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The Principal Financial Group^®: Built on Strength

10/27/11

When the going gets tough, you need a solid, experienced company you can trust. For more than 130 years, The Principal^® has been helping our clients with their financial goals in all kinds of markets.

Whether you're an individual preparing for retirement, someone just starting out, or a business owner managing benefit costs, we have the longevity, experience and solutions you need:

• Solid operating results
• Strong liquidity and capital adequacy
• An investment portfolio for the long-term
• Strong financial strength ratings

Solid operating results

The Principal has continuously delivered results throughout the economic crisis and continued to do so in third quarter 2011.

Our success is rooted in more than 130 years of experience. How do we do it? Amid short-term pressures, we focus on the long-term view. We have a mix of products and investments that provide us flexibility. And we remain committed to working with our clients for greater financial security, in good times and bad. Through recession and recovery, challenge and opportunity, we've relied on a disciplined, long-term investing approach to help keep things on track.

17.8 million customers worldwide trust the Principal Financial Group, and here's why:

• We're a member of the Fortune 500.
• We're one of the nation's 401(k) leaders^[1].
• We manage assets for 9 of the 25 largest pension plans in the world^[2].
• We're the 15th-largest manager of U.S. institutional, tax-exempt assets^[3].
• We're the 11th largest life insurer^[4].
• We're the number two deferred compensation plan service provider^[5].
• We're the 4th largest non-medical carrier based on in-force contracts and 3rd largest non-can IDI carrier^[6].

Our most recent financial results (Sept. 30, 2011) reflect the strength of our business under challenging conditions. Highlights of 3Q 2011 results include:

• Excellent sales of two key retirement and investment products in the third quarter with $1.5 billion for Full Service Accumulation, $2.6 billion for Principal Funds.
• Net cash flows of $1.2 billion for Principal Global Investors and $700 million for Principal International.
• Strong capital and position, with: an estimated risk based capital ratio of 455 percent at quarter-end and $1.8 billion of excess capital^[7].

» For more details, read the third quarter 2011 results.

Our revenue and earnings diversification and strong business fundamentals helped minimize the negative effects of some of the most challenging capital market and economic conditions in 75 years.

Strong liquidity and capital adequacy

The Principal has always focused on maintaining strong liquidity and capital adequacy to meet our customer obligations.

Like many other companies, The Principal continues to hold more capital than we have historically given continued challenges with the economy. Further, our fee-based businesses require very little capital to support organic growth. This enables us to generate substantial free cash flows on an ongoing basis.

An investment portfolio for the long-term

The liabilities of our investment portfolio tend to be longer-term and more predictable in nature. To help ensure we can meet our obligations, our team of investment experts focuses on managing risks by:

• Maintaining high quality – selecting assets that are highly likely to pay according to their maturity dates
• Diversification – investing in a wide variety of assets such as corporate bonds, government and agency-backed securities, commercial real estate and cash; as well as diversifying by geographic location, industry and company
• Asset/liability management – building the portfolio so we have the cash we need to pay off our obligations when they come due

Even though our investment portfolio includes commercial real estate and commercial mortgage-backed securities (CMBS), that does not impact our ability to fulfill our promises to our customers.

• Regular stress testing of our portfolio, which includes CMBS, continues to demonstrate that even under severe stress, losses would be manageable, occurring over a multi-year period.
• Regarding commercial mortgages, our portfolio characteristics remain strong. As of Sept. 2011, debt service coverage was 1.9 times, occupancy rate was 90 percent and current loan to value was 62 percent.

» For more details, visit the Financial & SEC Reports: Supplementary Info page of the Investor Relations site.

Strong financial strength ratings

We continue to earn strong financial strength ratings from all the major ratings agencies^[8].

• A.M. Best: A+ (2nd highest of 16) Superior
• Fitch Rating: AA- (4th highest of 21) Very Strong
• Moody's: Aa3 (4th highest of 21) Excellent
• Standard & Poor's Rating Group: A (6th highest of 21) Strong

For customers, these "strong" ratings mean they can continue to have confidence in the ability of Principal Life Insurance Company to meet its long-term obligations. For shareholders, they validate the continued solid business performance of Principal Life and the strength of our capital and liquidity positions. Our strong relative ratings speak to our ongoing ability to compete for new business and retain existing business, across product lines.

» For more details, view our credit ratings.

^[1]

The Principal ranks number one in total plans for all asset sizes among fully bundled 401(k) providers – 2010 Spectrem Group analysis of fully-bundled 401(k) providers

^[2]

Pensions & Investments P&I 1,000 report. (Sept. 2010)

^[3]

Pensions & Investments. (May 2010)

^[4]

Based on 2011 HIGHLINEDATA, LLC.

^[5]

Based on number of plans, PLANSPONSOR Deferred Compensation Plan Buyer's Guide, December 2010

^[6]

2010 LIMRA data of annualized new sale premium

^[7]

Excess capital includes cash at the holding company and capital at the life company above that needed to maintain a 350 percent NAIC risk based capital ratio for the life company

^[8]

Third party ratings relate only to Principal Life Insurance Company, the largest member company of the Principal Financial Group and Principal National Life Insurance Company, and do not reflect any ratings actions or notices relating to the US life insurance sector generally.