Management continues to take appropriate actions to further strengthen its competitive positioning.

From the Board of Directors

To our shareholders

To create long-term shareholder value in a rapidly changing world, management must continuously address new challenges and capitalize on emerging opportunities. As your board of directors, we take our responsibilities, which include oversight of management’s strategy and succession, very seriously, and we are committed to representing your interests. On behalf of the board, I’m pleased to provide an update on our key areas of focus and to share some thoughts on company performance.

Strategic oversight: The board not only evaluates strategy, but also shares perspectives, provides advice, and monitors and assesses management’s implementation of our chosen strategy. Each quarter, as well as at our annual strategy retreat with management, we discuss and debate topics critical to long-term success. At our 2017 retreat, we focused on global growth and capital planning. This involved looking at key challenges, opportunities, and risks created by changing customer expectations, demographic shifts, further expansion of a global middle class, technology (including Principal’s digital transformation), and industry regulation. Management continues to evolve and refine company strategy, invest in growth, and take appropriate actions to further strengthen its competitive positioning.

Risk oversight: We have a coordinated, comprehensive approach to overseeing the company’s enterprise risk management. The board regularly reviews strategic threats, opportunities, and key risks, including financial, product, cybersecurity, regulatory, and reputational risk, as well as new exposures that could potentially emerge in the future. Both your board and management are fully engaged in risk management and have made it a fundamental aspect of company strategy, operations, and culture.

Talent and succession planning: Our role in talent and succession planning applies to both company leadership and the board. In February 2017, as part of a planned succession, Deanna Strable transitioned from president of U.S. Insurance Solutions to chief financial officer, replacing Terry Lillis. Amy Friedrich succeeded Deanna as president of U.S. Insurance Solutions in May 2017, after serving as senior vice president and head of Specialty Benefits Insurance.

In October 2017, Diane Nordin, former partner at Wellington Management Company, LLP, joined the Principal board. She brings over 30 years’ experience in investment management, with expertise in product management, client relationship management, strategic planning, and operations. We are committed to regular board refreshment and continue to strive for balance between introducing new perspectives and maintaining continuity. Our board now includes 11 independent directors with broad expertise, skills, and viewpoints to help the company advance and execute its strategy. The board values diversity in all aspects including gender, race, age, and experience. Five of our 11 independent directors are women.

Company performance: The board remains focused on sustainable performance. We, too, were pleased with performance in 2017, but even more so with long-term growth. Since 2012, the company has increased assets under management by more than $265 billion or 66 percent. This has helped drive 13 percent compounded annual growth in earnings per share over the past five years. Again, through strategic investment, the company continues to make important strides in meeting customers’ needs.

Thank you for your continued support and for the opportunity to serve as your lead director. Please contact me with your questions, thoughts, and opinions at principal.com/contactliz.

Sincerely,

Elizabeth Tallett

Lead director, Principal Financial Group