filingbody.htm - Generated by SEC Publisher for SEC Filing
SECURITIES AND EXCHANGE COMMISSION
 
 
Washington, D.C. 20549
 
 
FORM 8-K
 
CURRENT REPORT
 
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report: October 27, 2011
(Date of earliest event reported)
 
 
PRINCIPAL FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
 
 
  Delaware  1-16725  42-1520346 
  (State or other jurisdiction  (Commission file number)  (I.R.S. Employer 
  of incorporation)    Identification Number) 
 
 
711 High Street, Des Moines, Iowa 50392
(Address of principal executive offices)
 
(515) 247-5111
(Registrant’s telephone number, including area code)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the 
registrant under any of the following provisions:   
 
[ ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 
[ ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 
[ ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 
  240.14d-2(b))     
[ ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 
  240.13e-4(c))     

 



Page 2   
Item 2.02. Results of Operations and Financial Condition 
On October 27, 2011, Principal Financial Group, Inc. publicly announced information regarding its 
results of operations and financial condition for the quarter ended September 30, 2011. The text of 
the announcement is included herewith as Exhibit 99. 
Item 9.01 Financial Statements and Exhibits   
99 Third Quarter 2011 Earnings Release   
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
 
 
PRINCIPAL FINANCIAL GROUP, INC.
                                                    By:      ___/s/ Terrance J. Lillis _______
Name:       Terrance J. Lillis
                                                                  Title:       Senior Vice President and Chief Financial
      Officer
   
Date: October 27, 2011   

 



Page 3     
    EXHIBIT 99 
Release:  On receipt, Oct. 27, 2011 
Media contact:  Susan Houser, 515-248-2268, houser.susan@principal.com 
Investor contact:  John Egan, 515-235-9500, egan.john@principal.com 
 
Principal Financial Group, Inc. Announces Third Quarter 2011 Results
 
·  Third quarter 2011 operating earnings1 of $192 million were down 12 percent from third 
  quarter 2010; net income available to common shareholders was $64 million, a decrease of 55 
  percent from third quarter 2010. 
·  Year-to-date operating earnings were $661 million, an increase of 5 percent over the same 
  period in 2010; year-to-date net income available to common shareholders was $518 million, an 
  increase of 11 percent over the same period in 2010. 
·  Assets under management were $320.8 billion at the end of third quarter 2011, an increase of 5 
  percent compared to third quarter 2010. 
·  Book value per share, excluding AOCI2, increased to a record high of $29.59, up 7 percent over 
  third quarter 2010 and 1 percent sequentially. 
(Des Moines, Iowa) – Principal Financial Group, Inc. (NYSE: PFG) today announced results for third quarter 
2011. The company reported operating earnings of $191.9 million for third quarter 2011, compared to $218.9 
million for third quarter 2010. Operating earnings per diluted share (EPS) were $0.61 for third quarter 2011, 
compared to $0.68 for third quarter 2010. The company reported net income available to common stockholders 
of $63.7 million, or $0.20 per diluted share for third quarter 2011, compared to $142.2 million, or $0.44 per 
diluted share for third quarter 2010. Operating revenues for third quarter 2011 were $2,026.3 million compared 
to $1,986.7 million for the same period last year. 
  “Although operating earnings were negatively impacted by extreme market events, the 
momentum of our businesses remained strong in the third quarter,” said Larry D. Zimpleman, chairman, 
president and chief executive officer. “We expect full-year 2011 sales and net cash flows for fee-based 
businesses to be significantly improved from 2010.” 
  Added Terry Lillis, senior vice president and chief financial officer, “Our financial position 
remains strong giving us the flexibility to continue to invest for future growth, as well as return capital to 
shareholders. During the quarter, we completed our share repurchase programs, reducing our common shares 
outstanding by 9.1 million shares. In addition, today we announced a $0.70 per share common stock annual 
dividend, a 27 percent increase over 2010, further demonstrating our long-term commitment to shareholders.” 

 

1 Use of non-GAAP financial measures is discussed in this release after Segment Highlights. 
2 Accumulated Other Comprehensive Income 

 



Page 4 

 

Key Highlights for the Third Quarter
 
·  Strong sales in two key Retirement and Investor Services businesses in the third quarter, with $1.5 billion 
  for Full Service Accumulation and $2.6 billion for Principal Funds, contributing to positive net cash flows 
  of $350 million for Full Service Accumulation and $180 million for Principal Funds. 
·  Unaffiliated deposits of $5.6 billion in the quarter led to net cash flows of $1.2 billion for Principal Global 
  Investors. 
·  Principal International net cash flows of $700 million and $3.1 billion of operations acquired with our 
  HSBC Mexican AFORE acquisition in the quarter contributed to a record $54.5 billion of assets under 
  management. (Reported assets under management do not include an additional $7.3 billion of assets 
  managed by our Chinese joint venture.) 
·  Continued momentum in U.S. Insurance Solutions with $41 million of Individual Life sales and $66 million 
  of Specialty Benefits sales. 
·  Strong capital position with an estimated risk based capital ratio of 455 percent at quarter end and 
  approximately $1.8 billion of excess capital.3 
·  Principal Financial Group completed both Board authorized share repurchase programs and bought back 9.1 
  million shares of common stock in the third quarter at an average share price of $24.16, bringing the year-to- 
  date total number of shares repurchased to 16.8 million. 
 
Net Income 
Net income available to common stockholders of $63.7 million for third quarter 2011 reflects net realized 
capital losses of $63.7 million, which includes $30.0 million of losses related to credit gains and losses on 
sales and permanent impairments of fixed maturity securities, including $23.5 million of losses on 
commercial mortgage-backed securities. 
 
Net income also reflects a $79.4 million after-tax loss resulting from the impact of a court ruling regarding 
some uncertain tax positions and the estimated obligation associated with the New York State Insurance 
Department’s liquidation plan for Executive Life Insurance Company of New York. 
  Segment Highlights 
Retirement and Investor Services 
  Segment operating earnings for third quarter 2011 were $128.6 million, compared to $147.4 million for 
the same period in 2010. Full Service Accumulation earnings were $71.0 million compared to $80.3 million for 
the same period a year ago, reflecting an $8.3 million after-tax increase in deferred policy acquisition cost 
(DPAC) amortization expense due to negative equity market returns in the current quarter. Principal Fund’s 
earnings increased 47 percent from a year ago to $12.5 million, reflecting strong operating leverage on a 16 
percent increase in average account values. Individual Annuities earnings were $15.0 million for third quarter 
2011 compared to $31.9 million a year ago, reflecting a $10.5 million after-tax increase in DPAC amortization 
expense due to negative equity market returns in the current quarter. Bank and Trust Services earnings were up 
26 percent from a year ago to $9.2 million due to margin improvement and expense management in the current 
quarter. Investment Only earnings were $11.5 million for third quarter 2011, compared to $13.9 million for the 
same period a year ago. The decline is primarily due to a 17 percent decrease in average account values, 
reflecting the company’s scale back of its institutional GIC and funding agreement business. Full Service Payout 
earnings increased 71 percent from the year ago quarter to $9.4 million in third quarter 2011 primarily due to 
more favorable mortality experience in the current quarter compared to the third quarter 2010. 

 

3 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. 

 



Page 5 
Operating revenues for third quarter 2011 were $995.5 million compared to $997.0 million for the 
same period in 2010, as higher revenues for the accumulation businesses, which improved $42.2 million, or 6 
percent, from the year ago quarter were offset by a $43.7 million decline in revenues for the guaranteed 
businesses. 
Segment assets under management were $168.6 billion as of Sept. 30, 2011, compared to $168.8 
billion as of Sept. 30, 2010. 
 
Principal Global Investors 
Segment operating earnings for third quarter 2011 were $19.1 million, a 27 percent increase 
compared to the year ago quarter, primarily due to the increase in revenue and operating leverage. 
Operating revenues for third quarter were $132.9 million, compared to $118.0 million for the same 
period in 2010, primarily due to higher asset management and transaction fees. 
Unaffiliated assets under management were $77.8 billion as of Sept. 30, 2011, compared to $76.2 
billion as of Sept. 30, 2010 as we saw strong demand in several of our investment strategies. 
 
Principal International 
Segment operating earnings were $36.6 million in third quarter 2011, an 11 percent increase 
compared to the prior year quarter. The improvement was primarily due to the increase in assets under 
management. 
Operating revenues were $220.2 million for third quarter 2011, compared to $200.1 million for the 
same period in 2010, primarily due to growth in assets under management. 
Segment assets under management were a record $54.5 billion as of Sept. 30, 2011, up from $42.3 
billion as of Sept. 30, 2010. This includes $5.6 billion of net cash flows over the trailing twelve months, or 13 
percent of beginning of period assets under management and $3.1 billion from the HSBC AFORE acquisition 
in Mexico. Reported assets under management do not include an additional $7.3 billion of assets managed by 
our Chinese joint venture. 
 
U.S. Insurance Solutions 
Segment operating earnings for third quarter 2011 were $47.6 million, compared to $47.3 million 
for the same period in 2010. Specialty Benefits earnings were $21.8 million in third quarter 2011, down from 
$24.7 million for the same period in 2010. The decrease was driven by a higher loss ratio in the current 
quarter compared to the year ago quarter, exhibiting normal quarterly volatility. Individual Life earnings were 
$25.8 million in the third quarter, compared to $22.6 million in third quarter 2010 as the growth in the block of 
business was partially offset by $3.3 million after-tax of higher DPAC amortization expense due to negative 
equity market returns in the current quarter. 

 



Page 6 
 
Segment operating revenues for third quarter 2011 were $734.3 million compared to $690.7 million 
for the same period a year ago due to higher premiums and fees in Individual Life and positive trends in both 
sales and client retention in Specialty Benefits. 
 
 
Corporate 
Operating losses for third quarter 2011 were $40.0 million compared to operating losses of $23.9 
million in third quarter 2010 primarily due to lower variable investment income on excess capital at the holding 
company due to negative marks caused by widening of credit spreads. 
 
Forward looking and cautionary statements 
This press release contains forward-looking statements, including, without limitation, statements as to 
operating earnings, net income available to common stockholders, net cash flows, realized and unrealized 
gains and losses, capital and liquidity positions, sales and earnings trends, and management's beliefs, 
expectations, goals and opinions. The company does not undertake to update these statements, which are 
based on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. 
Future events and their effects on the company may not be those anticipated, and actual results may differ 
materially from the results anticipated in these forward-looking statements. The risks, uncertainties and 
factors that could cause or contribute to such material differences are discussed in the company's annual report 
on Form 10-K for the year ended Dec. 31, 2010, and in the company’s quarterly report on Form 10-Q for the 
quarter ended June 30, 2011, filed by the company with the Securities and Exchange Commission, as updated 
or supplemented from time to time in subsequent filings. These risks and uncertainties include, without 
limitation: adverse capital and credit market conditions may significantly affect the company’s ability to meet 
liquidity needs, access to capital and cost of capital; continued difficult conditions in the global capital markets 
and the economy generally; continued volatility or further declines in the equity markets; changes in interest 
rates or credit spreads; the company’s investment portfolio is subject to several risks that may diminish the value 
of its invested assets and the investment returns credited to customers; the company’s valuation of securities may 
include methodologies, estimations and assumptions that are subject to differing interpretations; the 
determination of the amount of allowances and impairments taken on the company’s investments requires 
estimations and assumptions that are subject to differing interpretations; gross unrealized losses may be realized 
or result in future impairments; competition from companies that may have greater financial resources, broader 
arrays of products, higher ratings and stronger financial performance; a downgrade in the company’s financial 
strength or credit ratings; inability to attract and retain sales representatives and develop new distribution 
sources; international business risks; the company’s actual experience could differ significantly from its pricing 
and reserving assumptions; the company’s ability to pay stockholder dividends and meet its obligations may be 
constrained by the limitations on dividends or distributions Iowa insurance laws impose on Principal Life; the 
pattern of amortizing the company’s DPAC and other actuarial balances on its universal life-type insurance 
contracts, participating life insurance policies and certain investment contracts may change; the company may 
need to fund deficiencies in its “Closed Block” assets that support participating ordinary life insurance policies 
that had a dividend scale in force at the time of Principal Life’s 1998 conversion into a stock life insurance 
company; the company’s reinsurers could default on their obligations or increase their rates; risks arising from 
acquisitions of businesses; changes in laws, regulations or accounting standards; a computer system failure or 
security breach could disrupt the company’s business, and damage its reputation; results of litigation and 
regulatory investigations; from time to time the company may become subject to tax audits, tax litigation or 
similar proceedings, and as a result it may owe additional taxes, interest and penalties in amounts that may be 
material; fluctuations in foreign currency exchange rates; and applicable laws and the company’s stockholder 
rights plan, certificate of incorporation and by-laws may discourage takeovers and business combinations that 
some stockholders might consider in their best interests. 

 



Page 7 

 

Use of Non-GAAP Financial Measures 
The company uses a number of non-GAAP financial measures that management believes are useful to investors 
because they illustrate the performance of normal, ongoing operations, which is important in understanding and 
evaluating the company’s financial condition and results of operations. They are not, however, a substitute for 
U.S. GAAP financial measures. Therefore, the company has provided reconciliations of the non-GAAP 
measures to the most directly comparable U.S. GAAP measure at the end of the release. The company adjusts 
U.S. GAAP measures for items not directly related to ongoing operations. However, it is possible these 
adjusting items have occurred in the past and could recur in the future reporting periods. Management also uses 
non-GAAP measures for goal setting, as a basis for determining employee and senior management 
awards and compensation, and evaluating performance on a basis comparable to that used by investors 
and securities analysts. 
Earnings Conference Call 
On Friday, Oct. 28, 2011 at 10:00 a.m. (ET), Chairman, President and Chief Executive Officer Larry 
Zimpleman and Senior Vice President and Chief Financial Officer Terry Lillis will lead a discussion of 
results, asset quality and capital adequacy during a live conference call, which can be accessed as follows: 
·  Via live Internet webcast. Please go to www.principal.com/investor at least 10-15 minutes prior to the 
  start of the call to register, and to download and install any necessary audio software. 
·  Via telephone by dialing 800-374-1609 (U.S. and Canadian callers) or 706-643-7701 (International 
  callers) approximately 10 minutes prior to the start of the call. The access code is 13931944. 
·  Replay of the earnings call via telephone is available by dialing 855-859-2056 (U.S. and Canadian 
  callers) or 404-537-3406 (International callers). The access code is 13931944. This replay will be 
  available approximately two hours after the completion of the live earnings call through the end of day 
  November 4, 2011. 
·  Replay of the earnings call via webcast as well as a transcript of the call will be available after the call at: 
  www.principal.com/investor. 
 
The company's financial supplement and additional investment portfolio detail for third quarter 2011 is 
currently available at www.principal.com/investor, and may be referred to during the call. 
 
 
About the Principal Financial Group 
The Principal Financial Group Ò (The Principal ® )4 is a leader in offering businesses, individuals and 
institutional clients a wide range of financial products and services, including retirement and investment 
services, insurance, and banking through its diverse family of financial services companies. A member of the 
Fortune 500, the Principal Financial Group has $320.8 billion in assets under management5 and serves some 
17.8 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United 
States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol 
PFG. For more information, visit www.principal.com. 

 









Page 10         
 
 
Principal Financial Group, Inc.
Reconciliation of Non-GAAP Financial Measures to U.S. GAAP
(in millions, except as indicated)
 
  Three Months Ended,  Nine Months Ended, 
  9/30/11  9/30/10  9/30/11  9/30/10 
Diluted Earnings Per Common Share:         
Operating earnings  $ 0.61  $ 0.68  $ 2.06  $ 1.95 
Net realized capital losses  (0.21)  (0.10)  (0.30)  (0.48) 
Other after-tax adjustments  (0.20)  (0.14)  (0.15)  (0.02) 
Net income available to common stockholders  $ 0.20  $ 0.44  $ 1.61  $ 1.45 
 
Book Value Per Common Share Excluding Accumulated         
Other Comprehensive Income:         
Book value per common share excluding accumulated other         
comprehensive income  $ 29.59  $ 27.71  $ 29.59  $ 27.71 
Net unrealized capital gains  2.67  2.18  2.67  2.18 
Foreign currency translation  (0.13)  0.01  (0.13)  0.01 
Net unrecognized postretirement benefit obligations  (1.19)  (0.70)  (1.19)  (0.70) 
Book value per common share including accumulated other         
comprehensive income  $ 30.94  $ 29.20  $ 30.94  $ 29.20 
 
Operating Revenues:         
RIS  $ 995.5  $ 997.0  $ 3,057.4  $ 3,031.0 
PGI  132.9  118.0  394.5  346.1 
PI  220.2  200.1  653.8  569.4 
USIS  734.3  690.7  2,246.6  2,070.1 
Corporate  (56.6)  (19.1)  (130.3)  (81.2) 
Total operating revenues  2,026.3  1,986.7  6,222.0  5,935.4 
Net realized capital losses and related adjustments  (55.2)  (42.3)  (124.8)  (199.5) 
Exited group medical insurance business  117.7  344.1  553.4  1,050.2 
Total GAAP revenues  $ 2,088.8  $ 2,288.5  $ 6,650.6  $ 6,786.1 
 
Operating Earnings:         
RIS  $ 128.6  $ 147.4  $ 449.2  $ 433.4 
PGI  19.1  15.0  56.5  39.3 
PI  36.6  33.1  102.6  106.0 
USIS  47.6  47.3  156.6  141.4 
Corporate  (40.0)  (23.9)  (103.9)  (89.4) 
Total operating earnings  191.9  218.9  661.0  630.7 
Net realized capital losses  (63.7)  (30.9)  (94.9)  (156.9) 
Other after-tax adjustments  (64.5)  (45.8)  (48.1)  (6.8) 
Net income available to common stockholders  $ 63.7  $ 142.2  $ 518.0  $ 467.0 
 
Net Realized Capital Gains (Losses):         
Net realized capital losses, as adjusted  $ (63.7)  $ (30.9)  $ (94.9)  $ (156.9) 
Certain derivative and hedging-related adjustments  25.4  20.5  73.2  69.8 
Amortization of DPAC and sale inducement costs  55.0  26.7  47.1  71.3 
Certain market value adjustments of embedded derivatives  (0.9)  (0.9)  (64.7)  (6.7) 
Capital gains (losses) distributed  (9.7)  (0.1)  2.0  2.2 
Tax impacts  (29.5)  (34.7)  (44.9)  (111.1) 
Noncontrolling interest capital gains (losses)  (6.4)  (0.6)  30.4  4.1 
Recognition of front-end fee revenues  (0.9)  (1.2)  0.5  (5.2) 
Certain market value adjustments to fee revenues  -  2.3  0.1  2.3 
Net realized capital gains (losses) associated with exited group         
medical insurance business  -  (1.8)  0.2  (2.4) 
GAAP net realized capital losses  $ (30.7)  $ (20.7)  $ (51.0)  $ (132.6) 
 
Other After-Tax Adjustments:         
Exited group medical insurance business  $ 14.9  $ (45.8)  $ 50.8  $ 1.0 
Court ruling regarding some uncertain tax positions  (68.9)  -  (68.9)  - 
ELNY liquidation provision estimated obligation  (10.5)  -  (10.5)  - 
Contribution to PFG Foundation  -  -  (19.5)  - 
Tax impact of healthcare reform  -  -  -  (7.8) 
Total other after-tax adjustments  $ (64.5)  $ (45.8)  $ (48.1)  $ (6.8)