SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: FEBRUARY 5, 2007
(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 CFR240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR240.13e-4(c))
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1
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 5, 2007, Principal Financial Group, Inc. publicly announced
information regarding its results of operations and financial condition for the
quarter ended December 31, 2006. The text of the announcement is included
herewith as Exhibit 99.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
99 Fourth Quarter 2006 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/ MICHAEL H. GERSIE
------------------------------------
Name: Michael H. Gersie
Title: Executive Vice President and Chief
Financial Officer
Date: February 6, 2007
2
EXHIBIT 99
RELEASE: On receipt
MEDIA CONTACT: Jeff Rader, 515-247-7883, RADER.JEFF@PRINCIPAL.COM
INVESTOR RELATIONS CONTACT: Tom Graf, 515-235-9500,
investor-relations@principal.com
PRINCIPAL FINANCIAL GROUP, INC. REPORTS FOURTH QUARTER 2006 RESULTS
Des Moines, IA (February 5, 2007) - Principal Financial Group, Inc. (NYSE: PFG)
today announced net income available to common stockholders for the three months
ended December 31, 2006, of $284.1 million, or $1.04 per diluted share compared
to $246.9 million, or $0.87 per diluted share for the three months ended
December 31, 2005. The company reported operating earnings of $252.0 million for
fourth quarter 2006, compared to $217.9 million for fourth quarter 2005.
Operating earnings per diluted share (EPS) for fourth quarter 2006 were $0.93
compared to $0.77 for the same period in 2005. Operating revenues for fourth
quarter 2006 were a record $2,537.0 million compared to $2,481.1 million for the
same period last year.(1)
"The fourth quarter was a very strong finish for The Principal, with 16 percent
growth in operating earnings contributing to a 13 percent increase in earnings
for the year," said J. Barry Griswell, chairman and chief executive officer.
"Driven by record earnings for U.S. Asset Management and Accumulation, which
improved $107 million or 20 percent for the year, and by disciplined capital
management, the company delivered 19 percent growth in earnings per share
compared to 2005."
"2006 marks an eighth consecutive year of record earnings for The Principal, as
we continue to build an exceptional track record of performance," said Griswell.
"Since our IPO in 2001, we've achieved five-year compounded annual growth of 11
percent for earnings and 17 percent for earnings per share. We've also improved
return on equity (ROE)(2) by 640 basis points since 2001, to 15.3 percent at
year-end."
Additional highlights for 2006 include:
o Record net income available to common stockholders (net income) of
$1.03 billion, and record net income per diluted share of $3.74 in
2006.
o Record operating earnings of $972.1 million, and record EPS of $3.53
in 2006.
o Record assets under management of $256.9 billion, up $61.7 billion, or
32 percent from 2005(3).
o Record full service accumulation account values of $91.8 billion, up
19 percent from 2005.
o Record sales of each of the company's three key retirement and
investment products in 2006, including: $3.8 billion for mutual funds,
up 12 percent; $2.5 billion for individual annuities, up 25 percent;
and $7.2 billion for organic full service accumulation, up 18 percent,
including $1.9 billion in the fourth quarter.
"Strong results in 2006 reflect our ongoing focus on fundamentals - innovative
retirement and employee benefits solutions, responsive service, and exceptional
convenience, choice and value," said Griswell. "During the year, we continued to
help employers understand benefit trends and employee retention strategies, and
3
to broaden our array of high quality, cost effective benefits. We continued to
help captive and independent distribution alike, through new product education,
additional needs analysis tools, and point of sale expertise. And we expanded
our portfolio of worksite solutions, adding an array of product offerings, tools
and personalized guidance to help employees assess needs, evaluate options, and
execute a tailored financial plan."
"Our ongoing investment in helping customers achieve financial security and
success continues to drive solid retention and sales. In our largest business,
full service accumulation, we achieved 94 percent employer-level retention in
2006 and our retention of at-risk participant assets continued to significantly
outpace the industry average," said Griswell. "Sales of our three key retirement
and investment products - full service accumulation, mutual funds and individual
annuities - each reached record levels, combining for $13.5 billion for the
year, an increase of 18 percent from 2005. We also achieved a fifth consecutive
year of record sales in our Specialty Benefits division, an increase of 21
percent."
"Looking ahead, we remain highly optimistic about the opportunities that exist
across our businesses, and our ability to translate those opportunities into
growth," said Griswell. "We've built a strong foundation for success: deep
experience meeting the benefit needs of growing businesses and their employees;
a broad array of asset accumulation and retirement income management solutions;
and unique expertise managing assets appropriate for retirement investors. We'll
continue to strive to leverage these competitive strengths, to execute our
customer-focused strategy, and to create long-term value for our shareholders."
SEGMENT HIGHLIGHTS
U.S. ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for fourth quarter 2006 were a record $178.7 million,
compared to $136.0 million for the same period in 2005. Full service
accumulation generated record earnings of $78.8 million, compared to $64.8
million in fourth quarter 2005, reflecting increased fees from higher account
values. Full service accumulation account values were $91.8 billion as of
December 31, 2006, compared to $77.3 billion as of December 31, 2005. Principal
Global Investors generated record earnings of $32.1 million for the quarter,
compared to $18.7 million in fourth quarter 2005, primarily due to management
fee growth in all lines.
Operating revenues for the fourth quarter increased to a record $1,212.2 million
compared to $1,205.7 million for the same period in 2005. Lower single premium
group annuity sales were more than offset by double-digit revenue growth in all
other businesses within the segment. The single premium group annuity product,
typically used to fund defined benefit plan terminations, can generate large
premiums from a small number of customers and tends to vary from period to
period. Excluding this product, segment revenues increased 15 percent,
reflecting record revenues for full service accumulation, individual annuities,
investment only, and Principal Global Investors.
4
Segment assets under management reached a record $221.9 billion as of December
31, 2006, up 35 percent from $164.3 billion as of December 31, 2005. Excluding
the purchase of WM Advisors, Inc., segment assets under management increased 18
percent from December 31, 2005.
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for fourth quarter 2006 were $14.9 million. This
compares to $22.7 million of earnings for fourth quarter 2005, which included an
$8.7 million tax benefit associated with the liquidation of defined contribution
operations in Japan. Fourth quarter 2006 earnings included a net benefit of $0.8
million, as tax benefits of $5.9 million were substantially offset by $5.1
million of other items, primarily deflation in Chile and organizational
restructuring costs.
Operating revenues were $128.6 million for fourth quarter 2006, compared to
$165.1 million for the same period last year. The decline in operating revenues,
primarily the result of deflation in Chile, was substantially offset by a
corresponding decline in benefits and claims expenses.
Assets under management for the segment were a record $19.1 billion as of
December 31, 2006, compared to $15.4 billion as of December 31, 2005.
LIFE AND HEALTH INSURANCE
Segment operating earnings for fourth quarter 2006 were $64.9 million, compared
to $63.2 million for the same period in 2005. Individual Life division earnings
were $30.4 million, compared to $25.0 million for fourth quarter 2005. The
increase from a year ago primarily reflects normal fluctuations in experience
between periods. Specialty Benefits division earnings were $21.4 million, a
decline of $0.4 million. In fourth quarter 2006, growth in premium for the
division, and a $2.9 million benefit to earnings from a group long-term
disability reserve refinement, were offset by higher loss ratios. Health
division earnings were $13.1 million, compared to $16.4 million for fourth
quarter 2005. The decline primarily reflects worsened loss ratios compared to
the year ago period.
Operating revenues were $1,210.1 million, a ninth consecutive record quarter for
the segment, and an increase of eight percent from the same period in 2005.
Specialty Benefits revenues increased 15 percent, driven by strong sales and
steady retention in all of the division's lines. Health revenues increased eight
percent, reflecting member growth in the division's target markets and higher
premium per member. Individual Life revenues increased slightly, due to
increasing fees from universal life and variable universal life products.
5
CORPORATE AND OTHER
Operating losses for fourth quarter 2006 were $6.5 million, compared to
operating losses of $4.0 million for the same period in 2005. Fourth quarter
2005 results reflect higher operating earnings from joint venture real estate.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This press release contains forward-looking statements, including, without
limitation, statements as to sales targets, 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 December 31, 2005, and in the
company's quarterly report on Form 10-Q for the quarter ended September 30,
2006, filed by the company with the Securities and Exchange Commission. These
risks and uncertainties include, without limitation: competitive factors;
volatility of financial markets; decrease in ratings; interest rate changes;
inability to attract and retain sales representatives; international business
risks; foreign currency exchange rate fluctuations; a pandemic, terrorist attack
or other catastrophic event; default of the company's re-insurers; and
investment portfolio risks.
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 measures, 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, determining employee and senior management awards and
compensation, and evaluating performance on a basis comparable to that used by
investors and securities analysts.
SHARE REPURCHASES
In May 2006, following the Board's share repurchase authorization of up to $500
million, the company entered into an accelerated common stock repurchase
agreement with an investment bank. Under this agreement, the company paid $500
million and received an initial delivery of 7.67 million common shares, while
retaining the right to receive additional common shares depending on the volume
weighted average share price of the company's common stock over the program's
execution period. The program was completed during the fourth quarter 2006, at
which time the company received 1.67 million additional common shares. On
November 28, 2006, the Board authorized the repurchase of up to $250 million of
our outstanding common stock. The company began activity under the new
authorization with the repurchase of approximately $33 million of common stock
during the month ending January 31, 2007.
EARNINGS CONFERENCE CALL
At 9:00 A.M. (CST) tomorrow, Chairman and CEO J. Barry Griswell and Executive
Vice President and CFO Mike Gersie will lead a discussion of results, and the
company's longer-term growth expectations, during a live conference call.
Parties interested in listening to the conference call live may access the
webcast on the company's Investor Relations (IR) website
(www.principal.com/investor) or by dialing (800) 374-1609 (U.S. callers) or
(706) 643-7701 (international callers) approximately 10 minutes prior to the
start of the call. To access the call, leader name is Tom Graf. Listeners can
access an audio replay of the call on the IR website, or by calling (800)
642-1687 (U.S. callers) or (706) 645-9291 (international callers). The access
6
code for the replay is 4587874. Replays will be available through February 13,
2007. The financial supplement is currently available on the company's website
and may be referred to during the conference call.
ABOUT THE PRINCIPAL FINANCIAL GROUP
The Principal Financial Group(R) (The Principal (R))(4) 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 $256.9
billion in assets under management(5) and serves some 17.6 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
SUMMARY OF SEGMENT AND PRINCIPAL FINANCIAL GROUP, INC. RESULTS
OPERATING EARNINGS (LOSS)* IN MILLIONS
-------------------------------------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
--------------- -------------- -------------- ---------------
SEGMENT 12/31/06 12/31/05 12/31/06 12/31/05
---------------------------------------------------- --------------- -------------- -------------- ---------------
U.S. ASSET MANAGEMENT AND ACCUMULATION $178.7 $136.0 $ 645.1 $538.4
---------------------------------------------------- --------------- -------------- -------------- ---------------
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION 14.9 22.7 71.8 71.0
---------------------------------------------------- --------------- -------------- -------------- ---------------
LIFE AND HEALTH INSURANCE 64.9 63.2 282.5 274.4
---------------------------------------------------- --------------- -------------- -------------- ---------------
CORPORATE AND OTHER (6.5) (4.0) (27.3) (21.4)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OPERATING EARNINGS 252.0 217.9 972.1 862.4
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED 9.7 (15.9) 18.0 (20.6)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS 22.4 44.9 41.2 59.5
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $284.1 $246.9 $1,031.3 $901.3
---------------------------------------------------- --------------- -------------- -------------- ---------------
PER DILUTED SHARE
------------------------------ ------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
--------------- -------------- -------------- ---------------
12/31/06 12/31/05 12/31/06 12/31/05
--------------- -------------- -------------- ---------------
OPERATING EARNINGS $ 0.93 $ 0.77 $ 3.53 $ 2.97
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED 0.04 (0.06) 0.07 (0.06)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS 0.07 0.16 0.14 0.20
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 1.04 $ 0.87 $ 3.74 $ 3.11
---------------------------------------------------- --------------- -------------- -------------- ---------------
WEIGHTED-AVERAGE DILUTED COMMON SHARES OUTSTANDING 272.1 282.9 275.5 289.9
---------------------------------------------------- --------------- -------------- -------------- ---------------
*OPERATING EARNINGS VERSUS U.S. GAAP (GAAP) NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS
Management uses operating earnings, which excludes the effect of net
realized/unrealized capital gains and losses, as adjusted, and other after-tax
adjustments, for goal setting, 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/unrealized 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 our results of operations by highlighting earnings attributable
to the normal, ongoing operations of the company's businesses.
8
PRINCIPAL FINANCIAL GROUP, INC.
RESULTS OF OPERATIONS
(IN MILLIONS)
-----------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
-------------------------------- -------------------------------
12/31/06 12/31/05 12/31/06 12/31/05
---------------- --------------- --------------- ---------------
Premiums and other considerations $1,098.9 $1,148.6 $4,305.3 $3,975.0
Fees and other revenues 515.0 447.7 1,902.5 1,717.8
Net investment income 923.4 877.4 3,618.0 3,360.1
Net realized/unrealized capital gains 21.6 (18.1) 44.7 (11.2)
(losses) ---------------- --------------- --------------- ---------------
TOTAL REVENUES 2,558.9 2,455.6 9,870.5 9,041.7
---------------- --------------- --------------- ---------------
Benefits, claims, and settlement expenses 1,464.8 1,502.8 5,692.4 5,282.9
Dividends to policyholders 73.3 74.0 290.7 293.0
Operating expenses 692.9 603.3 2,558.7 2,342.1
---------------- --------------- --------------- ---------------
TOTAL EXPENSES 2,231.0 2,180.1 8,541.8 7,918.0
---------------- --------------- --------------- ---------------
Income from continuing operations before
income taxes 327.9 275.5 1,328.7 1,123.7
Income taxes 65.6 31.3 295.0 232.2
---------------- --------------- --------------- ---------------
Income from continuing operations, net of
related income taxes 262.3 244.2 1,033.7 891.5
Income from discontinued operations, net of
related taxes 30.1 11.0 30.6 27.5
---------------- --------------- --------------- ---------------
NET INCOME 292.4 255.2 1,064.3 919.0
Preferred stock dividends 8.3 8.3 33.0 17.7
---------------- --------------- --------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 284.1 $ 246.9 $1,031.3 $ 901.3
Less:
Net realized/unrealized capital gains
(losses), as adjusted 9.7 (15.9) 18.0 (20.6)
Other after-tax adjustments 22.4 44.9 41.2 59.5
---------------- --------------- --------------- ---------------
OPERATING EARNINGS $ 252.0 $ 217.9 $ 972.1 $ 862.4
================ =============== =============== ===============
SELECTED BALANCE SHEET STATISTICS
------------------------------------------------------------
PERIOD ENDED
------------------------------------------------------------
12/31/06 12/31/05 12/31/04
-------------------- --------------------- -----------------
Total assets (in billions) $ 143.7 $ 127.0 $ 113.8
Total common equity (in millions) $ 7,318.8 $ 7,265.2 $ 7,544.3
Total common equity excluding accumulated other
comprehensive income (in millions) $ 6,471.9 $ 6,270.4 $ 6,231.0
End of period common shares outstanding
(in millions) 268.4 280.6 300.6
Book value per common share $ 27.27 $ 25.89 $ 25.10
Book value per common share excluding
accumulated other comprehensive income $ 24.11 $ 22.35 $ 20.73
9
PRINCIPAL FINANCIAL GROUP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO U.S. GAAP
(IN MILLIONS, EXCEPT AS INDICATED)
------------------------------ --------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
------------------------------ --------------------------------
12/31/06 12/31/05 12/31/06 12/31/05
--------------- -------------- --------------- ----------------
DILUTED EARNINGS PER COMMON SHARE:
Operating Earnings 0.93 0.77 3.53 2.97
Net realized/unrealized capital gains (losses) 0.04 (0.06) 0.07 (0.06)
Other after-tax adjustments 0.07 0.16 0.14 0.20
--------------- -------------- --------------- ----------------
Net income available to common stockholders 1.04 0.87 3.74 3.11
=============== ============== =============== ================
BOOK VALUE PER COMMON SHARE EXCLUDING ACCUMULATED OTHER
COMPREHENSIVE INCOME:
Book value per common share excluding accumulated other
comprehensive income 24.11 22.35 24.11 22.35
Net unrealized capital gains 3.21 3.66 3.21 3.66
Foreign currency translation (0.10) (0.08) (0.10) (0.08)
Net unrecognized post-retirement benefit obligation 0.05 - 0.05 -
Minimum pension liability - (0.04) - (0.04)
--------------- -------------- --------------- ----------------
Book value per common share including accumulated other
comprehensive income 27.27 25.89 27.27 25.89
=============== ============== =============== ================
OPERATING REVENUES:
USAMA 1,212.2 1,205.7 4,511.6 4,133.8
IAMA 128.6 165.1 605.4 604.5
Life and Health 1,210.1 1,123.3 4,736.2 4,387.5
Corporate and Other (13.9) (13.0) (27.4) (59.1)
--------------- -------------- --------------- ----------------
Total operating revenues 2,537.0 2,481.1 9,825.8 9,066.7
Add: Net realized/unrealized capital gains (losses)
and related fee adjustments 20.6 (25.6) 44.2 (22.2)
Less: Operating revenues from discontinued real estate (1.3) (0.1) (0.5) 2.8
--------------- -------------- --------------- ----------------
Total GAAP revenues 2,558.9 2,455.6 9,870.5 9,041.7
=============== ============== =============== ================
OPERATING EARNINGS:
USAMA 178.7 136.0 645.1 538.4
IAMA 14.9 22.7 71.8 71.0
Life and Health 64.9 63.2 282.5 274.4
Corporate and Other (6.5) (4.0) (27.3) (21.4)
--------------- -------------- --------------- ----------------
Total operating earnings 252.0 217.9 972.1 862.4
Net realized/unrealized capital gains (losses) 9.7 (15.9) 18.0 (20.6)
Other after-tax adjustments 22.4 44.9 41.2 59.5
--------------- -------------- --------------- ----------------
Net income available to common stockholders 284.1 246.9 1,031.3 901.3
=============== ============== =============== ================
NET REALIZED/UNREALIZED CAPITAL GAINS (LOSSES):
Net realized/unrealized capital gains (losses), as
adjusted 9.7 (15.9) 18.0 (20.6)
Add:
Amortization of DPAC and sale inducement costs (1.5) 0.4 (5.4) 0.7
Capital gains distributed 6.0 2.0 11.8 5.8
Tax impacts 3.5 (12.4) 12.1 (10.6)
Minority interest capital gains 2.9 0.3 7.7 2.5
Less related fee adjustments:
Unearned front-end fee income (0.8) 0.3 0.8 1.1
Certain market value adjustments to fee revenues (0.2) (7.8) (1.3) (12.1)
--------------- -------------- --------------- ----------------
GAAP net realized/unrealized capital gains (losses) 21.6 (18.1) 44.7 (11.2)
=============== ============== =============== ================
OTHER AFTER TAX ADJUSTMENTS:
IRS Audit Issue - 33.8 18.8 33.8
Contribution to foundation (8.5) - (8.5) -
Gain on disposal of discontinued real estate investments 30.9 - 30.9 22.3
Discontinued operations - Mortgage Banking - 2.7 - (5.0)
Discontinued operations - BT - 8.4 - 8.4
--------------- -------------- --------------- ----------------
Total other after-tax adjustments 22.4 44.9 41.2 59.5
=============== ============== =============== ================
10
---------------------------
(1) Use of non-GAAP financial measures is discussed in this release after
Segment Highlights.
(2) Operating return on average equity, excluding other comprehensive income
(3) Includes $27.9 billion of AUM related to the company's fourth quarter 2006
acquisition of WM Advisors, Inc., which closed effective December 31, 2006.
(4)"The Principal Financial Group" and "The Principal" are registered service
marks of Principal Financial Services, Inc., a member of the Principal
Financial Group.
(5) As of December 31, 2006
11