thirdqter10.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: November 1, 2010
(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)) 

                                            __________________

 


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Item 2.02. Results of Operations and Financial Condition 
On November 1, 2010, Principal Financial Group, Inc. publicly announced information regarding its 
results of operations and financial condition for the quarter ended September 30, 2010. The text of the 
announcement is included herewith as Exhibit 99.   
Item 9.01 Financial Statements and Exhibits   
99       Third Quarter 2010 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: November 2, 2010   

 


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                                                                                            EXHIBIT 99 
Release:  On receipt, November 1, 2010
Media contact:  Susan Houser, 515-248-2268, mail to: houser.susan@principal.com
Investor contact:  John Egan, 515-235-9500, mail to: egan.john@principal.com
         Principal Financial Group, Inc. Announces Third Quarter 2010 Results 

 

(Des Moines, Iowa) – Principal Financial Group, Inc. (NYSE: PFG) today announced results for third quarter 
2010. The company reported operating earnings of $218.9 million for third quarter 2010, compared to $219.1 
million for third quarter 2009. Operating earnings per diluted share (EPS) were $0.68 for the third quarter 2010 and 
2009. The company reported net income available to common stockholders of $142.2 million, or $0.44 per diluted 
share for the three months ended Sept. 30, 2010, compared to $184.7 million, or $0.57 per diluted share for the 
three months ended Sept. 30, 2009. Operating revenues for third quarter 2010 were $1,986.7 million compared to 
$1,961.0 million for the same period last year. 
 
       “The Principal® continued to deliver strong financial results during the third quarter. Compared to 2009, 
on a year-to-date basis, operating earnings are up 19 percent while average assets under management are up 12 
percent. This reflects strong execution in an economic environment that is improving slowly. Importantly, we’re 
seeing increasing signs of growth across our businesses. Highlights for the quarter include strong net cash flow 
in Principal Funds, Principal Global Investors and Principal International,” said Larry D. Zimpleman, chairman, 
president and chief executive officer of Principal Financial Group, Inc. “Our hybrid business model of asset 
management and risk-based products, combined with our leadership position in the U.S. and strong presence in 
select international markets, uniquely positions The Principal to help a growing middle income customer base 
achieve financial security and success.” 
 
       “Despite the choppy economic recovery, our results in the third quarter demonstrate that our businesses 
continue to grow and we are excited about our prospects going forward,” said Terry Lillis, senior vice president and 
chief financial officer. “During the third quarter and now early into our second month of the fourth quarter, we are 
seeing positive sales momentum and are confident we will finish 2010 with Full Service Accumulation sales 15-20 
percent higher than 2009 year-end sales, resulting in positive cash flows. Overall, our diversified businesses and 
geography mix, strong balance sheet and continued expense management have and will continue to serve us well.” 
 ________________________
1 Use of non-GAAP financial measures is discussed in this release after Segment Highlights 
2 Accumulated Other Comprehensive Income 

 


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Key Highlights 

 

Net Income 
Net income available to common stockholders of $142.2 million for third quarter 2010 reflects net realized 
capital losses of $30.9 million, which include: 

 

Net income also reflects $48.5 million of one-time after-tax losses from planned severance and goodwill write- 
off as a result of our exit from the medical insurance business. 
 
 
Segment Highlights 
U.S. Asset Accumulation 
       Segment operating earnings for third quarter 2010 were $147.4 million, compared to $154.6 million for 
the same period in 2009, as higher earnings from the Full Service Accumulation business were more than offset by 
lower earnings from the Investment Only and Individual Annuities Businesses. Full Service Accumulation 
earnings increased 14 percent from a year ago to $80.3 million, reflecting a 9 percent increase in average account 
values. Principal Funds earnings increased 20 percent from a year ago to $8.5 million, primarily due to a 12 percent 
increase in average account values. Individual Annuities earnings were $31.9 million compared to $36.1 million 
for third quarter 2009, mostly due to relatively less favorable DPAC4 amortization equity market true-ups in the 
current quarter. Investment Only earnings were $13.9 million for third quarter 2010, compared to $26.0 million for 
the same period a year ago. The decline is primarily due to a 19 percent drop in average account values, reflecting 
the company’s scale back of its Investment Only business. In the third quarter 2009, earnings benefitted by $10.8 
million from the opportunistic early redemption of medium-term notes and an increase in the market value of a 
receivable. 
 _________________________
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. 
4 Deferred Policy Acquisition Costs 

 


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       Operating revenues for the third quarter 2010 were $997.0 million compared to $1,025.6 million for 
the same period in 2009. Higher revenues for the accumulation businesses5 , which improved $14.9 million, or 2 
percent increase from a year ago, were more than offset by a $43.1 million decline in revenues for the Investment 
Only business. 
       Segment assets under management were $168.8 billion as of Sept. 30, 2010, compared to $158.8 
billion as of Sept. 30, 2009. 
 
Principal Global Investors 
       Segment operating earnings for third quarter 2010 were $15.0 million, compared to $10.5 million in the 
prior year quarter, primarily due to increased transaction fees and an increase in assets under management. 
       Operating revenues for third quarter were $118.0 million, compared to $111.3 million for the same 
period in 2009, mostly due to higher management fees and a significant increase in transaction fees. 
            Unaffiliated assets under management were $76.2 billion as of Sept. 30, 2010, compared to $73.2 billion 
as of Sept. 30, 2009. 
 
 
Principal International 
       Segment operating earnings were $33.1 million in third quarter 2010 and 2009, as the increase in fees 
on higher assets under management and improved macroeconomic conditions offset lower earnings resulting from 
our reduced economic interest in the Brazilian joint venture. 
       Operating revenues were $200.1 million for third quarter, compared to $156.1 million for the same period 
last year, primarily due to higher net investment income from inflation-linked investments in Latin America, the 
impact of foreign currency movements, and an increase in fees on higher assets under management. 
       Segment assets under management were a record $42.3 billion as of Sept. 30, 2010, compared to 
$31.4 billion as of Sept. 30, 2009. This includes a record $3.8 billion of net cash flows over the trailing twelve 
months, or 12 percent of beginning of period assets under management. 
 
 
 
 
5 Full Service Accumulation, Principal Funds, Individual Annuities and Bank and Trust Services 

 


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U.S. Insurance Solutions6 
       Segment operating earnings for third quarter 2010 were $47.3 million, compared to $56.2 million for 
the same period in 2009. Individual Life earnings of $22.6 million were down compared to $29.8 million in 
third quarter 2009, primarily due to updates to the DPAC model and assumptions. Specialty Benefits earnings 
were $24.7 million in third quarter 2010, compared to $26.4 million in the same period a year ago, which is in 
line with membership declines from a year ago. 
       Operating revenues for third quarter were $690.7 million, compared to $701.4 million for the same 
period a year ago. 
 
Corporate 
       Operating losses for third quarter 2010 were $23.9 million compared to operating losses of $35.3 million 
in third quarter 2009. Results reflect higher investment returns on excess capital, which were partially offset by the 
allocation of overhead expenses to Corporate from the medical insurance exit. 
 
 
 
 
6 Prior to third quarter 2010, amounts now reported in the U.S. Insurance Solutions segment and amounts for our group 
medical business now reported in the Corporate segment were reported together in the Life and Health Insurance 
segment. This change was made due to our decision to exit the group medical insurance business (insured and 
administrative services only). Our segment results for 2009 have been restated to conform to the current segment 
presentation. 

 


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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 losses, capital 
and liquidity positions, sales and earnings trends, and management's beliefs, expectations, goals and opinions. 
The company does not undertake to update or revise 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 December 31, 2009, and in the company’s quarterly report on Form 10-Q for the quarter ended June 30, 
2010, 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 that may significantly affect the company’s ability to meet liquidity needs, access to 
capital and cost of capital; a continuation of difficult conditions in the global capital markets and the general 
economy that may materially adversely affect the company’s business and results of operations; the actions of 
the U.S. government, Federal Reserve and other governmental and regulatory bodies for purposes of stabilizing 
the financial markets might not achieve the intended effect; the risk from acquiring new businesses, which could 
result in the impairment of goodwill and/or intangible assets recognized at the time of acquisition; impairment of 
other financial institutions that could adversely affect the company; investment risks which may diminish the 
value of the company’s invested assets and the investment returns credited to customers, which could reduce 
sales, revenues, assets under management and net income; requirements to post collateral or make payments 
related to declines in market value of specified assets may adversely affect company liquidity and expose the 
company to counterparty credit risk; changes in laws, regulations or accounting standards that may reduce 
company profitability; fluctuations in foreign currency exchange rates that could reduce company profitability; 
Principal Financial Group, Inc.’s primary reliance, as a holding company, on dividends from its subsidiaries to 
meet debt payment obligations and regulatory restrictions on the ability of subsidiaries to pay such dividends; 
competitive factors; volatility of financial markets; decrease in ratings; interest rate changes; inability to attract 
and retain sales representatives; international business risks; a pandemic, terrorist attack or other catastrophic 
event; and default of the company’s re-insurers. 
 
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 Tuesday, Nov. 2, 2010 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: 

 


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  		•  Replay of the earnings call via telephone is available by dialing 800-642-1687 (U.S. and Canadian callers) or
      706-645-9291 (International callers). The access code is 16027050. This replay will be available
      approximately two hours after the completion of the live earnings call through the end of day Nov. 9, 2010.
  		• Replay of the earnings call via webcast as well as a transcript of the call is available after the call at:
      www.principal.com/investor.
    The company's financial supplement and additional investment portfolio detail for third quarter 2010 is 
    currently available at www.principal.com/investor, and may be referred to during the call. 
     
    2010 Investor Day and 2011 EPS guidance 
    The Principal will hold its Investor Day on Dec. 9, 2010 in New York. Details can be found at 
    www.principal.com/investor. In addition, The Principal plans to announce guidance prior to Investor Day 
    through a press release and a conference call. 
     
    About the Principal Financial Group 
    The Principal Financial GroupÒ (The Principal ® )7 is a leader in offering businesses, individuals and institutional 
    clients a wide range of financial products and services, including retirement and investment services, life and 
    health insurance, and banking through its diverse family of financial services companies. A member of the 
    Fortune 500, the Principal Financial Group has $305.7 billion in assets under management8 and serves some 18.9 
    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. 
     
     
                                                                                              ###
     
     
     
     
    7 “The Principal Financial Group” and “The Principal” are registered service marks of Principal Financial Services, 
    Inc., a member of the Principal Financial Group. 
    8 As of Sept 30, 2010 

     


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    *Operating earnings versus U.S. GAAP (GAAP) net income available to common stockholders 
    Management uses operating earnings, which excludes the effect of net realized capital gains and losses, as adjusted, and other after-tax 
    adjustments, for goal setting, as a basis for determining employee compensation, and evaluating performance on a basis comparable to 
    that used by investors and securities analysts. Segment operating earnings are determined by adjusting U.S. GAAP net income available 
    to common stockholders for net realized capital gains and losses, as adjusted, and other after-tax adjustments the company believes are 
    not indicative of overall operating trends. 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 segment operating earnings enhances the understanding of results of operations 
    by highlighting earnings attributable to the normal, ongoing operations of the company’s businesses. 

     


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