider in Latin America by AUM among multi‐country pension providers. Latin America PRINCIPAL INTERNATIONAL
- 43. HONG KONG Among Top Ten MPF* Providers Building a Strong Foundation MALAYSIA #2 in PRS CHINA Top Ten for Mutual Funds INDIA 1st mover in advisory services business 43 *Mandatory ProvidentFund. Malaysia source: Lipper. Percentage of market share as of 12/14. Hong Kong source: Towers Watson. Based on AUM as of 9/14. China source: East Fortune. Based on AUM as of 12/14. India source: Company data/media tracking at launch 11/12 PRINCIPAL INTERNATIONAL Asia
- 44. Corporate Public Bonds 27% Corporate Private Bonds 17% Commercial Mortgages 16% CMBS 5% Cash 3% MBS 6% ABS 5% Government,Agency, State & Political 10% Other* 11% Diversified Portfolio $72.1 Billion * Other includes Equity Securities, Residential Mortgages, Real Estate, Policy Loans, Investment in Equity Method subs, Direct Finance Leases and Other Investments 44 Invested Assets & Cash As of 09/30/15 GAAP 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
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- 47. 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 47 (Acquisitions & share buybacks) Organic Growth Dividends Available Capital 25% 25% 50% FINANCIALS
- 48. Driving ROE Growth OCI = Other Comprehensive Income. As Reported 2007 2014 Operating earnings $1.1B $1.3B Average equity (x‐OCI) $6.5B $9.3B Return on equity (x‐OCI) 16.4% 14.2% 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 48
- 49. 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 49 Opportunity Year Announced Rationale AXA Hong Kong Pension 2014 15 year exclusive distribution with 4,440 agents Gateway into China 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 FINANCIALS
- 50. Merger & Acquisition Criteria • Mid‐teens IRR • More accretive than buyback over time 1 2 3 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 50 IRR = Internal Rate of Return. FINANCIALS
- 51. Capital Deployment Strategic Acquisitions: $350M Share Repurchases: $550M 2011 2012 Over $1.1billion in total Allocated $2.1 billion Common Stock Dividends: $230M Share Repurchases: $300M Strategic Acquisitions: $1,595M 2013 Allocated $480 million Share Repurchases: $150M Strategic Acquisition: $44M Common Stock Dividends: $288M Common Stock Dividends: $215M 51 2014 Allocated $855 million Share Repurchases: $200M Strategic Acquisition: $180M Surplus Note Redemption: $100M Common Stock Dividends: $375M Long term: expect to deploy 65–70 percent of our net income with fluctuations in any given year FINANCIALS
- 52. Capital Deployment • As oftoday, we have deployed $885M of capital, outlined below: − $330M in common stock dividends Paid 1Q15, 2Q15, and 3Q15 dividends of 36, 38, and 38 cents per share respectively − $200M shares repurchased − $335M for AXA’s Hong Kong pension business − $20M for increased ownership in PGI boutiques • With the announced 4Q15 dividend of 38-cents, a 12% increase over 4Q14, we have committed to deploy nearly $1B in 2015 • In addition, we accelerated our 2016 capital deployment plans by announcing a new $150M share repurchase program • Long term: expect to deploy 65–70 percent of our net income with fluctuations in any given year FINANCIALS 52
- 53. 5‐Year 2015E Accumulation Net revenue growth 6‐8% 4‐6% Pre‐tax RONR28‐32% 30‐33% 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 Solutions 5‐Year 2015E Individual Life Premium & fee growth 4‐8% 3‐5% Pre‐tax operating margin 16‐21% 13‐16% Specialty Benefits Premium & fee growth 8‐10% 6‐8% Pre‐tax operating margin 8‐12% 10‐12% Loss ratio 65‐71% 64‐70% 53 Key Business Drivers Outlook 5‐Year 2015E Revenue growth 14‐17% 7‐10% Pre‐tax margin 30+% 26‐28% Principal Global Investors Principal International 5‐Year 2015E Combined* net revenue growth (normalized local basis) 15‐20% 14‐16% Combined net revenue growth (in reported USD) 15‐20% 8‐10% Combined pre‐tax RONR 55‐60% 50‐52% Principal’s share of combined pre‐tax earnings N/A 35% Estimated After-tax operating losses for Corporate of $130-$150 million in 2015 FINANCIALS
- 54. (1) Excludes discontinued operations. (2) Diluted. (3) Operating return on average equity excluding other comprehensive income, based on trailing 12 month period. 2001 2014 CAGR (’01-’14) YTD 3Q14 YTD 3Q15 Change Operating Earnings(1) ($M) $433$1,318 9% $993.9 $967.3 ‐3% Earnings Per Share(2) $1.20 $4.41 10.5% $3.33 $3.24 ‐3% Assets Under Management ($B) $98 $519 14% $514 $516 0% ROE (TTM)(3) 6.9% 14.2% +730 bps 14.1% 13.2% ‐90 bps Book Value Per Share (x‐OCI) $17.81 $32.64 5% $32.00 $34.56 8% S&P 500 1,148 2,059 5% 1,972 1,920 ‐3% Results Demonstrate Relative Strength of Our Business Model 54 FINANCIALS
- 55. Exhibit 1 PrincipalFinancial Group, Inc. Non-GAAP Financial Measure Reconciliations (in millions, except as indicated) Three Months Ended, Nine Months Ended, 30-Sep-15 30-Jun-15 31-Mar-15 31-Dec-14 30-Sep-14 30-Sep-15 30-Sep-14 Stockholders' Equity x-OCI Available to Common Stockholders: Retirement and Investor Services 3,174.5$ 3,192.1$ 3,145.1$ 3,124.0$ 3,194.4$ 3,174.5$ 3,194.4$ Principal Global Investors 621.0 619.7 609.8 602.8 638.1 621.0 638.1 Principal International 3,973.7 3,625.2 3,584.4 3,463.4 3,430.9 3,973.7 3,430.9 U.S. Insurance Solutions 2,470.0 2,398.9 2,333.4 2,288.0 2,342.7 2,470.0 2,342.7 Corporate (94.5) 184.1 179.9 113.4 (211.8) (94.5) (211.8) Total stockholders' equity x-OCI available to common stockholders: 10,144.7 10,020.0 9,852.6 9,591.6 9,394.3 10,144.7 9,394.3 Net unrealized capital gains (losses) 967.2 927.6 1,246.7 1,148.3 1,088.4 967.2 1,088.4 Foreign currency translation (1,116.4) (867.1) (819.6) (686.8) (563.1) (1,116.4) (563.1) Net unrecognized postretirement benefit obligations (375.2) (387.1) (399.1) (411.1) (145.2) (375.2) (145.2) Preferred stock, at par - - 0.1 0.1 0.1 - 0.1 Paid in capital - preferred stock - - 541.9 541.9 541.9 - 541.9 Noncontrolling interest 65.5 69.2 69.5 48.0 52.6 65.5 52.6 Total stockholders' equity 9,685.8$ 9,762.6$ 10,492.1$ 10,232.0$ 10,369.0$ 9,685.8$ 10,369.0$ Book Value Per Common Share x-OCI: Book value x-OCI 34.56$ 34.00$ 33.47$ 32.64$ 32.00 34.56 32.00 Net unrealized capital gains (losses) 3.30 3.14 4.23 3.91 3.70 3.30 3.70 Foreign currency translation (3.80) (2.94) (2.78) (2.34) (1.92) (3.80) (1.92) Net unrecognized postretirement benefit obligations (1.28) (1.31) (1.36) (1.40) (0.49) (1.28) (0.49) Book Value Per Common Share including OCI 32.78$ 32.89$ 33.56$ 32.81$ 33.29$ 32.78$ 33.29$ Operating Earnings (Losses): Retirement and Investor Services 163.3$ 216.7$ 210.9$ 195.2$ 204.3$ 590.9$ 632.9$ Principal Global Investors 30.4 31.5 30.7 36.4 25.3 92.6 79.6 Principal International 45.8 59.3 59.9 62.9 73.8 165.0 205.1 U.S. Insurance Solutions 114.5 58.8 55.1 55.6 83.3 228.4 175.7 Corporate (37.0) (42.4) (30.2) (26.1) (33.0) (109.6) (99.4) Total operating earnings (losses) 317.0 323.9 326.4 324.0 353.7 967.3 993.9 Net realized capital gains (losses) (16.5) (82.8) 13.1 (53.2) (55.2) (86.2) (47.3) Other after-tax adjustments (0.1) - 74.7 (0.4) (57.8) 74.6 (105.9) Net Income (Loss) Available to Common Stockholders 300.4$ 241.1$ 414.2$ 270.4$ 240.7$ 955.7$ 840.7$ Operating Revenues: Retirement and Investor Services 1,957.5$ 2,108.6$ 1,319.4$ 1,672.3$ 1,324.7$ 5,385.5$ 3,851.0$ Principal Global Investors 182.8 188.4 186.6 208.0 173.6 557.8 517.9 Principal International 311.2 315.0 236.2 323.2 294.5 862.4 952.2 U.S. Insurance Solutions 853.2 857.8 861.7 825.8 821.0 2,572.7 2,436.8 Corporate (69.0) (63.0) (59.3) (69.1) (61.1) (191.3) (163.3) Total operating revenues 3,235.7 3,406.8 2,544.6 2,960.2 2,552.7 9,187.1 7,594.6 Net realized capital gains (losses), net of related revenue adjustments 4.8 (141.3) 45.6 (52.4) (68.2) (90.9) (25.0) Other income on an indemnified uncertain tax position - (6.7) 66.9 - - 60.2 - Exited group medical insurance buisness 0.4 0.4 0.2 0.2 (0.2) 1.0 - Total GAAP Revenues 3,240.9$ 3,259.2$ 2,657.3$ 2,908.0$ 2,484.3$ 9,157.4$ 7,569.6$
- 56. Exhibit 2 PrincipalFinancial Group, Inc. Non-GAAP Financial Measure Reconciliations (in millions, except as indicated) Three Months Ended, Nine Months Ended, 30-Sep-15 30-Jun-15 31-Mar-15 31-Dec-14 30-Sep-14 30-Sep-15 30-Sep-14 Operating Earnings ROE (x-OCI): Retirement and Investor Services 24.7% 25.7% 25.6% 25.5% 24.3% 24.7% 24.3% Principal Global Investors 20.5% 23.0% 22.3% 21.2% 19.2% 20.5% 19.2% Principal International 6.2% 7.2% 7.6% 7.8% 7.9% 6.2% 7.9% U.S. Insurance Solutions 11.8% 11.2% 10.7% 10.6% 10.5% 11.8% 10.5% Corporate N/M N/M N/M N/M N/M N/M N/M Total operating earnings ROE (x-OCI) 13.2% 13.8% 14.0% 14.2% 14.1% 13.2% 14.1% Net realized capital gains (losses) -1.5% -1.9% -0.7% -1.1% -1.1% -1.5% -1.1% Other after-tax adjustments 0.8% 0.2% -0.3% -1.1% -1.2% 0.8% -1.2% Net income ROE available to common stockholders (x-OCI) 12.5% 12.1% 13.0% 12.0% 11.8% 12.5% 11.8% Net unrealized capital gains (losses) -1.2% -1.2% -1.3% -1.1% -1.1% -1.2% -1.1% Foreign currency translation 1.0% 0.7% 0.7% 0.6% 0.5% 1.0% 0.5% Net unrecognized postretirement benefit obligation 0.3% 0.3% 0.3% 0.3% 0.4% 0.3% 0.4% Net Income ROE Available to Common Stockholders (including OCI) 12.6% 11.9% 12.7% 11.8% 11.6% 12.6% 11.6% Net Realized Capital Gains (Losses): Total net realized capital gains (losses) (16.5)$ (82.8)$ 13.1$ (53.2)$ (55.2)$ (86.2)$ (47.3)$ Certain derivative and hedging-related adjustments 34.2 26.4 19.7 26.4 21.9 80.3 66.4 Amortization of deferred acquisition costs and other actuarial balances 28.6 (16.2) 16.0 22.5 3.6 28.4 26.8 Certain market value adjustments of embedded derivatives 1.1 - 0.9 1.2 (5.7) 2.0 (6.0) Capital gains distributed (12.9) 2.9 (4.8) 3.1 8.8 (14.8) 18.1 Noncontrolling interest capital gains (losses) 3.7 (0.8) 2.8 0.8 0.1 5.7 0.2 Tax impacts 0.9 (44.4) 17.6 (26.8) (19.8) (25.9) (16.8) Recognition of front-end fee revenues (0.1) 0.3 (0.2) (0.3) (0.1) - (0.4) Net realized capital gains (losses) associated with exited group medical insurance business (0.1) - - - - (0.1) - Certain market value adjustments to fee revenues - - 1.1 - - 1.1 - Certain adjustments related to seed money (0.5) - - - - (0.5) - GAAP Net Realized Capital Gains (Losses) 38.4$ (114.6)$ 66.2$ (26.3)$ (46.4)$ (10.0)$ 41.0$ Other After-Tax Adjustments: Exited group medical insurance business (0.1)$ -$ (0.2)$ (0.4)$ 0.3$ (0.3)$ (0.3)$ Impact of a court ruling on some uncertain tax positions - - (30.3) - - (30.3) (47.5) Impact of enactment of tax legislation in Chile - - - - (58.1) - (58.1) Change in deferred tax balances related to merged Chilean entities - - 105.2 - - 105.2 - Contribution to Principal Financial Group Foundation, Inc. - - - - - - - Early extinguishment of debt - - - - - - - Total Other After-Tax Adjustments (0.1)$ -$ 74.7$ (0.4)$ (57.8)$ 74.6$ (105.9)$