Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — IPO Roadshow (June 2008)
104 slides from Principal Financial's IPO roadshow presentation, Jun 18, 2008
Slide 1: Fixed Income Analyst Conference June 18, 2008
Fixed Income Analyst Conference June 18, 2008
Slide 2: Table of Contents
Table of Contents Tab 1: Company Overview Tab 2: Financial Overview and Risk Management Tab 3: Investment Portfolio Tab 4: Principal Global Investors Tab 5: Appendix (non-GAAP reconciliations)
Slide 3: Forward Looking Statements & Legal Notice
Forward Looking Statements & Legal Notice Certain statements made by Principal Financial Group, Inc. and its subsidiaries ("the Company") which are not historical facts may be considered forward-looking statements, including, without limitation, statements as to sales targets, sales and earnings tre
Slide 4: Use of Non-GAAP Financial Measures
Use of Non-GAAP Financial Measures A non-GAAP financial measure is a numerical measure of our performance, financial position, or cash flows that includes adjustments from a comparable financial measure presented in accordance with U.S. GAAP. We use a number of non-GAAP financial measures that manag
Slide 5: Simplified Organizational Structure
Principal Financial Group (r) Simplified Organizational Structure Principal Financial Group, Inc. Principal Financial Services, Inc. Principal Life Insurance Company* Principal International Entities Other Subsidiaries Principal Global Investors, LLC Other Subsidiaries Principal Financial Group (r)
Slide 6: Financial Reporting Structure
Principal Financial Group (r) Financial Reporting Structure Principal Financial Group, Inc. Principal Financial Services, Inc. U.S. Asset Accumulation Global Asset Management International Asset Mgmt & Accum (IAMA) Life & Health Insurance Principal International Individual Life Insurance Health Insu
Slide 7: Company Overview
Company Overview
Slide 8: The Principal Edge: Putting Strengths to Work
The Principal(r) Edge: Putting Strengths to Work Our Growth Strategy: Maximize strong presence in SMB market Capitalize on retirement-centric experience Leverage multi-channel distribution Maximize Worksite marketing advantage Expand in select markets internationally Seek to exceed the investment an
Slide 9: Sound Growth Strategy
Sound Growth Strategy Deepen SMB market penetration Deliver complete retirement solutions within comprehensive employee benefits package Expand distribution footprint Capitalize on global asset management expertise Leverage retirement leadership/expertise in select international markets Extend retir
Slide 10: Key Drivers of Long-Term Growth
Key Drivers of Long-Term Growth Trends create opportunity 1 Strengths & strategy to capitalize on trends Execution drives results 2 3
Slide 11: Trends Create Opportunity
Trends Create Opportunity By 2030, individuals must fund 76% of their retirement income* Increasing demand for trusted advisors Retiring Baby Boomers Savings acceleration; Income stream protection; estate planning Personal responsibility Increasing complexity & risk Global privatization of retiremen
Slide 12: Strengths & Strategy to Capitalize on Trends
Strengths & Strategy to Capitalize on Trends Baby Boomer Needs Personal Responsibility Increasing Complexity & Risk Retirement leadership Retail capabilities Income management solutions "Do-it-For-Me" solutions Worksite benefits counseling Advisor-based distribution Comprehensive solutions Bundled o
Slide 13: Retirement Leader Delivers Complete Solutions
Growth Fueled by Strengths: Retirement Leader Delivers Complete Solutions #1 Bundled 401(k) plans (1) #1 ESOP (2) #1 NQ-401(k) mirror plans (3) #1 Defined Benefit (4) #2 Fully bundled TRO plans (5) #3 Plan termination annuities (6) Sources: (1)Spectrem Group 2006, (2)PlanSponsor 06/07, (3)PlanSponso
Slide 14: Rising Retail Position
Growth Fueled by Strengths: Rising Retail Position Substantial added scale Intermediary distribution Improved combined product suite Investment professionals Range of lifecycle funds Target date (Lifetime) Risk based (SAM) 4th largest manager of lifecycle funds* *Source: Financial Research Corporati
Slide 15: Income Management Solutions
Growth Fueled by Strengths: Income Management Solutions Accumulation: IRAs 401(k) Mutual Funds Annuities Life Insurance Income: Inflation Protection Fund LifeTime Strategic Income Fund Target Date & Target Risk Funds VA with GMWB Income Annuities (COLA opt.) The Principal is well-positioned to turn
Slide 16: Proven Do-It-For-Me Features
Financial solutions for the rest of us Proactive, face-to-face guidance Milestones Complete view of retirement savings in one, easy-to- manage portfolio Personalized action plan Autopilot features: Auto enrollment Auto increase Lifecycle funds 75% Of workers prefer to have someone else manage their
Slide 17: Worksite Benefits Counseling Improves Plan Economics
Growth Fueled by Strengths: Worksite Benefits Counseling Improves Plan Economics* With RetireSecure** (as of 03/31/08) With WorkSecure** (as of 03/31/08) Close Ratio (by contract) +39%*** +100% Participation +24% +53% Avg Deferral rate +5% n/a Average annual premium per participant n/a +39% * Compar
Slide 18: Expanding Distribution Power
2001 2007 CAGR Alliance sales* $0.4 B $3.8 B 45% Total Sales* $3.3B $9.5B 19% * Based on assets Wirehouses Insurance Producers Regional Broker Dealers (B/Ds) Planners/ Independent B/Ds Bank, B/Ds and Marketers Growth Fueled by Strengths: Expanding Distribution Power 18
Slide 19: National Network of Sales, Service and Consulting Resources
Sales and business development 285 Consultants* 303 Client service 260 848 *Worksite benefits counselors; education specialists; Total Retirement Suite, ESOP and actuarial consultants; and retention and income management specialists. Growth Fueled by Strengths: National Network of Sales, Service and
Slide 20: Comprehensive, Needs-Based Solutions
Growth Fueled by Strengths: Comprehensive, Needs-Based Solutions "Total Retirement Solutions" provider: Comprehensive retirement plan consulting and administration for all plan designs, including DB, DC, ESOP, and NQ Benefits to Employers Best-in-class products Principal Connection to assist employe
Slide 21: Broad Offerings to Capitalize on PPA
Growth Fueled by Strengths: Broad Offerings to Capitalize on PPA Our comprehensive suite : Auto enrollment and increase options since 2000 Expanded education & guidance capabilities DC consulting for transitions from DB to DC DB plan analysis, design, freeze & termination DB(k) and other innovations
Slide 22: SMB Expertise
Growth Fueled by Strengths: SMB Expertise USAA IAMA L&H GAM* 655.8 110.7 221.1 108.5 4QYTD Individual Life 92 Health 34.8 Specialty Benefits 94.3 *Sources: National Underwriter 08/07 and LIMRA International, 03/06; Life ranking based on statutory assets, Health ranking based on premiums earned and N
Slide 23: Principal Global Investors Rankings
Sources for rankings for PGI: Pensions & Investments 12/05, 6/06, 12/06, 5/07, 6/07, 10/07; Institutional Investor 7/07 ?Principal Global Investors AUM of $242.4 billion as of 03/31/08*? Asset Category 2007 Rank 2007 Rank Stable Value Stable Value #3 U.S. Real Estate U.S. Real Estate #4 Fixed Income
Slide 24: Top Tier Investment Expertise
Retirement Assets in Top Two Morningstar Performance Quartiles (as of 03/31/08) Retirement Assets in Top Two Morningstar Performance Quartiles (as of 03/31/08) 1yr 64% 3yr 76% 5yr 72% 2001 2006 2007 1Q08 East 7.3 59.2 87.4 86.6 Principal Global Investors Third Party AUM 51% 6-Year CAGR Growth Fueled
Slide 25: Strong International Momentum
(1) As of 12/31/07 (2) IAM - Institutional Asset Management (3) As of 12/31/07. China AUM not included in reported totals due to level of ownership in joint venture (4) Twelve months ended 12/31/03 through twelve months ended 12/31/07 ? A customer base 6.5 million strong (1)? Growth Fueled by Streng
Slide 26: Disciplined Capital Management
Growth Fueled by Strengths: Disciplined Capital Management 1. ORGANIC GROWTH 2.STRATEGIC ACQUISITION 3. RETURN TO SHAREHOLDERS
Slide 27: Execution Drives Strong Results
Execution Drives Strong Results '01 '07 CAGR ('01-'07) Operating Earnings* ($M) $577 $1,058 11% Net Income ($M) $359 $827 15% Wtd. Avg. Shares (M)** 362 268 -5% EPS** $1.59 $3.95 16% AUM ($B)* $98 $311 21% ROE*** 8.9% 16.4% +750 bps Note: data in tables throughout presentation have generally been ro
Slide 28: Targeting Strong Long-Term Growth
Targeting Strong Long-Term Growth (1) Actual quarterly and annual results may fall outside the average annual range. Longer-term growth expectations should be applied to normalized results. (2) Operating return on average equity excluding accumulated other comprehensive income, calculated over the t
Slide 29: Strengths of Principal
Strengths of Principal Trends in marketplace creating meaningful growth opportunities Strengths at work to capitalize on trends Highly effective execution drives exceptional financial performance Strong capital position; disciplined capital management
Slide 30: Financial Overview and Risk Management
Financial Overview and Risk Management
Slide 31: Financial Overview
Financial Overview
Slide 32: Strategic Recap
Strategic Recap Grow Earnings Manage Capital Control Risk Increase Shareholder Value
Slide 33: Revenue Basis and Product
Revenue Basis Product Revenue Basis Product SMB - Employer SMB - Employee Retail & Other Institutional Fee Based Defined Contribution -Variable Fee Based Defined Benefit Fee Based Mutual Funds Fee Based Ind Annuities - Variable Fee Based Bank Fee Based Asset Management Fee Based Asset Securitization
Slide 34: Strong Growth in Earnings
Principal Financial Group (r) Strong Growth in Earnings Operating Earnings by Segment and Net Income For twelve months ended ($ in millions) 12/31/07 12/31/06 12/31/05 U.S. Asset Accumulation (USAA) $655.8 $542.6 $464.4 Global Asset Management (GAM) 108.5 102.5 74.0 Int'l Asset Management & Accumula
Slide 35: Strong Growth in Earnings by Segment and Net Income
For three months ended ($ in millions) 03/31/08 03/31/07 Change U.S. Asset Accumulation $139.1 $154.7 (10.1)% Global Asset Management 2.7 23.7 (88.6)% Int'l Asset Management & Accumulation 31.7 19.3 64.2% Life & Health Insurance 79.2 45.5 74.1% Corporate & Other (11.4) (6.4) N/A Operating Earnings (
Slide 36: Operating Earnings by Segment
Principal Financial Group (r) Operating Earnings by Segment 4Q02 1Q'03 2Q'03 3Q'03 4Q'03 1Q'04 2Q'04 3Q'04 4Q'04 1Q'05 2Q'05 3Q'05 4Q'05 1Q'06 2Q'06 3Q'06 4Q'06 1Q'07 2Q'07 3Q'07 4Q'07 1Q'08 USAA 83.7 97.5 105.7 107.9 114.1 119.5 121.7 123.5 134.3 138.6 130.5 133.3 136 157.8 151.2 157.4 178.7 154.7
Slide 37: Assets Under Management by Source
Principal Financial Group (r) Assets Under Management by Source 6/22/1905 12/31/2001 Dec 31 '02 Dec 31 '03 12/31/2004 12/31/2005 12/31/2006 12/31/2007 3/31/2008 USAA 78.1 82.2 92.3 120.8 142.1 122 161.9 178.1 170.9 GAM 41.2 59.2 87.4 86.6 IAMA 28.4 25.3 4.4 7.5 10.2 15.4 19.1 28.7 30.2 L&H 9.3 9.6 1
Slide 38: Actual Operating Return on Average Equity
Principal Financial Group (r) Actual Operating Return on Average Equity (1) x-OCI (2) Trailing Twelve Months 3/31/08 Operating Segment Operating Earnings Average Equity Return on Average Equity USAA $640.2 $3,392.7 18.9% GAM $87.5 $645.1 13.6% IAMA $123.1 $1,093.0 11.3% L & H $254.8 $2,046.0 12.5% C
Slide 39: Strong Financial Performance
Principal Financial Group (r) Strong Financial Performance '01 '02 '03 '04 '05 '06 '07 6 YR CAGR Operating Earnings (1) ($M) $577 $579 $668 $765 $862 $972 $1,058 11% Net Income (2) ($M) $359 $142 $746 $826 $901 $1,031 $827 15% Avg. # Diluted Shares (M) 362 351 327 315 290 276 268 -5% Diluted EPS $1.
Slide 40: Life Insurance Company Summary Financial Information
Principal Life Insurance Company Summary Financial Information (1) Defined as total GAAP revenues excluding net realized/unrealized capital gains and related fee adjustments. (2) Presented on a GAAP basis. (3) Defined as net income before net realized capital gains and other after-tax adjustments. (
Slide 41: Life Insurance Company Financial Strength Ratings
Principal Life Insurance Company Financial Strength Ratings S&P "AA", Very Strong (3rd highest of 21 levels) Moody's "Aa2", Excellent (3rd highest of 21 levels) A.M. Best "A+", Superior (2nd highest of 16 levels) Fitch "AA", Very Strong (3rd highest of 21 levels) Note: All ratings have stable outloo
Slide 42: Key Financial Targets
Principal Financial Group (r) Key Financial Targets 2006 Actual 2007 Actual Operating Earnings Per Diluted Share Targeted Average Annual Growth 11-13% $3.53 19% $3.95 12% Operating Return on Average Equity Targeted Average Annual Growth +0.5%/yr 15.3% +1.5% 16.4% +1.1% Targeted Debt/Capital - Moody'
Slide 43: Life Insurance Company Key Financial Targets
Principal Life Insurance Company Key Financial Targets Target 2006 Actual 2007 Actual Capital Ratio - S&P >100% at AA 111% 109%* Liquidity - S&P >260% 375% 348%* GIC/FA Exposure - Moody's <35% 32% 33% Liquidity - Internal (Staging Analysis) All Measures in Compliance All Measures in Compliance * est
Slide 44: Risk Management
Risk Management
Slide 45: Risk Management Strategic Recap
Strategic Recap Risk aware and risk astute culture Diligent and disciplined ERM tied to strategy Built on strong, well-established, traditional risk management fundamentals and controls Established risk appetite and tolerances Robust risk models/metrics, tools, processes to assess, monitor, and mana
Slide 46: Established Risk Tolerance Guidelines
Established Risk Tolerance Guidelines Overall Enterprise Tolerance Guidelines: Adequate capital and performance to maintain at least AA financial strength rating Adequate economic capital to meet obligations and protect shareholder value within a 99.5% confidence interval ROE ^ 15% Liquidity ratios
Slide 47: Organizational Structure
Organizational Structure Federated Model Board and senior management accountability for risk management Chief Risk Officer - independent oversight, integration, coordination, consolidation Authority and influence Oversight coordinated with Business Risk Consulting, Financial Reporting Business units
Slide 48: Recent Performance and Current Activities & Opportunities
Recent Performance and Current Activities & Opportunities 10-year financial forecasts 5-quarter rolling financial forecasts Other regular reporting - dynamic liquidity analysis, credit exposure, counterparty exposure, reinsurer exposure, immunization reports, expense reports, etc. Capital optimizati
Slide 49: Life Assigned Strong ERM Designation from S&P
Principal Life Assigned Strong ERM Designation from S&P Excellent Strong Adequate Weak 0.03 0.1 0.83 0.04 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Source: Standard & Poor's 2008 Total Companies: 274 Standard & Poor's
Slide 50: Broad Categories of Risks
Broad Categories of Risks Principal Financial Group (r) Credit Investment and Market Operational Business Asset Default Interest rates Information technology Reputation Counterparty Asset spreads Human resources Strategic Product/pricing Equity returns Fraud Expense management Mortality Liquidity Li
Slide 51: Non-Par Pension Business Liabilities
Full Service Payout GICs - Full Service GICs - Investment Only Funding Agreements East 6240.5 6787.4 5663.7 11580.6 West 30.6 38.6 34.6 31.6 North 45.9 46.9 45 43.9 Full-service Payout GICs - Investment Only GICs - Full Service Funding Agreements 2005 6450.3 5821 7282 12115.7 2008 6808.964 4430.119
Slide 52: Non-Par Pension Business Risk Management: Interest Rate Risk
Non-Par Pension Business Risk Management Interest Rate Risk Tools used Duration matching Key rate duration matching Daily hedging Scenario analysis Disciplined to stay within mismatch allowances 0.25 year duration 0.10 year key rate Employ various methods to correct duration mismatches Use derivativ
Slide 53: Non-Par Pension Business Risk Management: Liquidity Risk
Non-Par Pension Business Risk Management Liquidity Risk Monitoring and forecasting processes in place at both business unit and overall corporate level Analysis performed at least quarterly We carefully watch external measures S&P liquidity model, internal target 360% Moody's liquidity model, intern
Slide 54: Summary
Summary The Principal Financial Group is risk aware, risk astute, committed to and diligent about risk management We are in the risk business and willing to take risks - on an informed basis
Slide 55: Investment Portfolio Overview
Investment Portfolio Overview* *The data labeled Principal Life Insurance Company excludes assets that are not part of Principal Life Insurance Company consolidated cash and invested assets.
Slide 56: Investment Philosophy and Strategy
Investment Philosophy and Strategy Active Asset/Liability Management and Strategy Optimize Risk Adjusted Yields and Returns Maintain Quality Well-Diversified Portfolio
Slide 57: Cash and Invested Assets
Principal Financial Group (r) Cash and Invested Assets 12/31/2006 Real Estate 1.3 Policy Loans 1.4 Other Investments 2.3 Equity Securities 1.4 Residential Mortgages 2.5 Commercial Mortgages 16.3 Cash 2.6 Private Bonds 22 Public Bonds 50.2 3/31/2008 Real Estate 1.3 Policy Loans 1.3 Other Investments
Slide 58: Corporate Fixed Maturities Portfolio by Salomon Industry
Principal Financial Group (r) U.S. Invested Assets Corporate Fixed Maturities Portfolio by Salomon Industry 12/31/2006 Bank 12 Insurance 10.3 Finance Other 15.8 Consumer 3.6 Energy 8.8 Manufacturing 18.2 Industrial-Other 0.3 Service 14.7 Transport 2.7 Electric 8 Utility-Other 0.2 Telecom 5.4 3/31/20
Slide 59: Fixed Maturities Composition by Asset Type
Principal Financial Group (r) U.S. Invested Assets Fixed Maturities Composition by Asset Type 12/31/2006 Agency, Treasury, Other 6.2 RMBS 5.9 CMBS 10.1 ABS 6.2 Corporate Public 46.6 Corporate Private 25 3/31/2008 Agency, Treasury, Other 7.3 RMBS 5.5 CMBS 10.7 ABS 4.6 Corporate Public 45.3 Corporate
Slide 60: Fixed Maturities Portfolio Composition by Foreign Area
Principal Financial Group (r) U.S. Invested Assets Fixed Maturities Portfolio Composition by Foreign Area* 3/31/2008 United Kingdom 25.8 European Union 28.7 Australia 9.5 Japan 0.6 All Others 15.4 Mexico 3.3 Asia 10.7 South America 6 03-31-2008 Foreign Fixed Maturities = US $8.7 Billion 12-31-2006 F
Slide 61: Fixed Income Securities Portfolio by NAIC Class
Principal Financial Group (r) U.S. Invested Assets Fixed Income Securities Portfolio GAAP Carrying Value % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio
Slide 62: Fixed Maturity Securities Available-for-Sale by Industry Category
Principal Financial Group (r) U.S. Invested Assets - Fixed Maturity Securities Available-for-Sale by Industry Category
Slide 63: Credit Losses
Principal Financial Group (r) Credit Losses 12-31-2007 After-tax (in millions) 03-31-2008 After-tax (in millions) Total Fixed Income Credit Losses $198.1 $44.5 Related to Subprime 57.3 6.8 Related to Impairment of Structured Assets 84.8 15.4 Credit Sales and/or impairments 56.0 22.3
Slide 64: Asset-Backed Securities Home Equity by Rating and Vintage
Principal Financial Group (r) U.S. Invested Assets Asset-Backed Securities Home Equity by Rating and Vintage ($ in millions) Amortized Cost Carrying Amount Amortized Cost Carrying Amount Lowest Agency Rating Lowest Agency Rating Lowest Agency Rating AAA 407.4 373.2 AA 110.7 87.1 A 41.2 28.7 BBB 12.9
Slide 65: CDOs by Rating
Principal Financial Group (r) U.S. Invested Assets CDOs by Rating As of March 31, 2008 ($ in millions) Credit CDOs Credit CDOs CMBS CDOs CMBS CDOs Subprime CDOs Subprime CDOs Amortized Cost Carrying Amount Amortized Cost Carrying Amount Amortized Cost Carrying Amount AAA 55.0 39.1 71.4 52.7 19.2 14.
Slide 66: Monoline Insurer Exposure
Principal Life Insurance Company Monoline Insurer Exposure March 31, 2008 (Book Value) $ in millions Direct Wrapped* Total Total $116.0 $707.0 $823.0 *Wrapped Securities consist of (approximate %): - --47% municipal bonds (99% rated investment grade) - --36% investment grade bank perpetual preferred
Slide 67: CMBS by Rating & Vintage
Principal Financial Group (r) U.S. Invested Assets CMBS by Rating & Vintage As of March 31, 2008 ($ in millions) Vintage AAA % AA % A % BBB % BB+ and Below % Total Amortized Cost 2003 & prior $1,339.2 65% $252.9 12% $189.5 9% $197.9 10% $84.6 4% $2,064.1 2004 392.7 64% 80.6 13% 101.4 17% 37.9 6% 0.0
Slide 68: Fixed Income Problems, Potential Problems, and Restructured
Principal Financial Group (r) Fixed Income Securities Portfolio Problems, Potential Problems, and Restructured 2005 2006 2007 3/31/2008 Problems 42 3.5 13.1 26.9 Potential Problems 101.6 2.2 29.2 34 Restructured 0 11.2 5.9 5.3 42.0 101.6 0.0 3.5 2.2 29.2 5.9 11.2 GAAP Basis 13.1 26.9 34.0 5.3
Slide 69: Fixed Income Securities Impairment Review Process
Fixed Income Securities Impairment Review Process Monthly review of all exposures on watch list Rigorous analysis on all exposures trading materially below par Determination made if the credit is temporary or permanent impairment based on fundamental credit analysis
Slide 70: Commercial Mortgage Portfolio
Principal Life Insurance Company Commercial Mortgage Portfolio GAAP Basis (Excludes Credit Tenant Loans) As of March 31, 2008 Portfolio Size (Amortized cost): $9.8 Billion Current Loan-to-value: 57.7% Current Debt Service Coverage: 1.9x Current Occupancy: 90% Loans under Breakeven Debt Service Cover
Slide 71: Commercial Mortgage Loan Portfolio Composition
Composition by U.S. Region Composition by Type Principal Life Insurance Company Commercial Mortgage Loan Portfolio March 31, 2008 (Statutory Basis) Industry (ACLI) - 03/31/2008 Principal Life - 03/31/2008 New England 0.044 0.0387 Mid Atlantic 0.136 0.1504 EN Central 0.099 0.0861 WN Central 0.04 0.03
Slide 72: Commercial Mortgage Restructured & Delinquent/Foreclosed Loan Ratio
NOTES: Delinquency and foreclosure ratio is defined as mortgages 60 or more days delinquent, in the process of foreclosure, and foreclosed/deeded during the year, as a percentage of the commercial mortgage portfolio balance. A restructured loan is a loan in good standing for which basic terms, such
Slide 73: Commercial Mortgage Problems, Potential Problems, and Restructured
Principal Financial Group (r) Commercial Mortgage Portfolio Problems, Potential Problems, and Restructured Commercial Mortgages GAAP Basis 2005 2006 2007 03-31-2008 Problems 10.4 10.7 35.8 23.2 Potential Problems 10.2 9.1 14.5 14.5 Restructured 65.1 6.8 14.8 14.8 10.4 10.2 65.1 10.7 9.1 14.5 14.8 6.
Slide 74: Commercial Mortgage Loan Reserve/Loss Process
Commercial Mortgage Loan Reserve/Loss Process Monthly meeting to review entire watchlist, including an analysis of loan-to-value. Rigorous review of all loans deemed most at risk. Determination is made if a loss is probable. If loss is probable, a reserve is established.
Slide 75: Investment Portfolio Summary
Investment Portfolio Summary Active asset/liability management Broadly diversified portfolio across asset class, credit, industry and geographic location Predominantly high quality portfolio
Slide 76: Investment Portfolio 2008 Focus
Investment Portfolio 2008 Focus Enhancing diversification Active management of the portfolio Maintaining quality of the portfolio
Slide 77: Investment Portfolio Overview Addendum
Investment Portfolio Overview* Addendum *The data labeled Principal Life Insurance Company excludes assets that are not part of Principal Life Insurance Company consolidated cash and invested assets.
Slide 78: Life Insurance Company Cash and Invested Assets
Principal Life Insurance Company Cash and Invested Assets 12/31/2006 Real Estate 1.4 Policy Loans 1.4 Other Investments 1.6 Equity Securities 1.3 Residential Mortgages 1.8 Commercial Mortgages 17.2 Cash 3.2 Private Bonds 23.2 Public Bonds 48.9 3/31/2008 Real Estate 1.4 Policy Loans 1.4 Other Investm
Slide 79: Corporate Fixed Maturities Portfolio by Salomon Industry
Principal Life Insurance Company Invested Assets Corporate Fixed Maturities Portfolio by Salomon Industry 12/31/2006 Bank 12 Insurance 10.3 Finance-Other 15.7 Consumer 3.6 Energy 8.8 Manufacturing 18.2 Industrial-Other 0.3 Service 14.7 Transport 2.8 Electric 8 Utility-Other 0.2 Telecom 5.4 3/31/2008
Slide 80: Fixed Maturities Composition by Asset Type
Principal Life Insurance Company Invested Assets Fixed Maturities Composition by Asset Type 12/31/2006 Agency, Treasury, Other 6.2 RMBS 5.9 CMBS 10.1 ABS 6.2 Corporate Public 46.6 Corporate Private 25 3/31/2008 Agency, Treasury, Other 7.3 RMBS 5.5 CMBS 10.7 ABS 4.6 Corporate Public 45.3 Corporate Pr
Slide 81: Fixed Maturities Portfolio Composition by Foreign Area
Principal Life Insurance Company Invested Assets Fixed Maturities Portfolio Composition by Foreign Area* 12/31/2006 United Kingdom 27.5 European Union 25.7 Australia 9.4 Japan 0.7 All Others 13.4 Mexico 4.6 Asia 11.6 South America 7.1 3/31/2008 United Kingdom 25.8 European Union 28.7 Australia 9.5 J
Slide 82: Fixed Income Securities Portfolio by NAIC Class
Principal Life Insurance Company Invested Assets Fixed Income Securities Portfolio GAAP Carrying Value % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio % of Fixed Income Securities Portfolio NA
Slide 83: Fixed Income Problems, Potential Problems, and Restructured
Principal Life Insurance Company Fixed Income Securities Portfolio Problems, Potential Problems, and Restructured 2005 2006 2007 3/31/2008 Problems 42 3.5 13.1 26.9 Potential Problems 101.6 2.2 29.2 34 Restructured 0 11.2 5.9 5.3 42.0 101.6 2.2 11.2 0.0 GAAP Basis 3.5 13.1 29.2 5.9 26.9 34.0 5.3
Slide 84: Fixed Maturity Securities Available-for-Sale by Industry Category
Principal Life Insurance Company Invested Assets - Fixed Maturity Securities Available-for-Sale by Industry Category
Slide 85: Global Investors
Principal Global Investors
Slide 86: Strategic Recap
Strategic Recap Grow a World-Class Global Asset Management Platform an attractive high growth, high-multiple business strategic complement to Principal Financial Group world-class asset accumulation business Provide competitive investment returns equities, fixed income and real estate through organi
Slide 87: Principal Global Investors Organizational Structure
Pat Halter Executive Director Real Estate Hazel McNeilage Global Head of Institutional Advisory Services Institutional Advisory Services Barb McKenzie Chief Operating Officer Operations Jill Hittner Chief Financial Officer Finance Tim Dunbar Executive Director Equities David Blake Executive Director
Slide 88: A Multi-Boutique Firm
A Multi-Boutique Firm Leadership Team (Operating Committee) Coordinated Shared Services Investment Platform 1 Investment Platform 2 Investment Platform N Operations & Compliance Financial Management Information Technology Coordinated Distribution Principal Global Investors, LLC PGI's Global Offices
Slide 89: Global Investors Assets Under Management
Principal Global Investors* A diversified global asset management organization $242.4 billion in assets under management as of 3/31/08 Broad range of capabilities, tailored to client objectives Global reach and clarity of purpose *Principal Global Investors represents the asset management operations
Slide 90: 2007 Performance
2007 Performance Financial Global Asset Management segment operating earnings for 2007 of $108.5 million (CAGR of 20% since 2001) and net income of $102.1 million* Pre-tax profit margin of 27.7% Competitive expense structure (20 bp as a percent of average assets under management) Asset management te
Slide 91: Recent Performance
Recent Performance Institutional mandates numbered over 275* in last three years for over $22.7 billion in assets Non-affiliated assets under management have grown by $46.2 billion over the last two years (includes $12.0 billion from acquisitions of Edge and Morley) Retention of Principal Global Inv
Slide 92: Global Asset Management Segment Financial Information
Principal Global Investors Principal Financial Group, Inc. Global Asset Management Segment - Financial Information (in millions) Spread and Securitization Business Line Item 31-Mar-08 31-Dec-07 30-Sep-07 30-Jun-07 31-Mar-07 31-Dec-07 31-Dec-06 31-Dec-05 Fees and other revenues $ 4.0 $ 7.4 $ 8.7 $ 10
Slide 93: Global Investors Other Issues
Principal Global Investors Other Issues Actively search out growth opportunities through acquisition Tremendous success with our past acquisitions of Post, Spectrum, Columbus Circle and now Edge and Morley Financial Services Add to range of product offerings including absolute return alternatives an
Slide 94: Asset Management Affiliates
Principal Global Investors is the asset management arm of the Principal Financial Group(r) (The Principal(r)). This includes the asset management operations of the following members of The Principal: Principal Global Investors Asset Management Affiliates Principal Global Investors, LLC Principal Rea
Slide 95: Thank you
Thank you
Slide 96: Appendix
Appendix
Slide 97: Reconciliation of Net Income Available to Common Stockholders
Principal Financial Group (r) Reconciliation of Net Income Available to Common Stockholders ($ in millions) Principal Financial Group Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended Twelve Months Ended 31-Dec-01 31-Dec-02 31-Dec
Slide 98: Reconciliation of Net Income Available to Common Stockholders (Quarterly)
Principal Financial Group (r) Reconciliation of Net Income Available to Common Stockholders ($ in millions) Three Months Ended Three Months Ended Three Months Ended Three Months Ended Three Months Ended 31-Mar-07 30-Jun-07 30-Sep-07 31-Dec-07 31-Mar-08 Operating Earnings: USAA $ 154.7 $ 164.5 $ 186.
Slide 99: Reconciliation of Net Income Available to Common Stockholders (TTM)
Principal Financial Group (r) Reconciliation of Net Income Available to Common Stockholders Principal Financial Group $ in millions Twelve Months Ended 31-Mar-08 Operating Earnings: USAA $640.2 GAM 87.5 IAMA 123.1 Life and Health 254.8 Mortgage Banking -- Corporate and Other (42.7) Total operating e
Slide 100: Reconciliation of per Share Net Income
Principal Financial Group (r) Reconciliation of per Share Net Income Available to Common Stockholders Principal Financial Group Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: 31-Dec-01 31-Dec-02 31-De
Slide 101: Reconciliation of Net Income Return on Equity
Principal Financial Group (r) Reconciliation of Net Income Return on Equity Available to Common Stockholders Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: Twelve Months Ended: 31-Dec-01 31-Dec-02 31-Dec-03 31-Dec-04 31-D
Slide 102: Life Insurance Company Reconciliation of Total GAAP Revenues
Principal Life Insurance Company Reconciliation of Total GAAP Revenues 31-Dec-06 31-Dec-07 31-Mar-07 31-Mar-08 Total Operating Revenues $9,051 $9,951 $2,366 $2,333 Plus: Net realized/unrealized capital gains (losses) and related fee adjustments 29.9 (362.5) 33.7 (154.8) Less: Operating revenues from
Slide 103: Life Insurance Company Reconciliation of Net Income
Principal Life Insurance Company Reconciliation of Net Income 31-Dec-06 31-Dec-07 31-Mar-07 31-Mar-08 Operating earnings $ 928.7 $ 977.6 $ 224 $ 223.2 Net realized/unrealized capital gains (losses) 7.7 (245.4) 17.8 (89.1) Other after-tax adjustments 41.2 8.9 --- 7.6 Net income $ 977.6 $ 741.1 $ 241.
Slide 104: Life Insurance Company Reconciliation of Stockholders' Equity
Principal Life Insurance Company Reconciliation of Stockholders' Equity 31-Dec-06 31-Dec-07 31-Mar-07 31-Mar-08 Total Stockholder's Equity xOCI $6,189 $6,359 $6,447 $6,515 Foreign currency translation 603.6 52.8 633.9 (802.4) Net realized/unrealized capital gains (losses) (5.5) (2.5) (3.5) 4.7 Minim