From the Chairman and the CEO To our shareholders:

What’s next is clearly on your mind. It’s top of mind for us, as well, as we think about the daily challenges our customers face in achieving their financial goals; highly competitive markets; and differentiating ourselves in a world that’s in constant change. So, let’s talk about what’s next.

Letter from CEO Dan Houston and Chairman Larry Zimpleman
Dan Houston,
President and CEO
Larry Zimpleman,
Chairman

What’s next for our strategy?

At its core, our strategy remains the same. We know where we’re going to compete in:

Opportunities in our chosen markets remain compelling. The global asset management industry—which includes retail, retirement and institutional investing—is projected to grow at a compounded annual rate of 6 percent, surpassing $100 trillion of AUM in 2020, on its way to $400 trillion in 2050.1

And we know how we’ll continue to win:

In 2015, we did just that, as evidenced by superior investment performance, strong customer retention, notable recognition and essential actions to drive long-term success.

Superior investment performance—44 funds, or 76 percent of our Morningstar-rated retail mutual funds, had a four- or five-star rating at year-end; and 93 percent of these funds were above median for the five-year period.

Strong customer retention—We delivered $23 billion in positive net customer cash flows, while many of our peers were experiencing outflows. Principal International, our retirement and long-term savings business in Latin America and Asia, delivered its 29th consecutive quarter of positive flows.

Notable third party recognition—In 2015, Principal was named by Ethisphere magazine as one of the world’s most ethical companies. As recognized in the 2015 Recognition highlights, we were also recognized for top-tier investment performance, as a best place to work and as a leading business technology innovator.

Essential actions—We also positioned the company for future success by: expanding our portfolio of income solutions; using technology to improve the customer experience; enhancing our distribution network; and expanding our presence in Asia through the acquisition of AXA’s pension business in Hong Kong, where we are now the fifth largest provider.

What’s next for growth = what’s next for customers

To answer “What’s next for growth?” we must answer “What’s next for customers?” Because customer needs and preferences are continuously changing, this is the hard part. But this is also the part that makes our work rewarding.

Getting people on the path to financial security

Building resilient investment portfolios

Principal continues to help retirees diversify and balance four key investment objectives given longer life expectancies: protecting purchasing power; preserving capital in volatile markets; life-time income; and capital appreciation. In 2015, with these goals in mind, we continued to expand our solution set, including:

Influencing the development of retirement systems that work

Globally, populations are aging and fertility rates are declining. The result: fewer workers to support a larger number of retirees who are living longer. In 2015, we sponsored a comprehensive study on emerging market retirement systems, markets such as Brazil, China and Mexico, where the number of elderly per 100 working-age adults is projected to at least triple between 2010 and 2050. Global Aging and Retirement Security in Emerging Markets is just one example of the work we’re involved in. Our focus: understanding how various retirement systems are structured and financed; then advocating ways to help more people maintain their lifestyle during retirement, without putting undue burden on future workers or employers, or on governments already struggling with debt. You can read more about the report in the global aging report section.

What’s next: making our customers more successful

When customers succeed, we succeed, and when we succeed, shareholders succeed. In the pages that follow, we explain what’s next by connecting our strategy more directly to the end customer, whether that customer is an institutional investor, a business owner or an individual.

We’re also introducing our new face to the world—one we believe truly represents the way we help people achieve financial progress, wherever they are in their journey. Our new global brand reveals who we’ve always been with renewed pride. And it captures our ongoing commitment to simplifying the complex for people.

On behalf of Principal, our sincere thanks for your continued support. We encourage you to cast your vote in time for the Annual Meeting of Shareholders, which is on May 17, 2016. We remain, as always, firmly focused on delivering on our promises to you, and to each of our stakeholders.

Larry Zimpleman
Chairman

Dan Houston
President and chief executive officer


1 Asset Management 2020: A Brave New World, PwC, 2014; The age of asset management? Speech by Andrew G Haldane, Executive Director, Financial Stability, Bank of England, April 4, 2014.

What’s next: Letter from the Board of Directors