Principal Financial Group Inc · NASDAQ:PFG
Principal Financial — Investor Day (March 2015)
92 slides from Principal Financial's investor day presentation, Mar 11, 2015
Slide 1: The Principal Financial Group
THE PRINCIPAL The Principal Financial Group’ e.. Group
Slide 2: Introduction
INTRODUCTION
Slide 3: Agenda
8:30am. Introduction / Agenda John Egan AGENDA 8:35am. Opening Remarks Luis Valdés 8:45am. LatAm Overview & Brazil Roberto Walker 9:45am. The Principal in Chile Pedro Atria 10:25am. Break 10:55a.m. The Principal in Mexico Alejandro Elizondo 11:35am. Financials Michael Garvin 12:00am. Q&A Panel 12:30
Slide 4: Use of Non-GAAP Financial Measures
USE OF NON-GAAP FINANCIAL MEASURES Anon-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
Slide 5: Forward Looking Statements
FORWARD LOOKING STATEMENTS Certain statements made by the company which are not historical facts may be considered forward-looking statements, including, ‘without limitation, statements asto operating earnings, net income available to common stockholders, net cash flows, realized and unrealized gain
Slide 6: Principal International
PRINCIPAL INTERNATIONAL
Slide 7: Welcome
WELCOME
Slide 8: Principal Financial Group: A Global Investment Management Leader
PRINCIPAL FINANCIAL GROUP® A GLOBAL INVESTMENT MANAGEMENT LEADER Fortune 500 company ©135 year history 19.7 million customers * Offices in 18 countries Nearly 14,900 employees worldwide (34% outside of U.S.) 8 After tax. Results exclude corporate Operating Earnings* USD $ 1,443 Mn 2014 Retirement &
Slide 9: Principal International Our Strategy
PRINCIPAL INTERNATIONAL OUR STRATEGY Capitalize on large and growing middle class in key emerging Latin American and Asian markets by delivering pension, mutual fund and asset management expertise and solutions. Brazil Chile Mexico China + Hong Kong + India + Indonesia “a Malaysia ~ Singapore + Thai
Slide 10: Ten Largest Economies by Decade
PRINCIPAL TEN LARGEST ECONOMIES BY DECADE INTERNATIONAL Current Principal International locations: [Asia [J Latin America usD$ 1990 Tm 2000 Tm 2010 2020E Japan RIGHT MARKETS 1 2 3 ‘. 4 5 Italy 11 France 13 France 25 Germany © Political stability 6 vk 10 (Em UK aon Ds 8 a Germany 17 Germany 19 Japan
Slide 11: Increasing Contributor to Operating Earnings
PRINCIPAL FINANCIAL GROUP® USD $ Bn INCREASING CONTRIBUTOR ss. TOOPERATING - EARNINGS .. Principal International OE as percent of total Principal Financial Group OE* 1% Principal International is $0.4 positioned to capitalize on the global growth $0.2 | opportunities in $0.0 emerging markets 2001 20
Slide 12: Latin America
LATIN AMERICA
Slide 13: Latin America
LATIN AMERICA ° Pension and Mutual Fund overview and opportunities e Strong future growth e Continue adding value for our customers 13 re.
Slide 14: Right Strategy at the Right Time
LATIN AMERICA RIGHT STRATEGY AT THE RIGHT TIME Extend retirement and long- term asset accumulation expertise in key markets with fast growing middle classes and retirement assets 14 Unprecedented demand for long term savings ERA OF PERSONAL | RESPONSIBILITY #>
Slide 15: Pension Savings in Latin America
LATIN AMERICA Zero Pillar First Pillar Second Pillar Third Pillar state Financed Mandatory ‘Mandatory Voluntary PENSION overated ont Ml BRAZIL Guarniaa —-PHVASYouGo 1 P"bvesl. = AMERICA et) Satu finds | Pension . t Minimum cerry : CHILE Guaranteed Run Off = ARP ARAENC. . Mutual Funds Pension . . Min
Slide 16: 2nd Largest Pension Provider in Latin America
LATIN AMERICA Mexico (1993) Pensions, Mutual Funds, 2ND LARGEST se" + AUM of USD $ 11.9 B PENSION <38Mecueemen “pun 633 more Share PROVIDER IN LATIN Gute (1995) AMERICA fecetMonapemen Brazit (1999) Pensions, Mutual Funds, Asset Management, Anni Brasilprev—a 25% ‘owned joint venture with Banco do Bra
Slide 17: Projected Market Growth: Pensions
LATIN AMERICA Pension Markets Overview (USD $ 0.6 Tr) PROJECTED Projected MARKET Growth Rates| Brazil 199 160 15% GROWTH Chile 18 161 12% . Mexico 121 193 13% Pensions Colombia” 48 79 15% Peru? 30 37 14% 417, SOURCE: CerulliLatin America Distribution Dynamics2014, World Bank Pensions. ‘Local currenc
Slide 18: Projected Market Growth: Mutual Funds
LATIN AMERICA Mutual Fund Markets Overview (USD $ 1.1 Tr) PROJECTED Mutual Fund AUM_ Projected Growth Country (USD $ Bn) Rate’ MARKET Brazil 885 12% GROWTH Chile 39 14% Mexi % Mutual Funds oe = ~ Colombia? 24 17% Peru? 6 16% ug SOURCE: Cerulli Latin America Distribution Dynamics2014, World Bank Pens
Slide 19: Need for Retirement and Asset Management
LATIN AMERICA NEED FOR RETIREMENT AND ASSET MANAGEMENT Currently a small pool of retirement assets SOURCES: OECD Global Pension 19 Cerullitatin America Distributio Percent of retirement assets relative to GDP 83% 62% 13% 15% United Brazil Chile © Mexico States Percent of mutual fund assets relative
Slide 20: Pension Contribution Rate
LATIN AMERICA Contribution rates as % of taxable wage 28% PENSION CONTRIBUTION RATE Great opportunity for voluntary savings mEmployee mEmployer 20 SOURCE: World Bank. Design Contribution R 1014; OECD Pensions ata Glance (2013)
Slide 21: Developing Group Solutions
LATIN AMERICA DEVELOPING GROUP SOLUTIONS © Growing middle class © High affluent individuals have access to tailored solutions © Group solutions provide savings for large % of population Household Income Distribution Individual Solutions 36.1% s (=e = Group Solutions 47.5% % State Financed BRAZIL CHI
Slide 22: Need for Higher Value-Added Products
VALUE-ADDED ~* Real Interest Rates (%) 20.0 LATIN AMERICA —UvUS —Mexico —Brazil —Chile 15.0 NEED FOR HIGHER “™ PRODUCTS 2002 2008 © Latin America interest a rates converging to developed economies Percentage of Pension Assets Invested Abroad © Declining interest rates 0.1% 17.5% 18.5% 35.2% ‘ll driv
Slide 23: Unique Multichannel Distribution Approach
LATIN AMERICA UNIQUE AN |S SES MULTICHANNEL inpivipuat | GROUP DIGITAL DISTRIBUTION SALESFORCE |SALESFORCE] (future) ff : APPROACH Palabella ~ Robust and difficult to Creoirsuisse™ && UBS replicate model NS €X) neuro rnanciero ia) “_ HSBC @ JPMorgan zurich’ Glenpar HBcica erm Pe Financial 23
Slide 24: Customer Centric Advisory Model
LATIN AMERICA CUSTOMER CENTRIC ADVISORY MODEL 24 e Needs-based approach e Higher value added solutions e Reach retirement and long-term savings goal re.
Slide 25: Proven Investment Capabilities
LATIN AMERICA Percentage of AUM in Top Two Quartiles 85% 86% 85% 85% 85% 73% PROVEN INVESTMENT 54% 47% 46% CAPABILITIES Difficult to replicate Investment Platform: = 100+ member investment team: Brazil, Chile & Mexico 1Year 3 Year 5 Year * Assetallocation expertise in the region I Dec. 31,2013 [ Sep
Slide 26: Going Deeper & Broader into Existing Countries
LATIN AMERICA GOING DEEPER & BROADER INTO EXISTING COUNTRIES * Primary focus is deeper in Brazil, Chile & Mexico through organic growth and M&A * Continue to monitor Colombia & Peru 26 Mutual Asset Pensions Funds Mgmt Annuities Brazil ® Chile ® 7 . Mexico @ = Where we have a product offering today O
Slide 27: Proven Track Record
300 723% CAGR LATIN AMERICA 200 20% constant currency Operating Earnings" eal a PROVEN 2009 2010 2011 2012 2013 2014 TRACK. RECORD w- 32% CAGR AUN? (USD $ Bn) 2009 2010 2011 2012 2013 2014 NCF? (USD $ Bn) 2009 2010 2011 2012 2013 2014 * Operating earning 2 AUM and net cash fl jorted include economic
Slide 28: Latin America Key Takeaways
LATIN AMERICA KEY TAKEAWAYS Right markets Strong growth potential 28 Retirement and asset management market leader Meaningful presence in key Latin America countries Pioneers in product innovation Commitment to voluntary solutions The only global pension expert in the region “a
Slide 29: Brazil
BRAZIL
Slide 30: Leveraging Our Competitive Advantages
BRAZIL LEVERAGING. « Strong joint venture with Banco do Brasil OUR — Successful co-management — Banco do Brasil exclusive pension offering COMPETITIVE until October 2032 ADVANTAGES ° Asset management opportunities with Claritas e Significant global opportunities with current platform — Higher value-
Slide 31: Pension Savings in Brazil
BRAZIL Zero Pillar First Pillar Second Pillar Third Pillar State Financed Mandatory DB ‘Mandatory DC Voluntary PENSION = i il SAVINGSIN ~ os Minimum Guaranteed PAYG N/A P/VGBL Pension B R AZ\| L * 100% of minimum wage’ * 28% Salary + Offered through Contribution with Brasilprev caps (17.5% *IRAsike
Slide 32: Principal Financial Group in Brazil
BRAZIL PRINCIPAL FINANCIAL GROUP IN BRAZIL 32 SOURCES: * Global Finan +z Banco do Brasil RETIREMENT DISTRIBUTION EXPERTISE STRENGTH + 135 year history + 200 year history * Worldwide * Largest bank in presence Latin America* + Retirement * 61.6 Mn customers expertise * 5,500 branches * Asset manageme
Slide 33: Brasilprev: Power of Engaged Distribution
BRASILPREV POWER OF ENGAGED DISTRIBUTION 33 SOURCE: Quantum Axisas of December 2014 (P/VGBL products only) AUM Brasilprev (USD $ Bn) 22% cAGR 33% Local currency 27 16 2009 2010 2011 2012 2013 2014 Industry Net Cash Flow (USD $ Bn)' 2008 2010 2011 2012 2013 2014 Industry Ne 4698 «140 «15.9205 14. 16.
Slide 34: Brasilprev Market Share Evolution
BRASILPREV MARKET SHARE EVOLUTION Fastest growing company Currently #2 in market share 3d SOURCE: Fenaprevias of Dec 2014 MARKET SHARE P/VGBL Assets Under Management 14.3% 2009 2010 2011 2012 2013 2014 —*Bradesco “@iBrasilprev = —# Itai
Slide 35: Brasilprev Distribution
BRASILPREV asi DISTRIBUTION PARTNERSHP SS CO = | prasipee [estar Sales Force Distributors Robust and difficult to replicate model Poe 35 Group
Slide 36: Opportunities with Banco do Brasil Distribution
BRASILPREV OPPORTUNITIES WITH BANCO DO BRASIL DISTRIBUTION Many growth drivers 36 © Bank footprint — Currently more than 5,500 branches covering entire country — Exclusive distribution throughout Banco do Brasil network — Sao Paulo under penetrated © Further reach of Banco do Brasil customers — Banc
Slide 37: Capitalizing on Opportunities for Value-Added Products
BRASILPREV Open Pension Funds Asset Allocation 98% domestic/invested locally CAPITALIZING ON Multimarket* OPPORTUNITIES ra 1.6% 6% FOR VALUE-ADDED waar ss f PRODUCTS 10% * Declining interest rates will drive: — Asset diversification — International investments — Assetallocation * synergies with Clar
Slide 38: Claritas
Cc LARITAS | Pioneer in the Brazilian retail and institutional asset iA mioiabat of Pricer cl igh management market focused on multi-alpha generation strategies e Doing business since 1999 e Expertise in asset allocation strategies e First Brazilian long/short equity fund ¢ First to launch timber fu
Slide 39: Diversified and Unique Asset Allocation Strategies
CLARITAS DIVERSIFIED AND UNIQUE ASSET ALLOCATION STRATEGIES © Maturing investment markets will drive flows to Claritas strategies ® Recent regulation changes allow for more international diversification 39 OPEN FUNDS + Long Only Equities * Long/Short Equities * Value * Enhanced Index * Macro ASSET A
Slide 40: Claritas Multichannel Distribution Approach
CLARITAS PROPRIETARY | patron | PARTNERSHIP External Distributors MULTICHANNEL DISTRIBUTION APPROACH Institutional High net worth Banks Distribution synergies * Local to global: Principal Global Investors distributes Claritas managed funds (Brazilian Equity Fund) *Global to local: Claritas distribut
Slide 41: Brazil Key Takeaways
BRAZIL KEY TAKEAWAYS Ready for more growth 41 Untapped markets — Underpenetrated markets — High value added products Strong JV with Banco do Brasil Asset management and mutual fund development with Claritas Organic growth combined with M&A opportunities “a
Slide 42: Chile
CHILE
Slide 43: Leveraging Our Competitive Advantages
CHILE LEVERAGING OUR COMPETITIVE ADVANTAGES 43 e Complete product offering “From Hire Through Retire” e Strong positioning in higher income savings market e Leading investment performance e Unique multi-channel distribution e Expertise in higher value-added solutions re.
Slide 44: Pension Savings in Chile
CHILE Zero Pillar First Pillar | Second Pillar Third Pillar Pp E N S | re) N State Financed Mandatory 08 ‘Mandatory DC Voluntary im im ‘init Im Minimum Guaranteed PAYG bd AFP APV CH l LE Pension (Ended 1981) = (Established 1981) _ (Established 2002) * Approximately 38% of * Around 19% salary = * 10%
Slide 45: Significant Opportunity for Growth
CHILE SIGNIFICANT OPPORTUNITY FOR GROWTH Low replacement rates create a great opportunity to advise and develop voluntary savings Gross Replacement Rates Contributions as% of earnings 6 OECD countries with 75+% gross pension replacement rate compared to Chile 1 | 42 Chile U.S. Austria. Denmark Irela
Slide 46: Multi-Product Solution Set
CHILE MULTI-PRODUCT SOLUTION SET _ “i OUR ACCUMULATION RETIREMENT INCOME BUSINESS = ‘Mandatory Pension * Annuities ¢Voluntary Pension * Programmed withdrawal Complete product ih Mutual Funds L offering —“From *Life Accumulation Hire Through Retire“ 46
Slide 47: Principal Financial Group in Chile
CHILE Mandatory DC Pension Savings (USD $ 29.9 Bn) PRINCIPAL aves (0 — #1 in average contributor balance Fl NAN CIAL — #1 in market share of high income salaries (35%) G ROU P | N — #1 in average monthly salary (86% above AFP average) Voluntary Pension Savings (USD $ 2.1 Bn) ° CH I LE — #1 in APV AU
Slide 48: Cuprum AFP Acquisition Look Back
CHILE CuprumAFP ACQUISITION LOOK BACK Bottom Line * Transformative deal * Compelling growth * Completes our suite of comprehensive retirement solutions What We Said In February 2013, The Principal acquired 90.4% share of Cuprum AFP for USD $ 1.3 Bn * 0.6 millioncustomers and USD $ 32.7 Bn AUMs * EPS
Slide 49: Cuprum: Marquee AFP in Chile
CUPRUM MARQUEE AFP IN CHILE * #3 Mandatory Pension Provider (by AUM) * #2 in APV by AFP’s (voluntary pension by AUM) * #1 in CAV (voluntary non-pension by AUM) * Most desired customer base AQ SOURCE: Lazard2014 254 Cuprum 372 Cuprum 786 Cuprum Taxable Salary/Contributor (USD $ Ths per year) 15.0 14a
Slide 50: The High-Income Platform in Latin America
CUPRUM THE HIGH-INCOME PLATFORM IN LATIN AMERICA Cuprum has: * Highest percentage of actively contributing clients (density) * Fastest growing market share in voluntary savings 50 SOURCE: Lazard201¢ 8 & AUM per Customer (US $ Ths} x 8 10 0 10 20 AUM per Customer vs. AUM Old Mutual ~~ Cuprum/AFP Habi
Slide 51: Investment Performance Leader
CUPRUM INVESTMENT MANDaTorRY | 12-MONTH | 3-YEAR SINCE FUNDS RANK RANK INCEPTION* PERFORMANCE rl #1 #2 #2 LEADER 80% equity limit B #2 #1 #1 Cc #1 #1 #1 Leading investment performance supported D #1 #2 #2 by global standards and expertise E #2 #3 #2 20% equity limit 51 _ Investment Performance ranki
Slide 52: Growing Mandatory Salary Base
CUPRUM AFP Cumulative Net Transfers Of Salary Base Jan 2009 —Nov 2014, excludes new entrants, number of transfers (Ths) GROWING MANDATORY - SALARY BASE as Strong sales with iil Le industry leading 33.4 Provida Capital Habitat Modelo Planvital ~=Cuprum 52 SOURCE: SVS, SP as of November 2014 r* al
Slide 53: Voluntary APV Market Share Leader
CHILE Top Five Aggregated? APV Market Share PRINCIPAL, SURA HABITAT METUFE SECURITY 30% VOLUNTARY — hasnt — 25% APV MARKET © ae sie 23 20.0% SHARE LEADER = Growth will continue by 10% i ee meeting client needs through financial 5% ee ee advisory 4.5% 4.5% 26.1% 0% 2009 2010 2011 2012 2013 2014 53 SO
Slide 54: Unique Multichannel Distribution Approach
CHILE UNIQUE qa Gn ESE MULTICHANNEL pisrRieurion ES SEEN (0 APPROACH [22% Lurie Lie. |e BEE Brana Mandatory Falabella — advisors ieee Cuprum Robust and difficult Voluntary Ganner to replicate model Principal . Voluntary SBci Seguros Poe , 54 Group
Slide 55: Capitalizing on Opportunities for High Value-Added Solutions
CHILE CAPITALIZING ON OPPORTUNITIES FOR HIGH VALUE- ADDED SOLUTIONS Product allocation + Customer-focused advisory model 55 HIGH VALUE ADDED SOLUTIONS Financial advice, tax benefits, Af eovearon Pension and financial advice, tools and technology L cupaiice tax benefits, tools and technology SOLUTION
Slide 56: Chile Key Takeaways
CHILE KEY TAKEAWAYS Complete product offering — “From Hire Through Retire” 56 e Continued momentum with marquee franchise e Growth opportunities — Chileans need to save more — Voluntary savings through © Advice ° High value added products e Organic growth using multi-channel distribution P:--
Slide 57: Mexico
MEXICO
Slide 58: Leveraging Our Competitive Advantages
MEXICO LEVERAGING ° Growth in voluntary due to OUR insufficient mandatory savings COMPETITIVE ° Capitalize on cross-selling platform with advisory based approach ADVANTAGES e Unique multi-channel distribution e Expertise in higher value added products Financial 58 ee
Slide 59: Pension Savings in Mexico
MEXICO Zero Pillar First Pillar Second Pillar Third Pillar State Financed Mandatory DB Mandatory DC Voluntary PENSION = ii i il SAVINGS IN = Minimum Guaranteed PAYG AFORE Voluntary AFORE = Pension (Ended 1997) (Established 1997) 4 M EXl co * 100% of 1997 minimum » Funded by IMSS 1.5% Salary Allows a
Slide 60: Principal Financial Group in Mexico
MEXICO PRINCIPAL Customers FINANCIAL a GROUP IN tora me . Z MEXICO MERIC : ! Pension 10.3 3,743 j 100% ownership and 1 i doing business in Mexico H Mutual 41 16 1 since 1993 i Funds USDS 11.9 Bn AUM Annuities & Life os 1s ae Target le Markets AUM as of December 31,2014. Financial 60 Pm
Slide 61: AFORE Market Share
MEXICO COMPANY AUM RANK MARKET CUSTOMERS RANK MARKET (Usb $ Bn) SHARE (in millions) SHARE XXI BANORTE 40.8 1 25.4% 17.6 1 33.3% AFORE BANAMEX 27.0 2 16.8% 78 2 14.8% SURA 23.8 3 14.8% 61 4 11.6% MARKET °° 198 4 12.3% 33 6 6.2% IE PRINCIPAL 5 SHARE INVERCAP 10.2 6 6.3% 3.1 7 5.9% PENSIONISSSTE 7.5 7
Slide 62: Mutual Funds Market Share
AUM% by MEXICO AUM marker ANNUAL pjstribution 3% paRTY COMPANY (usD$Bn) RANK sHare GROWTH AUM _isTRIBUTION BANAMEX 28.7 1 24.9% 5.2% 0.0 0.0% BANCOMER 22.7 2 19.7% — -2.9% 0.0 0.1% M UTUAL SANTANDER 13.9 3 12.1% —--2.3% 0.2 1.6% Others (12) 36.6 31.7% — -0.5% 2.2 6.0% F U N DS BANKS 101.9 88.4% 2.6%
Slide 63: HSBC Acquisition Look Back
MEXICO What We Said <p In August 2011 Principal Afore acquired 100% of HSBC Afore for USD $ 206.1 Mn HSBC on ® 1.6 million customers and USD $ 3.1 Bn AUM ACQUISITION * 5-year exclusive distribution agreement (1,200+ branches and 2,000+ advisors) LOO K B. AC K * EPS accretion 2-3 cents in 2011, 6-8 c
Slide 64: Unique Distribution Approach
MEXICO Ss UNIQUE Mancha, SSH DISTRIBUTION ten | l — APPROACH mami Worksite L Mobile 2 FINCH Funds WS Advisors @ Distribution Robust and difficult JPMorgan ZURICH’ [Agreements to replicate model (Gnenupo Financiere Mitel) Banks 60% of new AFORE sales come from external 3 UBS crepir suisse distributor
Slide 65: Significant Opportunity for Growth
MEXICO SIGNIFICANT OPPORTUNITY FOR GROWTH Low replacement rates create a great opportunity to advise and develop voluntary savings Gross Replacement Rate 42% 29% 54% Mexico Chile 65 SOURCE: OECD (2013): “Pensions ata Glance 2013.” OECD net replacement rate fora male average earner OECD Avg re. Group
Slide 66: Capitalizing on Asset Allocation Opportunities
MEXICO CAPITALIZING ON ASSET ALLOCATION OPPORTUNITIES © Opportunities — Asset diversification — Growing voluntary savings — Higher value added solutions © Synergies with Principal Global Investors SOURCES: CONSAR a: 66 Distribution Dynamics2014 4 (AFORE); AMIB & Morningstar as of December 2014 (Mutu
Slide 67: Mutual Funds Evolution
MEXICO MUTUAL FUNDS EVOLUTION © Rapid growth from multi-channel distribution model © First lifecycle provider ® Strong investment performance 67 High value-added products: ° Only global provider focused on retirement and long-term savings © Global asset allocation expertise AUM (USD § Mn) 1,149 2009
Slide 68: Differentiation and Positioning
MEXICO Capitalize on cross selling platform DIFFERENTIATION Theeter, in ong-term AND investments Nionitor i onitoring, POSITIONING uiecyte SY eucation guidance ie Advisory Stronger customer loyalty Higher contributions Lower lapses Cross-sell Expertise * Data Analytics * Target Marketing Higher repl
Slide 69: Financial Education in a Developing Market
MEXICO FINANCIAL EDUCATION INA DEVELOPING MARKET 69 “Museo Interactive de Economia (MIDE) / Regulator * Leverage Principal Financial Group global expertise in pension markets * CONSAR visits to Des Moines and Chile * Principal Forum 2015 Consumers * Media outreach and workshops * Financial education
Slide 70: Mexico Key Takeaways
MEXICO KEY ° Better preparing our clients for retirement TAKEAWAYS — Improving replacement rates Extending our success — Grow voluntary savings e Leverage unique multi-channel distribution model ° Capitalize on cross-selling platform e Organic growth combined with M&A opportunities Financial 70 ee
Slide 71: Financials
FINANCIALS
Slide 72: Financials Overview
LATIN AMERICA FINANCIALS; Fee based businesses drive OVERVIEW results and growth ° Net revenue growth and margin stability ° Increasing payout ratio Poe 2 Group
Slide 73: Proven Track Record
LATIN AMERICA 200 Operating Earnings’ 100 (USD $ Mn) PROVEN ° 2009 2010 2011 2012 2013 2014 TRACK RECORD | AUM? 50 (USD $ Bn) @ Brazil Dis: @ chile 2009 2010 2011 2012 2013 2014 i Mexico 54 * caGt 10 35 ceed 5 39% cons [| ia NCF? (USD $ Bn) o/ = O i = = 2009 2010 2011 2012 2013 2014 73. {Operating e
Slide 74: Balanced Mix of Earnings
LATIN AMERICA Operating Earnings by Country BALANCED 2009 2014 2019E MIX OF EARNINGS me 3S @ Brazil @ Chile @ Mexico ® Growth across the region © Diversified by country re. TA. Operatingearnings as eported include economic ownership change in Brasilpre from 46% to 25% n June 2010 Group
Slide 75: Understanding Net Revenue Generation
LATIN AMERICA Brazil e Fees are charged as a percentage of AUM e Spread of inflation indexes impacts net revenue UNDERSTANDING i ie Chi NET REVENUE . Mandatory: fees are collected as a percentage of salary with a cap, not AUM (i.e. front end only); less GENERATION volatile than AUM based fees Volunt
Slide 76: Growing Net Revenue
Net Revenue (USD $ Mn) LATIN AMERICA Combined Basis S15 $1.0) GROWING sos NET $0 2009 2010 2011 2012 2013 2014 REVENUE mi Mexico m Chile Braz Pre-tax Return On Net Revenue Combined Basis Stable pre-tax 80% return on growing 58% net revenue 60% —_ SS 40% 20% 2009 2010 2011 2012 2013 2014 —LatAm (Incl
Slide 77: Fee vs. Spread
LATIN AMERICA Growing Percentage of Net Revenue from Fee-Based Businesses (Brasilprev at 25%) FEE vs. SPREAD 2009 2014 2019E 18% MFee Spread fee equals fees and other revenues; Spresd equals premiums and others considerstionsplusnet investment income minus e ' 77 benefits, claims and-ettlemen minus
Slide 78: Voluntary vs. Mandatory Fees
LATIN AMERICA Growing Voluntary Fees (Brasilprev at 25%) VOLUNTARY 2009 2014 2019E vs. MANDATORY 48% 48% FEES Cuprum acquisition atided mandatory fee USD $125 Mn USD $500 Mn business and will be a base for growing i Mandatory Voluntary voluntary fee business in the future Financial 78 ee
Slide 79: Increasing Payout Ratio
LATIN AMERICA Distributions as a Percent of Net Income INCREASING 2009 2014! 2019E PAYOUT RATIO Latin America generates capital sufficient to sustain organic growth and make distributions Wi Distributions upstream 79. 'Removed from net income other after tax adjustments due to Chiletax reform USD $
Slide 80: Driving ROE Growth
PRINCIPAL INTERNATIONAL DRIVING ROE GROWTH Reported Principal International ROE 7.8% Influenced by — Leverage — FX headwind — Acquisitions Adjusted ROE around 11% Expected growth from here 80 Revenue growth Chile salary base growth Operational efficiency Stable margin EARNINGS EQUITY Encaje growth F
Slide 81: Checkbook Economics: BB Seguridade Valuation
Slide 82: Key Takeaways
Slide 83: Q&A Panel
Slide 84: Appendix
Slide 85: Joint Venture Accounting Treatment
Slide 86: Joint Venture Accounting Treatment
Slide 87: Principal International Income Statement
Slide 88: Acronyms and Useful Links
Slide 89: Product Overview - Brazil
Slide 90: Product Overview - Chile
Slide 91: Product Overview - Mexico
Slide 92: Non-GAAP Financial Measure Reconciliations
Principal Financial Group — Investor Day (March 2015) on 6ix