Letter from the Lead Director

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

Strategic oversight

The board not only evaluates company strategy, but also shares perspectives, provides advice, and oversees and assesses management’s implementation. Each quarter, and at our annual strategy retreat with management, we discuss and debate topics critical to the company’s long-term success. At our 2018 retreat, we focused on global growth strategies and capital planning. This involved an in-depth look at key challenges, opportunities, and risks created by changing customer expectations, demographic shifts, further expansion of a global middle class, technology (including Principal’s data strategy and digital transformation), and industry regulation. Management continues to evolve and refine company strategy, invest in growth, and take appropriate actions to further strengthen its long-term 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 risks that could potentially emerge or increase 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.

Social responsibility

Principal has long understood the importance of making a positive impact on the global communities in which it operates and has long been committed to ESG initiatives. Management reports to the Board of Directors regularly on ESG focus areas.

Principal’s commitment to social responsibility continues to be recognized by the financial press, human rights campaigns, and representatives of military and gender-equality associations and advocates. This includes being named one of the World’s Most Ethical Companies by the Ethisphere Institute for an eighth straight year in 2018, ranking No. 6 on Forbes 2018 list of America’s Best Employers for Diversity, and ranking No. 1 on Forbes 2018 list of America’s Best Employers for Women.

Talent and succession planning

Our role in talent and succession planning applies to both company leadership and the board. In September 2018, Tim Dunbar was named head of Global Asset Management, and Pat Halter was named Principal Global Investors’ chief executive officer after having served as its chief operating officer since 2016.

While there were no additions to the board in 2018, we remain committed to regular board refreshment and continue to strive for balance between introducing new perspectives and maintaining continuity. Our board is composed of 11 directors, 10 of whom are independent, 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. Half of our independent directors are women.

Company performance

The board remains focused on sustainable performance. While unfavorable macroeconomic conditions negatively impacted company performance in 2018, long-term growth remains strong. Since 2013, the company has increased AUM by more than $140 billion, or 30 percent. This has helped drive a 9 percent compounded annual growth in non-GAAP diluted operating earnings per share over the past five years. Again, through strategic investment, the company continues to make important strides in meeting customers’ needs, positioning Principal for long-term success.

Let me close by thanking you again for your continued support. I appreciate 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