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Principal to acquire Wells Fargo Institutional Retirement & Trust business

  • Definitive agreement includes Wells Fargo's defined contribution,
    defined benefit, executive deferred compensation, employee stock
    ownership plans, institutional trust and custody and institutional
    asset advisory businesses.
  • Doubles Principal U.S. retirement businessi;
    achieving greater scale and balance to compete, invest and grow.
  • A powerful combination for customers, employees and shareholders;
    will make Principal a Top 3 defined contribution recordkeeper.

Today, Principal
Financial Group® (NASDAQ:
PFG) announced a definitive
agreement with Wells
Fargo & Company (NYSE:
WFC) to acquire its Institutional
Retirement & Trust business. At closing, Principal® will
assume ownership of Wells Fargo's defined contribution, defined benefit,
executive deferred compensation, employee stock ownership plans,
institutional trust and custody and institutional asset advisory
businesses and serve a combined 7.5 million U.S. retirement customersi.

"Retirement is at the heart of our business and core to our future,"
said Dan Houston, chairman, president and CEO of Principal. "This will
be a powerful combination for customers, employees and shareholders as
we solidify our place as a top-three leader in the U.S. retirement
market. The acquisition will bring expanded capabilities, reach and
scale; fueling our ability to compete, invest and grow to help more
people to achieve their retirement outcomes."

Through this acquisition, Principal will double the size of its U.S.
retirement business by the number of total recordkeeping assetsi,
while bringing on attractive institutional trust and custody offerings
for the non-retirement market. In addition to increased scale, Principal
will gain a strong foothold with mid-sized employers as more than
two-thirds of Wells Fargo's institutional retirement assets are in plans
ranging from $10 million to $1 billionii. Principal expects
to be well-positioned to deliver a broader set of solutions and
capabilities to its customers, strengthen investments in digital
technologies and automation, and recognize materially significant
synergies and efficiencies.

"We are deeply committed to helping people have enough, save enough and
protect enough in retirement," said Renee Schaaf, president of
Retirement and Income Solutions at Principal. "Together with the Wells
Fargo Institutional Retirement & Trust business, our customers can
expect a continued focus on delivering differentiated investment, income
and financial wellness solutions that empower them to reach their
retirement goals."

As of December 31, 2018, the respective Wells Fargo retirement
businesses had $827 billion in assets under administrationiii
served by approximately 2,500 employees in locations across the U.S.,
Philippines and India. There are four major employee centers in:
Charlotte, N.C.; Minneapolis/Roseville, Minn.; Waco, Texas; and Manila,

for more information about the Principal acquisition of Wells Fargo's
Institutional Retirement & Trust business.

Transaction details

Under the agreement, the purchase price is $1.2 billion. The agreement
also includes an earnout of up to $150 million tied to better than
expected revenue retention, payable two years post-closing.

The acquisition is expected to be accretive to net income and non-GAAP
operating earnings per diluted share in 2020iv and will be
financed with cash and senior debt financing.

The transaction between Principal and Wells Fargo will be reviewed by
U.S. regulatory authorities prior to closing, which is anticipated in
third quarter of 2019.

Lazard acted as the financial advisor on the transaction to Principal.
Debevoise & Plimpton LLP acted as legal counsel to Principal on the

Conference call

On Tuesday, April 9, 2019, at 9 a.m. ET, Dan Houston, chairman,
president and chief executive officer, will discuss the company's
planned acquisition during a live conference call. Other members of
senior management will be available for a question and answer session. A
slide presentation to accompany the call is available on our website at

You can access the conference call several ways:

  • Connect to
    to listen to a live Internet webcast.
    • Please go to the website at least 10-15 minutes prior to the start
      of the call to register and to download/install any necessary
      audio software.
  • Via telephone by dialing in approximately 10 minutes prior to the
    start of the call.
    • 866-427-0175 (U.S. and Canadian callers)
    • 706-643-7701 (International callers)
    • Access code: 2085676
  • An audio replay will be available approximately two hours after the
    live earnings call via:
    • Online at
    • Telephone:
      • 855-859-2056 (U.S. and Canadian callers)
      • 404-537-3406 (International callers)
      • Access code: 2085676
      • The replay will be available until April 15, 2019

About Principal®

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

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 flow, 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, 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;
technological and societal changes may disrupt the company's business
model and impair its ability to maintain profitability; 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; risks arising from participation in joint ventures; 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. With respect to the acquisition of the
Wells Fargo Institutional Retirement & Trust business in particular,
additional risks and uncertainties that could cause actual results to
differ materially from results anticipated in forward-looking statements
include, but are not limited to: purchase price adjustments; the
successful fulfillment or waiver of all closing conditions without
unexpected delays or conditions; the successful closing of the
transaction within the estimated timeframe; the failure to realize the
expected synergies and benefits of the transaction or delay in
realization thereof; and the successful financing of the transaction.

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. 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.

i Pro-Forma calculations based upon data as of December 31,
2017 provided by PLANSPONSOR 2018 Recordkeeping Survey and inclusive of
shock lapse and new sales assumptions.
ii Source: Wells
Fargo; Data as of 6/30/2018
iii Source: Wells Fargo;
Data as of 12/31/18
iv Excludes cost of the transaction
and integration of the Wells Fargo Institutional & Retirement Trust
business and earnout liability accounting

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