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 6, 2006
(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 February 6, 2006, Principal Financial Group, Inc. publicly announced
information regarding its results of operations and financial condition for the
quarter ended December 31, 2005. The text of the announcement is included
herewith as Exhibit 99.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
99 Fourth Quarter 2005 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 7, 2006
2
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 2005 RESULTS
Des Moines, IA (February 6, 2006) - Principal Financial Group, Inc. (NYSE: PFG)
today announced net income available to common stockholders for the three months
ended December 31, 2005, of $246.9 million, or $0.87 per diluted share compared
to $213.5 million, or $0.70 per diluted share for the three months ended
December 31, 2004. The company reported operating earnings of $217.9 million for
fourth quarter 2005, compared to $199.7 million for fourth quarter 2004(1).
Operating earnings per diluted share (EPS) for fourth quarter 2005 were $0.77
compared to $0.66 for the same period in 2004. Operating revenues for fourth
quarter 2005 were $2,470.8 million compared to $2,215.7 million for the same
period last year.(2)
"We entered 2005 faced with a number of familiar challenges," said J. Barry
Griswell, chairman and chief executive officer. "A difficult equity market
environment, continuously evolving customer needs, and a very high performance
bar - a track record set over our first three years as a public company that
included a 10 percent compounded annual growth rate for operating earnings, a
$70 billion increase in assets under management, and an average improvement of
more than 110 basis points per year in return on equity."
"Importantly, we delivered another very strong result. In 2005, we achieved our
seventh consecutive year of record operating earnings, up 13 percent from 2004
to $862 million, reflecting record performance in all three operating segments,"
said Griswell. "Strong earnings, combined with strategic use of share
repurchases, drove EPS up 22 percent to a record $2.97, including record fourth
quarter earnings per share of $0.77, a 17 percent improvement. We also grew
assets under management by $28 billion in 2005, and improved our return on
equity by 150 basis points, reaching 13.8 percent as of year-end."
Additional highlights for the fourth quarter and full year 2005 include:
o Record net income available to common stockholders of $901.3 million,
driving net income per diluted share up 19 percent to a record $3.11 in
2005.
o Record assets under management (AUM) of $195.2 billion, up 17 percent from
2004, including organic growth of 33 percent for Principal International
and 25 percent for Principal Global Investors' third party AUM.
o Record full service accumulation account values of $77.3 billion, up 12
percent from a year ago, and record full service accumulation deposits of
$15.4 billion in 2005, an increase of 15 percent.
o Record sales for each of the company's three key retirement and investment
products in 2005, including: $3.4 billion for mutual funds; $2.0 billion
for individual annuities; and $6.1 billion for organic full service
accumulation, including $1.6 billion in the fourth quarter, a 17 percent
increase for both periods.
3
"Our ability to again deliver sustainable, profitable growth, even under
difficult conditions, reflects our discipline and strong focus on meeting the
changing needs of our customers," said Griswell. "Employers continue to
recognize the importance of employee benefits in attracting and retaining
employees - but increasingly they're looking for more cost-effective options and
shifting decision-making and financial responsibilities to employees. In turn,
employees are increasingly seeking education, guidance, and "do-it-for-me"
solutions as they take a more active interest in building their financial
security."
"In 2005, we continued to invest in our portfolio of worksite solutions: we
enhanced our array of bundled offerings such as Total Retirement Suite SM,
helping employers reduce administrative burden and costs; we expanded access to
personalized investment advice for retirement plan participants; we developed
new retirement income management solutions for retirees; we added new cost
effective health and voluntary benefits offerings; and we significantly expanded
our educational resources to help employers meet their fiduciary obligations,
and to help employees improve their health and financial well being," said
Griswell.
"Our ongoing investment in helping customers achieve financial security
continues to drive strong and improving retention across our businesses, as well
as tremendous sales success," said Griswell. "Combined sales of our three key
retirement and investment products - full service accumulation, mutual funds and
individual annuities - reached a record $11.5 billion for the year, a 13 percent
increase. We also achieved a fourth consecutive year of record sales in our
Specialty Benefits division, an increase of 23 percent."
"2005 was another year of strong execution, a year in which we continued to
differentiate The Principal in the marketplace and to strengthen our competitive
position," said Griswell. "We are highly optimistic about the growth
opportunities across our businesses, and in 2006, we'll continue to leverage our
strengths and execute our customer-focused strategy to deliver long-term value
for shareholders."
SEGMENT HIGHLIGHTS
U.S. ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for fourth quarter 2005 were $136.0 million, compared
to $134.3 million for the same period in 2004. Full service accumulation
earnings were a record $66.1 million in fourth quarter 2005. This compares to
$64.6 million in fourth quarter 2004, which included a $6.2 million tax benefit
for a special dividend received. The increase in full service accumulation
earnings was primarily due to increased fees generated from higher account
values. Full service accumulation account values were $77.3 billion as of
December 31, 2005 compared to $68.9 billion as of December 31, 2004.
Operating revenues for fourth quarter increased 18 percent to $1,195.4 million
from $1,010.5 million for the same period in 2004, primarily due to higher sales
of single premium group annuities. The single premium product, typically used to
fund defined benefit terminations, can generate large premiums from very few
customers and therefore causes revenues to vary from period to period. Excluding
4
this product, segment revenues increased 6 percent due to increased fees in the
full service accumulation and Principal Global Investors' operations.
Assets under management for the segment were a record $164.3 billion as of
December 31, 2005, compared to $159.0 billion as of September 30, 2005, and
compared to $142.1 billion as of December 31, 2004.
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for fourth quarter 2005 were a record $22.7 million,
compared to $11.5 million for the same period a year ago, reflecting tax
benefits of $13.0 million, including an $8.7 million tax benefit associated with
the liquidation of defined contribution operations in Japan. Partially
offsetting fourth quarter 2005 tax benefits was some discretionary expenditure
on marketing, advertising and sales training during the quarter, as well as
costs associated with the Japan liquidation.
Operating revenues for fourth quarter were $165.1 million, compared to $147.1
million for the same period a year ago reflecting strong growth in Hong Kong and
India, and favorable currency translation in Chile, Mexico, and Brazil.
Assets under management for the segment were a record $15.4 billion as of
December 31, 2005, compared to $14.7 billion as of September 30, 2005, and
compared to $10.2 billion as of December 31, 2004.(3)
LIFE AND HEALTH INSURANCE
Segment operating earnings for fourth quarter 2005 were $63.2 million, compared
to $52.9 million for the same period in 2004, primarily due to solid growth and
improved loss ratios in the Health and Specialty Benefits divisions.
Operating revenues increased to a record $1,123.3 million for the quarter,
compared to $1,063.5 million for the same period in 2004. Revenues in the
Specialty Benefits division increased 13 percent, driven by strong sales and
steady retention in each of the division's product lines. Health revenues
improved 8 percent, primarily reflecting an increase in group medical covered
members and higher premium per member. Individual Life revenues decreased 3
percent, as the company continued its shift in marketing emphasis from
traditional premium-based products to fee-based universal life and variable
universal life products. Unlike traditional premium-based products, universal
life and variable universal life deposits are not reported as GAAP revenue.
5
CORPORATE AND OTHER
Operating losses for fourth quarter 2005 were $4.0 million, compared to
operating earnings of $1.0 million for the same period in 2004. Because
corporate operations are varied, many items contribute to this variance. The
primary contributor to the decline was the declaration of the fourth quarter
2005 preferred stock dividend. This $8.3 million cost reduced operating earnings
within the Corporate segment with no corresponding activity in the year earlier
period. Partially offsetting this cost was reduced interest expense on federal
income tax matters.
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 our
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 that these adjusting items have occurred in the past and could recur
in the future. 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.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This press release may contain forward-looking statements, including, without
limitation, statements as to sales targets, sales and earnings trends, and
management's beliefs, expectations, goals and opinions. These statements 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, 2004, and in the company's quarterly report on Form 10-Q
for the quarter ended September 30, 2005, filed 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; and
investment portfolio risks.
SHARE REPURCHASES
In June 2005, following the Board's share repurchase authorization of up to 15.0
million shares, the company entered into an accelerated stock repurchase
agreement with a third party investment bank for approximately 13.7 million
shares of Principal Financial Group, Inc. common stock with an initial payment
of $542.3 million, using cash proceeds from the company's June issuance of
perpetual preferred stock. The transaction was subject to a market price
adjustment provision based on the volume weighted average market price over the
execution period, which was settled in cash for $84.0 million on November 16,
2005. In the fourth quarter 2005, the company did not repurchase any shares from
the Board's November 2005 $250 million authorization, but repurchased $50.0
million of shares under that program through February 1, 2006.
STOCK OPTIONS
The Principal expenses employee stock options and the employee stock purchase
plan, resulting in an after-tax expense of $5.1 million and $21.3 million,
respectively for the three and twelve months ended December 31, 2005, compared
to $5.6 million and $22.4 million, respectively for the three and twelve months
ended December 31, 2004.
6
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 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 (US callers) or (706) 645-9291 (International callers). The access code
for the replay is 3370203. Replays will be available through February 14, 2006.
The financial supplement is currently available on our 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 $195.2
billion in assets under management(5) and serves some 15.6 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 (LOSSES)* IN MILLIONS
-------------------------------------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
SEGMENT 12/31/05 12/31/04 12/31/05 12/31/05
---------------------------------------------------- --------------- -------------- -------------- ---------------
U.S. ASSET MANAGEMENT AND ACCUMULATION $136.0 $134.3 $538.4 $499.0
---------------------------------------------------- --------------- -------------- -------------- ---------------
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION 22.7 11.5 71.0 40.3
---------------------------------------------------- --------------- -------------- -------------- ---------------
LIFE AND HEALTH INSURANCE 63.2 52.9 274.4 256.2
---------------------------------------------------- --------------- -------------- -------------- ---------------
MORTGAGE BANKING - - - (10.3)
---------------------------------------------------- --------------- -------------- -------------- ---------------
CORPORATE AND OTHER (4.0) 1.0 (21.4) (20.4)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OPERATING EARNINGS 217.9 199.7 862.4 764.8
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED (15.9) 15.9 (20.6) (62.3)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS 44.9 (2.1) 59.5 123.1
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $246.9 $213.5 $901.3 $825.6
PER DILUTED EARNINGS PER SHARE
AVAILABLE TO COMMON STOCKHOLDERS
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
12/31/05 12/31/04 12/31/05 12/31/04
---------------------------------------------------- --------------- -------------- -------------- ---------------
OPERATING EARNINGS $ 0.77 $ 0.66 $ 2.97 $ 2.43
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED (0.06) 0.05 (0.06) (0.20)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS 0.16 (0.01) 0.20 0.39
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 0.87 $ 0.70 $ 3.11 $ 2.62
---------------------------------------------------- --------------- -------------- -------------- ---------------
WEIGHTED-AVERAGE DILUTED COMMON SHARES OUTSTANDING 282.9 304.7 289.9 314.7
<*Operating earnings versus U.S. GAAP (GAAP) net income
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 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 we believe are not indicative of
overall operating trends. Note: after-tax adjustments 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, we believe the presentation of segment operating earnings enhances
the understanding of our results of operations by highlighting earnings
attributable to the normal, ongoing operations of our businesses.
8
PRINCIPAL FINANCIAL GROUP, INC.
RESULTS OF OPERATIONS
(IN MILLIONS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
---------------- --------------- --------------- ---------------
12/31/05 12/31/04 12/31/05 12/31/04
---------------- --------------- --------------- ---------------
Premiums and other considerations $1,148.6 $ 973.2 $3,975.0 $3,710.0
Fees and other revenues 437.4 411.6 1,683.2 1,472.0
Net investment income 877.3 827.6 3,360.7 3,224.0
Net realized/unrealized capital gains (18.1) 25.3 (11.2) (104.8)
(losses) ---------------- --------------- --------------- ---------------
TOTAL REVENUES 2,445.2 2,237.7 9,007.7 8,301.2
---------------- --------------- --------------- ---------------
Benefits, claims, and settlement expenses
1,502.8 1,314.3 5,282.9 4,959.5
Dividends to policyholders 74.0 77.0 293.0 296.7
Operating expenses 593.0 572.0 2,307.5 2,165.9
---------------- --------------- --------------- ---------------
TOTAL EXPENSES 2,169.8 1,963.3 7,883.4 7,422.1
---------------- --------------- --------------- ---------------
Income from continuing operations before
income taxes 275.4 274.4 1,124.3 879.1
Income taxes 31.3 59.4 232.4 178.2
---------------- --------------- --------------- ---------------
Income from continuing operations, net of
related income taxes 244.1 215.0 891.9 700.9
Income (loss) from discontinued operations,
net of related taxes 11.1 (1.5) 27.1 130.4
---------------- --------------- --------------- ---------------
Income before cumulative effect of
accounting change 255.2 213.5 919.0 831.3
Cumulative effect of accounting change, net
of related income taxes - - - (5.7)
---------------- --------------- --------------- ---------------
NET INCOME 255.2 213.5 919.0 825.6
Preferred stock dividends 8.3 - 17.7 -
---------------- --------------- --------------- ---------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 246.9 $ 213.5 $ 901.3 $ 825.6
Less:
Net realized/unrealized capital gains
(losses), as adjusted (15.9) 15.9 (20.6) (62.3)
Other after-tax adjustments 44.9 (2.1) 59.5 123.1
---------------- --------------- --------------- ---------------
OPERATING EARNINGS $ 217.9 $ 199.7 $ 862.4 $ 764.8
================ =============== =============== ===============
SELECTED BALANCE SHEET STATISTICS
PERIOD ENDED
------------------------------------------------------------
12/31/05 12/31/04 12/31/03
-------------------- --------------------- -----------------
Total assets (in billions) $ 127.0 $ 113.8 $ 107.8
Total common equity (in millions) $ 7,265.2 $ 7,544.3 $ 7,399.6
Total common equity excluding accumulated other
comprehensive income (in millions) $ 6,270.4 $ 6,231.0 $ 6,228.3
End of period common shares outstanding (in
millions) 280.6 300.6 320.7
Book value per common share $ 25.89 $ 25.10 $ 23.07
Book value per common share excluding
accumulated other comprehensive income $ 22.35 $ 20.73 $ 19.42
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
12/31/05 12/31/04 12/31/05 12/31/04
-------------- -------------- ------------- -------------
DILUTED EARNINGS PER COMMONG SHARE:
Operating Earnings 0.77 0.66 2.97 2.43
Net realized/unrealized capital gains (losses) (0.06) 0.05 (0.06) (0.20)
Other after-tax adjustments 0.16 (0.01) 0.20 0.39
-------------- -------------- ------------- -------------
Net income available to common stockholders 0.87 0.70 3.11 2.62
============== ============== ============= =============
BOOK VALUE PER COMMON SHARE EXCLUDING OTHER COMPREHENSIVE
INCOME:
Book value per common share excluding other comprehensive
income 22.35 20.73 22.35 20.73
Net unrealized capital gains 3.66 4.67 3.66 4.67
Foreign currency translation (0.08) (0.28) (0.08) (0.28)
Minimum pension liability (0.04) (0.02) (0.04) (0.02)
-------------- -------------- ------------- -------------
Book value per common share including other comprehensive
income 25.89 25.10 25.89 25.10
============== ============== ============= =============
OPERATING REVENUES:
USAMA 1,195.4 1,010.5 4,099.2 3,741.9
IAMA 165.1 147.1 604.5 518.4
Life and Health 1,123.3 1,063.5 4,387.5 4,181.3
Corporate and Other (13.0) (5.4) (59.1) (23.0)
-------------- -------------- ------------- -------------
Total operating revenues 2,470.8 2,215.7 9,032.1 8,418.6
Add: Net realized/unrealized capital gains (losses) and
related fee adjustments (25.6) 23.0 (22.2) (114.9)
Less: Operating revenues from discontinued real estate - 1.0 2.2 2.5
investments -------------- -------------- ------------- -------------
Total GAAP revenues 2,445.2 2,237.7 9,007.7 8,301.2
============== ============== ============= =============
OPERATING EARNINGS:
USAMA 136.0 134.3 538.4 499.0
IAMA 22.7 11.5 71.0 40.3
Life and Health 63.2 52.9 274.4 256.2
Mortgage Banking - - - (10.3)
Corporate and Other (4.0) 1.0 (21.4) (20.4)
-------------- -------------- ------------- -------------
Total operating earnings 217.9 199.7 862.4 764.8
Net realized/unrealized capital gain (losses) (15.9) 15.9 (20.6) (62.3)
Other after-tax adjustments 44.9 (2.1) 59.5 123.1
Net income available to common stockholders 246.9 213.5 901.3 825.6
============== ============== ============= =============
NET REALIZED/UNREALIZED CAPITAL GAINS (LOSSES):
Net realized/unrealized capital losses, as adjusted (15.9) 15.9 (20.6) (62.3)
Add:
Amortization of DPAC and sale inducement costs 0.4 (4.2) 0.7 (6.2)
Capital gains distributed 2.0 3.1 5.8 4.4
Tax impacts (12.4) 8.2 (10.6) (51.1)
Minority interest capital gains 0.3 - 2.5 0.3
Less related fee adjustments:
Unearned front-end fee income 0.3 (2.0) 1.1 (2.1)
Certain market value adjustments to fee revenues (7.8) (0.3) (12.1) (8.0)
-------------- -------------- ------------- -------------
GAAP net realized/unrealized capital gains (losses) (18.1) 25.3 (11.2) (104.8)
============== ============== ============= =============
OTHER AFTER TAX ADJUSTMENTS:
IRS audit issues 33.8 - 33.8 -
SOP 03-1 implementation - - - (5.7)
Discontinued operations - Mortgage Banking 2.7 (1.8) (5.0) 118.8
Discontinued operations - Argentina - (0.3) - 10.0
Discontinued operations - BT 8.4 - 8.4 -
Gain on disposal of discontinued real estate investments - - 22.3 -
-------------- -------------- ------------- -------------
Total other after-tax adjustments 44.9 (2.1) 59.5 123.1
============== ============== ============= =============
10
--------
(1) Segment highlights that follow discuss a number of items benefiting fourth
quarter 2005 operating earnings.
(2) Use of non-GAAP financial measures, as well as a reconciliation of these
measures to U.S. GAAP, is included later in this release.
(3) In third quarter 2005, Principal International increased ownership in its
Malaysian joint venture. As a result of increased ownership, joint venture
assets under management of $1.8 billion were included in segment AUM as of
September 30, 2005.
(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, 2005
11