Market Overview

Principal Announces Second Quarter 2018 Results

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Company Also Announces Increase to Common Stock Dividend

Company Highlights

  • Second quarter 2018 net income attributable to Principal Financial
    Group, Inc. (PFG) of $456.6 million, or $1.58 per diluted share
  • Second quarter 2018 non-GAAP operating earnings1
    of $391.4 million, or $1.35 per diluted share
  • Assets under management (AUM) of $666.6 billion, up 6 percent over
    second quarter 2017
  • Company declares third quarter 2018 common stock dividend of $0.53
    per share; a 13 percent increase over third quarter 2017

Principal Financial Group® (NASDAQ:PFG) today announced
results for second quarter 2018.

  • Net income attributable to PFG for second quarter 2018
    increased 48 percent to $456.6 million
    , compared to $309.5 million
    for second quarter 2017. Net income per diluted share of $1.58 for
    second quarter 2018 compared to $1.06 in prior year quarter. The
    company benefited from a $99.5 million after-tax gain related to a
    sale of an equity method investment.
  • Non-GAAP operating earnings for second quarter 2018 of $391.4
    million
    , compared to $383.6 million for second quarter
    2017. Non-GAAP operating earnings per diluted share (EPS) of $1.35 for
    second quarter 2018 compared to $1.31 for second quarter 2017.
  • Quarterly common stock dividend of $0.53 per share for third
    quarter 2018 was authorized by the company's Board of Directors,
    bringing the trailing twelve-month dividend to $2.05 per share, a 13
    percent increase compared to the prior year trailing twelve-month
    period. The dividend will be payable on Sept. 28, 2018, to
    shareholders of record as of Sept. 6, 2018.

"I'm pleased with our results for the quarter and first six months of
the year," said Dan Houston, chairman, president and CEO of Principal.
"We delivered $391 million of non-GAAP operating earnings in the second
quarter. At $800 million year-to-date, non-GAAP operating earnings are
up 6 percent compared to the first half of 2017, despite some
unfavorable macroeconomic conditions and our accelerated investment in
digital business solutions."

"We continue to create long-term shareholder value through our balanced
approach to capital deployment," added Houston. "In the first half of
the year, we've returned over $670 million to shareholders through
common stock dividends and share repurchases. Additionally, we've
committed $130 million to strategic acquisitions to increase scale and
capabilities in our global businesses. Our recent acquisition of
financial technology company RobustWealth is an important step forward
for Principal as we look to make investment advice more accessible to
customers. RobustWealth provides us a suite of solutions for investment
advisors, including a digital advice platform, goal-based investment
tools, and efficient client onboarding."

Other second quarter highlights

  • Strong Morningstar investment performance2, with 83 percent
    of Principal's investment options above median on a
    one-year basis, 70 percent on a three-year basis and 86 percent on a
    five-year basis.
  • We continue to execute on our accelerated investment in digital
    business strategies as we intensify our focus on the customer
    experience, direct-to-consumer offerings and our use of data science
    in investment research.
  • Total company AUM of $666.6 billion with total company net cash flows
    of $2.3 billion.
  • Retirement and Income Solutions (RIS) - Fee sales of $3.1 billion and
    net cash flow of $1.2 billion contributed to higher end of period
    account values of $229.3 billion, a 9 percent increase over the prior
    year quarter.
  • RIS - Spread sales of $2.1 billion, including fixed annuity sales of
    $1.5 billion, helped drive end of period account values to $42.7
    billion, a 9 percent increase over the prior year quarter.
  • Principal Global Investors (PGI) pre-tax return on operating revenues
    less pass-through commissions3 was 37.5 percent on a
    trailing twelve-month basis.
  • Principal International (PI) generated net cash flows of $1.4 billion
    and reported AUM of $156.3 billion, a 6 percent increase over the year
    ago quarter despite headwinds from foreign exchange rates,
    particularly in Brazil.
  • Specialty Benefits premium and fees4 increased 8 percent
    compared to the year ago quarter driven by strong retention and sales.
  • Individual Life sales increased 3 percent over the year ago quarter
    with 65 percent coming from the business market.
  • Continued strong capital position with a 2018 capital deployment
    target of $900 million to $1.3 billion. Deployed $390.9 million of
    capital in second quarter 2018, including:
    • $196.4 million to repurchase 3.4 million shares of common stock;
    • $148.5 million of common stock dividends with the $0.52 per share
      common dividend paid in the second quarter; and
    • $46.0 million committed to acquisitions and increased ownership in
      a PGI boutique.
 
Segment Results
Retirement and Income Solutions - Fee
(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change

Pre-tax operating earnings5

$ 135.7     $ 147.5     (8 )%     $ 501.6     $ 547.1     (8 )%

Net revenue6

$ 405.7 $ 406.1 0 % $ 1,603.3 $1,575.5 2 %

Pre-tax return on net revenue7

      33.4 %       36.3 %    

 

      31.3 %     34.7 %      
 
  • Pre-tax operating earnings decreased $11.8 million primarily
    due to higher operating expenses.
  • Net revenue was flat as higher fees from growth in account
    values was offset by lower net investment income.
 

Retirement and Income Solutions - Spread

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating earnings $ 81.2     $ 96.3     (16 )%     $ 359.7     $ 359.3     0 %
Net revenue $ 127.1 $ 145.1 (12 )% $ 525.9 $ 544.1 (3 )%
Pre-tax return on net revenue       63.9 %       66.4 %             68.4 %       66.0 %      
 
  • Pre-tax operating earnings decreased $15.1 million due to lower
    variable investment income8 and lower reserve gains.
  • Net revenue decreased $18.0 million as growth in the business
    was more than offset by lower variable investment income, lower
    reserve gains, and spread compression.
 

Principal Global Investors

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating earnings $ 127.0     $ 115.4     10 %     $491.6     $ 462.0     6 %
Operating revenues less pass-through commissions $ 337.7 $ 315.7 7 % $ 1,325.8 $1,265.7 5 %

Pre-tax return on operating revenues less pass-through commissions9

38.0 % 37.1 % 37.5 % 37.0 %
Total PGI assets under management (billions) $ 429.8 $ 410.4 5 %
PGI sourced assets under management (billions)     $ 217.6       $ 208.5       4 %        
 
  • Pre-tax operating earnings increased $11.6 million primarily
    due to growth in operating revenues less pass-through commissions and
    disciplined expense management.
  • Operating revenues less pass-through commissions increased
    $22.0 million driven by growth in management fees and performance fees.
 

Principal International

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating earnings $ 82.1     $ 78.4     5 %     $ 319.8     $ 329.5     (3 )%

Combined10

$ 246.8 $ 220.2 12 % $ 960.8 $ 861.3 12 %
Pre-tax return on combined net revenue (at PFG share) 33.3 % 35.6 % 33.3 % 38.3 %
Assets under management (billions)     $ 156.3       $ 147.7       6 %                  
 
  • Pre-tax operating earnings increased $3.7 million as growth in
    the business was partially offset by lower actual versus expected
    encaje performance.
  • Combined net revenue (at PFG share) increased $26.6 million
    driven by growth in the business.
 

Specialty Benefits Insurance

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating earnings $ 63.9     $ 63.6     0 %     $ 277.2     $ 254.9     9 %
Premium and fees $ 536.7 $ 499.2 8 % $ 2,096.9 $ 1,935.2 8 %

Pre-tax return on premium and fees11

11.9 % 12.7 % 13.2 % 13.2 %
Incurred loss ratio       62.8 %       63.7 %             61.9 %       64.1 %      
 
  • Pre-tax operating earnings increased $0.3 million as favorable
    claims experience and growth in the business was offset by lower
    variable investment income and higher operating expenses.
  • Premium and fees increased $37.5 million reflecting strong
    retention and sales.
  • Incurred loss ratio was at the low end of our expected range.
 

Individual Life Insurance

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating earnings $ 45.3     $ 40.8     11 %     $ 134.7     $ 112.8     19 %
Premium and fees $ 268.0 $ 270.2 (1 )% $ 1,095.7 $ 1,030.2 6 %
Pre-tax return on premium and fees       16.9 %       15.1 %             12.3 %       10.9 %      
 
  • Pre-tax operating earnings increased $4.5 million primarily due
    to favorable claims experience.
  • Premium and fees decreased $2.2 million as growth in the
    business was more than offset by volatility in reinsurance premiums.
 

Corporate

(in millions except percentages or otherwise noted)     Quarter     Trailing Twelve Months
2Q18     2Q17     % Change     2Q18     2Q17     % Change
Pre-tax operating losses     $ (49.5 )     $ (47.5 )     (4 )%     $ (196.0 )     $ (217.1 )     10 %
                   
  • Pre-tax operating losses increased $2.0 million; we continue to
    expect to be within our guided range of $(190) - $(210) million for
    full year 2018.

Forward looking and cautionary statements
Certain statements
made by the company which are not historical facts may be considered
forward-looking statements, including, without limitation, statements as
to non-GAAP operating earnings, net income available to PFG, 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, 2017, and in the company's
quarterly report on Form 10-Q for the quarter ended March 31, 2018,
filed by the company with the U.S. 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; conditions in the global capital markets and the economy
generally; volatility or declines in the equity, bond or real estate
markets; changes in interest rates or credit spreads or a sustained low
interest rate environment; 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
investments and the determination of the amount of allowances and
impairments taken on such investments may include methodologies,
estimations and assumptions that are subject to differing
interpretations; any impairments of or valuation allowances against the
company's deferred tax assets; the company's actual experience could
differ significantly from its pricing and reserving assumptions; the
pattern of amortizing the company's DAC and other actuarial balances on
its universal life-type insurance contracts, participating life
insurance policies and certain investment contracts may change; changes
in laws, regulations or accounting standards; the company may not be
able to protect its intellectual property and may be subject to
infringement claims; the company's ability to pay stockholder dividends
and meet its obligations may be constrained by the limitations on
dividends Iowa insurance laws impose on Principal Life; 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; applicable laws and the company's certificate of
incorporation and by-laws may discourage takeovers and business
combinations that some stockholders might consider in their best
interests; competition, including 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; client terminations, withdrawals or changes
in investor preferences; inability to attract and retain qualified
employees and sales representatives and develop new distribution
sources; an interruption in telecommunication, information technology or
other systems, or a failure to maintain the confidentiality, integrity
or availability of data residing on such systems; international business
risks; fluctuations in foreign currency exchange rates; the company may
need to fund deficiencies in its "Closed Block" assets; the company's
reinsurers could default on their obligations or increase their rates;
risks arising from acquisitions of businesses; and loss of key vendor
relationships or failure of a vendor to protect information of our
customers or employees.

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 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, Jul. 27, 2018, at 10:00
a.m. (ET), Chairman, President and Chief Executive Officer Dan Houston
and Executive Vice President and Chief Financial Officer Deanna Strable
will lead a discussion of results and the impacts on future prospects,
asset quality and capital adequacy during a live conference call, which
can be accessed as follows:

  • Via live Internet webcast. Please go to 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 866-427-0175 (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 8249939.
  • 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 8249939. This replay will
    be available approximately two hours after the completion of the live
    earnings call through the end of day Aug. 3, 2018.
  • Replay of the earnings call via webcast as well as a transcript of the
    call will be available after the call at principal.com/investor.

The company's financial supplement and slide presentation is currently
available at principal.com/investor,
and may be referred to during the call.

About
Principal
®12
Principal helps people and
companies around the world build, protect and advance their financial
well-being through retirement, insurance and asset management solutions
that fit their lives. Our employees are passionate about helping clients
of all income and portfolio sizes achieve their goals – offering
innovative ideas, investment expertise and real-life solutions to make
financial progress possible. To find out more, visit us at principal.com.

 

Summary of Principal Financial Group, Inc. and Segment
Results

 

Principal Financial Group, Inc. Results:

    (in millions)
Three Months Ended,     Trailing Twelve Months,
    6/30/18     6/30/17     6/30/18     6/30/17
Net income attributable to PFG     $ 456.6       $ 309.5       $ 2,505.7       $ 1,284.6  
Net realized capital (gains) losses, as adjusted       (65.2 )       74.1         (456.5 )       125.2  
Other after-tax adjustments       0.0         0.0         (524.5 )       52.0  
Non-GAAP Operating Earnings*     $ 391.4       $ 383.6       $ 1,524.7       $ 1,461.8  
Income taxes       94.3         110.9         363.9         386.7  
Non-GAAP Pre-Tax Operating Earnings     $ 485.7       $ 494.5       $ 1,888.6       $ 1,848.5  
                         
Segment Pre-Tax Operating Earnings (Losses):                        
Retirement and Income Solutions     $ 216.9       $ 243.8       $ 861.3       $ 906.4  
Principal Global Investors       127.0         115.4         491.6         462.0  
Principal International       82.1         78.4         319.8         329.5  
U.S. Insurance Solutions       109.2         104.4         411.9         367.7  
Corporate       (49.5 )       (47.5 )       (196.0 )       (217.1 )
Total Segment Pre-Tax Operating Earnings     $ 485.7       $ 494.5       $ 1,888.6       $ 1,848.5  
 
 

 

Per Diluted Share
Three Months Ended,     Six Months Ended,
      6/30/18         6/30/17         6/30/18         6/30/17  
Net income     $ 1.58       $ 1.06       $ 2.93       $ 2.25  
Net realized capital (gains) losses, as adjusted       (0.23 )       0.25         (0.18 )       0.33  
Non-GAAP Operating Earnings     $ 1.35       $ 1.31       $ 2.75       $ 2.58  
Weighted-average diluted common shares outstanding (in
millions)
      289.2         292.7         291.1         292.5  
           

*U.S. GAAP (GAAP) net income attributable to PFG versus non-GAAP
operating earnings

Management uses non-GAAP operating earnings, which is a financial
measure that excludes the effect of net realized capital gains and
losses, as adjusted, and other after-tax adjustments the company
believes are not indicative of overall operating trends, 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. Note: it
is possible these adjusting items have occurred in the past and could
recur in future reporting periods. While these items may be significant
components in understanding and assessing our consolidated financial
performance, management believes the presentation of non-GAAP operating
earnings enhances the understanding of results of operations by
highlighting earnings attributable to the normal, ongoing operations of
the company's businesses.

 

Selected Balance Sheet Statistics

     
Period Ended,
6/30/18     12/31/17
Total assets (in billions) $ 252.1     $ 253.9
Stockholders' equity (in millions) $ 11,706.5 $ 12,921.9
Total common equity (in millions) $ 11,639.3 $ 12,849.3
Total common equity excluding accumulated other comprehensive income
(AOCI) other than foreign currency translation adjustment (in
millions)
$ 11,635.0 $ 11,765.3
End of period common shares outstanding (in millions) 284.6 289.0
Book value per common share $ 40.90 $ 44.46
Book value per common share excluding AOCI other than foreign
currency translation adjustment
$ 40.88 $ 40.71
 
 
Principal Financial Group, Inc.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in millions, except as indicated)
     
Period Ended,
6/30/18     12/31/17
Stockholders' Equity, Excluding AOCI Other Than Foreign Currency
Translation Adjustment, Available to Common Stockholders:
   
Stockholders' equity $ 11,706.5 $ 12,921.9
Noncontrolling interest   (67.2 )       (72.6 )
Stockholders' equity available to common stockholders 11,639.3 12,849.3
Net unrealized capital (gains) losses (438.8 ) (1,455.1 )
Net unrecognized postretirement benefit obligation   434.5         371.1  
Stockholders' equity, excluding AOCI other than foreign currency
translation adjustment, available to common stockholders
$ 11,635.0       $ 11,765.3  
 
 
Book Value Per Common Share, Excluding AOCI Other Than Foreign
Currency Translation Adjustment:
Book value per common share $ 40.90 $ 44.46
Net unrealized capital (gains) losses (1.55 ) (5.03 )
Net unrecognized postretirement benefit obligation   1.53         1.28  
Book value per common share, excluding AOCI other than foreign
currency translation adjustment
$ 40.88       $ 40.71  
 
 
Principal Financial Group, Inc.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in millions)
    Three Months Ended,     Trailing Twelve Months,
6/30/18     6/30/17     6/30/18     6/30/17
Income Taxes:            
Total GAAP income taxes (benefits) $ 55.9 $ 50.8 $ (73.1 ) $ 197.6
Net realized capital gains (losses) tax adjustments 16.6 39.6 (239.4 ) 76.1
Tax benefit related to other after-tax adjustments - - 594.5 34.4
Income taxes related to equity method investments and noncontrolling
interest
 

21.8

       

20.5

       

81.9

       

78.6

 
Income taxes $ 94.3       $ 110.9       $ 363.9       $ 386.7  
 
Net Realized Capital Gains (Losses):
GAAP net realized capital gains (losses) $ 67.4 $ (95.9 ) $ 679.0 $ (111.7 )
 
Recognition of front-end fee revenues (0.8 ) - (2.4 ) (0.3 )
Market value adjustments to fee revenues 0.1 - - (0.2 )
Net realized capital gains (losses) related to equity method
investments
(4.2 ) 0.5 (3.7 ) 1.4
Derivative and hedging-related adjustments (14.9 ) (16.9 ) (57.6 ) (78.3 )
Sponsored investment fund adjustments 3.0 1.7 8.5 5.7
Amortization of deferred acquisition costs (0.1 ) 8.4 30.4 (5.8 )
Capital gains distributed – operating expenses (4.0 ) (8.0 ) (18.1 ) (21.9 )
Amortization of other actuarial balances 1.3 0.6 13.3 -
Market value adjustments of embedded derivatives 5.1 1.3 52.5 49.9
Capital gains distributed – cost of interest credited (4.3 ) (3.0 ) (6.5 ) (23.4 )
Net realized capital gains (losses) tax adjustments 16.6 39.6 (239.4 ) 76.1
Net realized capital gains (losses) attributable to noncontrolling
interest, after-tax
  -         (2.4 )       0.5         (16.7 )
Total net realized capital gains (losses) after-tax adjustments (2.2 ) 21.8 (222.5 ) (13.5 )
                   
Net realized capital gains (losses), as adjusted $ 65.2       $ (74.1 )     $ 456.5       $ (125.2 )
 
Other After-Tax Adjustments:
Contribution to PFG Foundation:
Pre-tax $ - $ - $ (70.0 ) $ -
Tax - - 26.2 -
Tax Cuts and Jobs Act:
Pre-tax - - - -
Tax - - 568.3 -
Early extinguishment of debt:
Pre-tax - - - (86.4 )
Tax   -         -         -         34.4  
Total other after-tax adjustments $ -       $ -       $ 524.5       $ (52.0 )
 
 
Principal Financial Group, Inc.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
(in millions)
           
Three Months Ended,     Trailing Twelve Months,
6/30/18     6/30/17     6/30/18     6/30/17
Principal Global Investors Operating Revenues Less Pass-Through
Commissions:
           
Operating revenues $ 379.6 $ 355.5 $ 1,491.1 $ 1,427.7
Commission expense   (41.9 )       (39.8 )       (165.3 )       (162.0 )
Operating revenues less pass-through commissions $ 337.7       $ 315.7       $ 1,325.8       $ 1,265.7  
 
 
Principal International Combined Net Revenue (at PFG Share)
Pre-tax operating earnings $ 82.1 $ 78.4 $ 319.8 $ 329.5
Combined operating expenses other than pass-through commissions (at
PFG share)
 

164.7

       

141.8

       

641.0

       

531.8

 
Combined net revenue (at PFG share) $ 246.8       $ 220.2       $ 960.8       $ 861.3  
 

1 Use of non-GAAP financial measures is discussed in this
release after segment results. Non-GAAP operating earnings for total
company is after tax.

2 Represents the percentage of Principal actively managed
mutual funds, exchange traded funds (ETFs), insurance separate accounts,
and collective investment trusts (CITs) in the top two Morningstar
quartiles. Excludes Money Market, Stable Value, Liability Driven
Investment, Hedge Fund Separate Account & US Property Separate Account.

3 The company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measures at the end
of the release. The company has determined this measure is more
representative of underlying operating revenues growth for PGI as it
removes commissions that are collected through fee revenue and passed
through expenses with no impact to pre-tax operating earnings.

4 Premium and fees = premiums and other considerations plus
fees and other revenues.

5 Pre-tax operating earnings = operating earnings before
income taxes and after noncontrolling interest.

6 Net revenue = operating revenues less benefits, claims and
settlement expenses less dividends to policyholders.

7 Pre-tax return on net revenue = pre-tax operating earnings
divided by net revenue.

8 Variable investment income includes certain types of
investment returns such as prepayment fees and income (loss) from
certain elements of our alternative asset classes, including results of
value-add real estate sales activity.

9 Pre-tax return on operating revenues less pass-through
commissions = pre-tax operating earnings, adjusted for noncontrolling
interest divided by operating revenues less pass-through commissions.

10 Combined net revenue: net revenue for all Principal
International companies at 100% less pass-through commissions. Prior to
1Q 2018, pass-through commissions were not excluded from this
definition. The company has determined combined net revenue (at PFG
share) is more representative of underlying net revenue growth for
Principal International as it reflects our proportionate share of
consolidated and equity method subsidiaries. In addition, using this net
revenue metric provides a more meaningful representation of our profit
margins. net revenue (at PFG share)

11 Pre-tax return on premium and fees = pre-tax operating
earnings divided by premium and fees.

12 Principal, Principal and symbol design and Principal
Financial Group are trademarks and service marks of Principal Financial
Services, Inc., a member of the Principal Financial Group.

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