Principal Financial (PFG) 10-Q 5 May 10 2010 Q1 Quarterly report Financial data

Consolidated Statements of Fina

Consolidated Statements of Financial Position (USD $)
In Millions	Mar. 31, 2010	Dec. 31, 2009
Assets
Fixed maturities, available-for-sale (2010 includes $262.8 million related to consolidated variable interest entities)	47765.4	46220.6
Fixed maturities, trading (2010 includes $164.7 million related to consolidated variable interest entities)	1359.4	1032.4
Equity securities, available-for-sale	181.9	214
Equity securities, trading (2010 includes $93.6 million related to consolidated variable interest entities)	235.4	221.5
Mortgage loans	11559.2	11845.6
Real estate	1048.5	1034.6
Policy loans	895.7	902.5
Other investments (2010 includes $117.4 million related to consolidated variable interest entities of which $117.3 million are measured at fair value under the fair value option)	2479.3	2465.3
Total investments	65524.8	63936.5
Cash and cash equivalents (2010 includes $106.8 million related to consolidated variable interest entities)	1629.7	2240.4
Accrued investment income (2010 includes $1.6 million related to consolidated variable interest entities)	724	691.9
Premiums due and other receivables (2010 includes $14.8 million related to consolidated variable interest entities)	1190.7	1065.4
Deferred policy acquisition costs	3554.2	3681.4
Property and equipment	480.5	489.3
Goodwill	384	386.4
Other intangibles	851.9	851.7
Separate account assets	65245.7	62738.5
Other assets	1251.2	1677.9
Total assets	140836.7	137759.4
Liabilities
Contractholder funds	39367.1	39801.9
Future policy benefits and claims	19228.6	19248.3
Other policyholder funds	568.6	559.2
Short-term debt	131.6	101.6
Long-term debt	1578.3	1584.6
Income taxes currently payable	2.4	2.8
Deferred income taxes (2010 includes $2.7 million related to consolidated variable interest entities)	126.6	120.2
Separate account liabilities	65245.7	62738.5
Other liabilities (2010 includes $415.2 million related to consolidated variable interest entities of which $132.4 million are measured at fair value under the fair value option)	5899.6	5585.9
Total liabilities	132148.5	129,743
Stockholders' equity
Common stock, par value $.01 per share - 2,500.0 million shares authorized, 447.8 million and 447.0 million shares issued, and 319.7 million and 319.0 million shares outstanding in 2010 and 2009	4.5	4.5
Additional paid-in capital	9512.5	9492.9
Retained earnings	4340.8	4160.7
Accumulated other comprehensive loss	-577.9	(1,042)
Treasury stock, at cost (128.1 million and 128.0 million shares in 2010 and 2009, respectively)	-4724.4	-4722.7
Total stockholders' equity attributable to Principal Financial Group, Inc.	8555.6	7893.5
Noncontrolling interest	132.6	122.9
Total stockholders' equity	8688.2	8016.4
Total liabilities and stockholders' equity	140836.7	137759.4
Series A
Stockholders' equity
Preferred stock, value	0	0
Series B
Stockholders' equity
Preferred stock, value	0.1	0.1

1_Consolidated Statements of Fi

Consolidated Statements of Financial Position (Parenthetical) (USD $)
In Millions, except Per Share data	Mar. 31, 2010	Dec. 31, 2009
Fixed maturities, available-for-sale related to consolidated VIEs	262.8
Fixed maturities, trading related to consolidated VIEs	164.7
Equity securities, trading related to consolidated VIEs	93.6
Other investments related to consolidated VIEs	117.4
Other investments measured at fair value under fair value option	117.3
Cash and cash equivalents related to consolidated VIEs	106.8
Accrued investment income related to consolidated VIEs	1.6
Premiums due and other receivables related to consolidated VIEs	14.8
Deferred income taxes related to consolidated VIEs	2.7
Other liabilities related to consolidated VIEs	415.2
Other liabilities measured at fair value under fair value option	132.4
Common stock, par value (in dollars per share)	0.01	0.01
Common stock, authorized (in shares)	2,500	2,500
Common stock, issued (in shares)	447.8	447
Common stock, outstanding (in shares)	319.7	319
Treasury stock, (in shares)	128.1	128
Series A
Preferred stock, par value (in dollars per share)	0.01	0.01
Preferred stock, liquidation preference (in dollars per share)	$100	$100
Preferred stock, authorized (in shares)	3	3
Preferred stock, issued (in shares)	3	3
Preferred stock, outstanding (in shares)	3	3
Series B
Preferred stock, par value (in dollars per share)	0.01	0.01
Preferred stock, liquidation preference (in dollars per share)	$25	$25
Preferred stock, authorized (in shares)	10	10
Preferred stock, issued (in shares)	10	10
Preferred stock, outstanding (in shares)	10	10

Consolidated Statements of Oper

Consolidated Statements of Operations (USD $)
In Millions, except Per Share data	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Revenues
Premiums and other considerations	878.9	949.9
Fees and other revenues	567.6	473.5
Net investment income	863	828.5
Net realized capital gains, excluding impairment losses on available-for-sale securities	33.7	32.7
Total other-than-temporary impairment losses on available-for-sale securities	-84.6	-146.6
Portion of impairment losses on fixed maturities, available-for-sale recognized in other comprehensive income	5.4	50.6
Net impairment losses on available-for-sale securities	-79.2	(96)
Net realized capital losses	-45.5	-63.3
Total revenues	2,264	2188.6
Expenses
Benefits, claims and settlement expenses	1275.3	1306.6
Dividends to policyholders	56.5	63.5
Operating expenses	675.9	688.4
Total expenses	2007.7	2058.5
Income before income taxes	256.3	130.1
Income taxes	52.7	7.5
Net income	203.6	122.6
Net income attributable to noncontrolling interest	4.6	1.6
Net income attributable to Principal Financial Group, Inc.	199	121
Preferred stock dividends	8.2	8.2
Net income available to common stockholders	190.8	112.8
Earnings per common share
Basic earnings per common share (in dollars per share)	0.6	0.43
Diluted earnings per common share (in dollars per share)	0.59	0.43

Consolidated Statements of Stoc

Consolidated Statements of Stockholders' Equity (USD $)
In Millions	Series A preferred stock	Series B preferred stock	Common stock	Additional paid-in capital	Retained earnings	Accumulated other comprehensive loss	Treasury stock	Noncontrolling interest	Total
Balances at Dec. 31, 2008	$0	0.1	3.9	8376.5	3722.5	-4911.6	-4718.6	96.5	2569.3
Common stock issued				4					4
Stock-based compensation and additional related tax benefits				7					7
Treasury stock acquired, common							(3)		(3)
Dividends to preferred stockholders					-8.2				-8.2
Distributions to noncontrolling interest								-17.4	-17.4
Purchase of subsidiary shares from noncontrolling interest				-45.4				-0.2	-45.6
Effects of reclassifying noncredit component of previously recognized impairment losses on fixed maturities, available-for-sale, net					9.9	-9.9
Comprehensive income:
Net income					121			1.6	122.6
Net unrealized gains, net						79.9			79.9
Noncredit component of impairment losses on fixed maturities, available-for-sale, net						-32.6			-32.6
Foreign currency translation adjustment, net of related income taxes						18.1		-0.2	17.9
Unrecognized postretirement benefit obligation, net of related income taxes						15			15
Comprehensive income									202.8
Balances at Mar. 31, 2009	0	0.1	3.9	8342.1	3845.2	-4841.1	-4721.6	80.3	2708.9
Balances at Dec. 31, 2009	0	0.1	4.5	9492.9	4160.7	(1,042)	-4722.7	122.9	8016.4
Common stock issued				8.3					8.3
Stock-based compensation and additional related tax benefits				11.3					11.3
Treasury stock acquired, common							-1.7		-1.7
Dividends to preferred stockholders					-8.2				-8.2
Distributions to noncontrolling interest								(1)	(1)
Contributions from noncontrolling interest								5.9	5.9
Effects of implementation of accounting change related to variable interest entities, net					-10.7	10.7
Comprehensive income:
Net income					199			4.6	203.6
Net unrealized gains, net						449.1			449.1
Noncredit component of impairment losses on fixed maturities, available-for-sale, net						(3)			(3)
Foreign currency translation adjustment, net of related income taxes						-2.6		0.2	-2.4
Unrecognized postretirement benefit obligation, net of related income taxes						9.9			9.9
Comprehensive income									657.2
Balances at Mar. 31, 2010	$0	0.1	4.5	9512.5	4340.8	-577.9	-4724.4	132.6	8688.2

Consolidated Statements of Cash

Consolidated Statements of Cash Flows (USD $)
In Millions	3 Months Ended Mar. 31, 2010	3 Months Ended Mar. 31, 2009
Operating activities
Net income	203.6	122.6
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of deferred policy acquisition costs	72.8	85.1
Additions to deferred policy acquisition costs	-123.8	-143.8
Accrued investment income	-32.1	-33.9
Net cash flows for trading securities	-148.8	74.6
Premiums due and other receivables	(12)	-42.9
Contractholder and policyholder liabilities and dividends	255.9	281.9
Current and deferred income taxes	37.6	8.2
Net realized capital losses	45.5	63.3
Depreciation and amortization expense	29.9	33.3
Mortgage loans held for sale, acquired or originated	-15.9	-10.3
Mortgage loans held for sale, sold or repaid, net of gain	13.7	12.2
Real estate acquired through operating activities		-16.3
Real estate sold through operating activities	3.1
Stock-based compensation	10.7	5.3
Other	313	510.6
Net adjustments	449.6	827.3
Net cash provided by operating activities	653.2	949.9
Investing activities
Available-for-sale securities: Purchases	-2228.5	-1771.9
Available-for-sale securities: Sales	707.2	765.8
Available-for-sale securities: Maturities	828.5	892.7
Mortgage loans acquired or originated	-219.1	-92.9
Mortgage loans sold or repaid	451.5	283.5
Real estate acquired	-9.7	-3.7
Real estate sold		0.4
Net purchases of property and equipment	-4.2	-13.2
Purchases of interest in subsidiaries, net of cash acquired		-34.2
Net change in other investments	12.3	-13.1
Net cash provided by (used in) investing activities	(462)	13.4
Financing activities
Issuance of common stock	8.3	4
Acquisition of treasury stock	-1.7	(3)
Proceeds from financing element derivatives	16.6	36.8
Payments for financing element derivatives	-13.2	(25)
Excess tax benefits from share-based payment arrangements	0.4	0.1
Dividends to preferred stockholders	-8.2	-8.2
Issuance of long-term debt	0.2
Principal repayments of long-term debt	-3.4	-4.9
Net proceeds from short-term borrowings	31.2	27.7
Investment contract deposits	1,051	1886.2
Investment contract withdrawals	-1920.7	-2819.4
Net increase in banking operation deposits	38.7	35.5
Other	-1.1	-1.5
Net cash used in financing activities	-801.9	-871.7
Net increase (decrease) in cash and cash equivalents	-610.7	91.6
Cash and cash equivalents at beginning of period	2240.4	2,608
Cash and cash equivalents at end of period	1629.7	2699.6

Nature of Operations and Signif

Nature of Operations and Significant Accounting Policies
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Nature of Operations and Significant Accounting Policies	1. Nature of Operations and Significant Accounting Policies Basis of Presentation The accompanying unaudited consolidated financial statements of Principal Financial Group,Inc. (PFG), its majority-owned subsidiaries and its consolidated variable interest entities (VIEs), have been prepared in conformity with accounting principles generally accepted in the U.S. (U.S. GAAP) for interim financial statements and with the instructions to Form10-Q and Article10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March31, 2010, are not necessarily indicative of the results that may be expected for the year ended December31, 2010. These interim unaudited consolidated financial statements should be read in conjunction with our annual audited financial statements as of December31, 2009, included in our Form10-K for the year ended December31, 2009, filed with the United States Securities and Exchange Commission (SEC). The accompanying consolidated statement of financial position as of December31, 2009, has been derived from the audited consolidated statement of financial position but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Recent Accounting Pronouncements In April2010, the Financial Accounting Standards Board (FASB) issued authoritative guidance addressing how investments held through the separate accounts of an insurance entity affect the entitys consolidation analysis. This guidance clarifies that an insurance entity should not consider any separate account interests held for the benefit of policyholders in an investment to be the insurers interests and should not combine those interests with its general account interest in the same investment when assessing the investment for consolidation. This guidance will be effective for us on January1, 2011, and will not have a material impact on our consolidated financial statements. In March2010, the FASB issued authoritative guidance that amends and clarifies the guidance on evaluation of credit derivatives embedded in beneficial interests in securitized financial assets, including asset-backed securities, credit-linked notes, collateralized loan obligations and collateralized debt obligations (CDOs). This guidance eliminates the scope exception for bifurcation of embedded credit derivatives in interests in securitized financial assets, unless they are created solely by subordination of one financial instrument to another. This guidance will be effective for us on July1, 2010, and we are currently assessing the impact it will have on our consolidated financial statements. In January2010, the FASB issued authoritative guidance that requires new disclosures related to fair value measurements and clarifies existing disclosure requirements about the level of disaggregation, inputs and valuation techniques. Specifically, reporting entities now must disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurement

Variable Interest Entities

Variable Interest Entities
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Variable Interest Entities	2. Variable Interest Entities We have relationships with and may have a variable interest in various types of special purpose entities. Following is a discussion of our interest in entities that meet the definition of a VIE. When we are the primary beneficiary we are required to consolidate the entity in our financial statements. On January1, 2010, we adopted authoritative guidance that changed the method of determining the primary beneficiary of a VIE. Prior to January1, 2010, the primary beneficiary was the enterprise who absorbed the majority of the entitys expected losses, received a majority of the expected residual returns or both. The new guidance identifies the primary beneficiary of a VIE as the enterprise with (1)the power to direct the activities of a VIE that most significantly impact the entitys economic performance and (2)the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. Due to the implementation of this guidance, certain previously unconsolidated VIEs were consolidated and certain previously consolidated VIEs were deconsolidated. See further discussion of the adoption in Note 1, Nature of Operations and Significant Accounting Policies. Consolidated Variable Interest Entities Grantor Trusts. We contributed undated subordinated floating rate notes to three grantor trusts. The trusts separated the cash flows by issuing an interest-only certificate and a residual certificate related to each note contributed. Each interest-only certificate entitles the holder to interest on the stated note for a specified term, while the residual certificate entitles the holder to interest payments subsequent to the term of the interest-only certificate and to all principal payments. We retained the interest-only certificates and the residual certificates were subsequently sold to third parties. We have determined these grantor trusts are VIEs due to insufficient equity to sustain them. As our interest-only certificates are exposed to the majority of the risk of loss due to interest rate risk, we determined we were the primary beneficiary prior to January1, 2010. Beginning January1, 2010, we determined we remain the primary beneficiary as a result of our contribution of securities into the trusts. Collateralized Private Investment Vehicles. We invest in synthetic CDOs, collateralized bond obligations, collateralized loan obligations, collateralized commodity obligations and other collateralized structures, which are VIEs due to insufficient equity to sustain the entities (collectively known as collateralized private investment vehicles). The performance of the notes of these structures is primarily linked to a synthetic portfolio by derivatives; each note has a specific loss attachment and detachment point. The notes and related derivatives are collateralized by a pool of permitted investments. The investments are held by a trustee and can only be liquidated to settle obligations of the trusts. These obligations primarily include derivatives, financial guarantees and the notes due at maturity or termination of the trusts. Prior to Jan

Investments

Investments
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Investments	3. Investments Fixed Maturities and Equity Securities Fixed maturity securities include bonds, asset-backed securities, redeemable preferred stock and certain nonredeemable preferred stock. Equity securities include mutual funds, common stock and nonredeemable preferred stock. We classify fixed maturity securities and equity securities as either available-for-sale or trading at the time of the purchase and, accordingly, carry them at fair value. See Note9, Fair Value Measurements, for methodologies related to the determination of fair value. Unrealized gains and losses related to available-for-sale securities, excluding those in fair value hedging relationships, are reflected in stockholders equity, net of adjustments related to deferred policy acquisition costs (DPAC), sales inducements, unearned revenue reserves, derivatives in cash flow hedge relationships and applicable income taxes. Unrealized gains and losses related to hedged portions of available-for-sale securities in fair value hedging relationships and mark-to-market adjustments on certain trading securities are reflected in net realized capital gains (losses). We also have trading securities portfolios that support investment strategies that involve the active and frequent purchase and sale of fixed maturity securities. Mark-to-market adjustments related to these trading securities are reflected in net investment income. The cost of fixed maturity securities is adjusted for amortization of premiums and accrual of discounts, both computed using the interest method. The cost of fixed maturities and equity securities classified as available-for-sale is adjusted for declines in value that are other than temporary. Impairments in value deemed to be other than temporary are primarily reported in net income as a component of net realized capital gains (losses), with noncredit impairment losses for certain fixed maturities, available-for-sale reported in other comprehensive income (OCI). For loan-backed and structured securities, we recognize income using a constant effective yield based on currently anticipated cash flows. The amortized cost, gross unrealized gains and losses, other-than-temporary impairments in OCI and fair value of fixed maturities and equity securities available-for-sale as of March31, 2010 and December31, 2009, are summarized as follows: Amortized cost Gross unrealized gains Gross unrealized losses Other-than- temporary impairments in OCI Fair value (in millions) March31, 2010 Fixed maturities, available-for-sale: U.S. government and agencies $ 562.8 $ 13.2 $ $ $ 576.0 Non-U.S. governments 758.3 114.2 0.4 872.1 States and political subdivisions 2,189.9 61.5 11.2 2,240.2 Corporate 33,255.6 1,522.8 696.5 53.3 34,028.6 Residential mortgage-backed securities 2,933.0 98.7 1.2 3,030.5 Commercial mortgage-backed securities 4,855.1 55.7 1,021.0 107.7 3,782.1 Collateralized debt obligations 574.4 0.5 166.9 35.4 372.6 Other debt obligations 3,050.7 46.1 146.1

Derivative Financial Instrument

Derivative Financial Instruments
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Derivative Financial Instruments	4. Derivative Financial Instruments Derivatives are generally used to hedge or reduce exposure to market risks associated with assets held or expected to be purchased or sold and liabilities incurred or expected to be incurred. Derivatives are used to change the characteristics of our asset/liability mix consistent with our risk management activities. Derivatives are also used in asset replication strategies. Types of Derivative Instruments Interest Rate Contracts Interest rate risk is the risk that we will incur economic losses due to adverse changes in interest rates. Sources of interest rate risk include the difference between the maturity and interest rate changes of assets with the liabilities they support, timing differences between the pricing of liabilities and the purchase or procurement of assets and changing cash flow profiles from original projections due to prepayment options embedded within asset and liability contracts. We use various derivatives to manage our exposure to fluctuations in interest rates. Interest rate swaps are contracts in which we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts based upon designated market rates or rate indices and an agreed upon notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by either party. Cash is paid or received based on the terms of the swap. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty at each due date. We use interest rate swaps primarily to more closely match the interest rate characteristics of assets and liabilities arising from timing mismatches between assets and liabilities (including duration mismatches). We also use interest rate swaps to hedge against changes in the value of assets we anticipate acquiring and other anticipated transactions and commitments. Interest rate swaps are used to hedge against changes in the value of the guaranteed minimum withdrawal benefit (GMWB) liability. The GMWB rider on our variable annuity products provides for guaranteed minimum withdrawal benefits regardless of the actual performance of various equity and/or fixed income funds available with the product. Interest rate caps and interest rate floors, which can be combined to form interest rate collars, are contracts that entitle the purchaser to pay or receive the amounts, if any, by which a specified market rate exceeds a cap strike interest rate, or falls below a floor strike interest rate, respectively, at specified dates. We have entered into interest rate collars whereby we receive amounts if a specified market rate falls below a floor strike interest rate, and we pay if a specified market rate exceeds a cap strike interest rate. We use interest rate collars to manage interest rate risk related to guaranteed minimum interest rate liabilities in our individual annuities contracts. A swaption is an option to enter into an interest rate swap at a future date. We have written these options and received a premium in order to

Federal Income Taxes

Federal Income Taxes
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Federal Income Taxes	5. Federal Income Taxes The effective income tax rate for the three months ended March31, 2010, was lower than the U.S. corporate income tax rate of 35% (U.S. statutory rate) primarily due to income tax deductions allowed for corporate dividends received and taxes on our share of earnings generated from equity method investments reflected in net investment income. The effective income tax rate for the three months ended March31, 2009, was lower than the U.S. statutory rate primarily due to income tax deductions allowed for corporate dividends received, the interest exclusion from taxable income and taxes on our share of earnings generated from equity method investments reflected in net investment income. We are a U.S. shareholder in various foreign entities classified as controlled foreign corporations (CFCs) for U.S. tax purposes.U.S. shareholders of CFCs are generally required to take into account as gross income in the U.S. certain passive income earned by the CFCs (subpart F income) even if the income is not currently distributed. A temporary exception (the active financing exception) was applicable prior to January1, 2010, to avoid the current recognition of subpart F income derived in the active conduct of a banking, financing, insurance or similar business.We previously disclosed anticipated action of the U.S. Congress and the President to enact extenders legislation in early 2010; however, this did not occur prior to March31, 2010.Therefore, current tax expense has increased by an immaterial amount associated with the U.S. recognition of subpart F income from our foreign operations.However, we still anticipate extenders legislation during 2010.Any tax expense recorded in 2010 on our subpart F income that is subject to the active financial exception will be reversed during the quarter of enactment, assuming it is retroactive to January1, 2010. The Internal Revenue Service (IRS) is currently auditing our federal income tax returns for the years 2004 through 2008. We do not expect the results of these audits or developments in other tax areas to significantly change the possible increase in the amount of unrecognized tax benefits, but the outcome of tax reviews is uncertain and unforeseen results can occur. Consistent with December31, 2009, we estimate that it is reasonably possible that the amount of our unrecognized tax benefits could increase by $0.0 to $11.0 million within the next twelve months.

Employee and Agent Benefits

Employee and Agent Benefits
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Employee and Agent Benefits	6. Employee and Agent Benefits Components of net periodic benefit cost: Pensionbenefits Otherpostretirement benefits Forthethreemonthsended March31, Forthethreemonthsended March31, 2010 2009 2010 2009 (inmillions) Service cost $ 11.4 $ 12.8 $ 2.8 $ 2.8 Interest cost 26.4 25.2 5.3 4.9 Expected return on plan assets (24.6 ) (19.9 ) (7.5 ) (6.5 ) Amortization of prior service benefit (2.5 ) (1.9 ) (0.5 ) (0.5 ) Recognized net actuarial loss 16.9 23.2 1.2 2.4 Net periodic benefit cost $ 27.6 $ 39.4 $ 1.3 $ 3.1 In 2009, the return on plan assets was greater than expected, resulting in an actuarial gain and higher than expected plan assets at December31, 2009.The higher asset value increased the expected return on plan assets in 2010 and the actuarial gain reduced the previous actuarial loss and its amortization in 2010. Contributions Our funding policy for our qualified pension plan is to fund the plan annually in an amount at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act (ERISA) and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. The minimum annual contribution for 2010 will be zero so we will not be required to fund our qualified pension plan during 2010. However, it is possible that we may fund the qualified and nonqualified pension plans in 2010 for a combined total of $20.0 million to $75.0 million. During the three months ended March31, 2010, no contributions were made to these plans.

Contingencies, Guarantees and I

Contingencies, Guarantees and Indemnifications
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Contingencies, Guarantees and Indemnifications	7. Contingencies, Guarantees and Indemnifications Litigation and Regulatory Contingencies We are regularly involved in litigation, both as a defendant and as a plaintiff, but primarily as a defendant. Litigation naming us as a defendant ordinarily arises out of our business operations as a provider of asset management and accumulation products and services, life, health and disability insurance. Some of the lawsuits are class actions, or purport to be, and some include claims for unspecified or substantial punitive and treble damages. In addition, regulatory bodies such as state insurance departments, the SEC, the Financial Industry Regulatory Authority, the Department of Labor and other regulatory agencies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, ERISA and laws governing the activities of broker-dealers. We receive requests from regulators and other governmental authorities relating to industry issues and may receive additional requests, including subpoenas and interrogatories, in the future. On November8, 2006, a trustee of Fairmount ParkInc. Retirement Savings Plan filed a putative class action lawsuit in the United States District Court for the Southern District of Illinois against Principal Life. Principal Lifes motion to transfer venue was granted and the case is now pending in the Southern District of Iowa. The complaint alleged, among other things, that Principal Life breached its alleged fiduciary duties while performing services to 401(k)plans by failing to disclose, or adequately disclose, to employers or plan participants the fact that Principal Life receives revenue sharing fees from mutual funds that are included in its pre-packaged 401(k)plans and allegedly failed to use the revenue to defray the expenses of the services provided to the plans. Plaintiff further alleged that these acts constitute prohibited transactions under ERISA. Plaintiff sought to certify a class of all retirement plans to which Principal Life was a service provider and for which Principal Life received and retained revenue sharing fees from mutual funds. On August27, 2008, the plaintiffs motion for class certification was denied. The plaintiffs new motion for class certification, filed May11, 2009, was struck by the court on March31, 2010. Principal Life continues to aggressively defend the lawsuit. On August28, 2007, a putative class action lawsuit was filed by Patricia Walsh (and another plaintiff, who subsequently withdrew) in the United States District Court for the Southern District of Iowa against Principal Life and Princor Financial Services Corporation (the Walsh Defendants). The lawsuit alleges that the Walsh Defendants breached alleged fiduciary duties to participants in employer-sponsored 401(k)plans who were retiring or leaving their respective plans, including providing misleading information and failing to act solely in the interests of the participants, resulting in alleged violations of ERISA. The plaintiffs motion for class certification was denied on March24, 2010. The Walsh Defendants are aggressively defending

Stockholders' Equity

Stockholders' Equity
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Stockholders' Equity	8. Stockholders Equity Reconciliation of Outstanding Shares SeriesA preferredstock SeriesB preferredstock Common stock (inmillions) Outstanding shares at January1, 2009 3.0 10.0 259.3 Shares issued 0.9 Treasury stock acquired (0.2 ) Outstanding shares at March31, 2009 3.0 10.0 260.0 Outstanding shares at January1, 2010 3.0 10.0 319.0 Shares issued 0.8 Treasury stock acquired (0.1 ) Outstanding shares at March31, 2010 3.0 10.0 319.7 In May2009 we issued 58.2 million shares of common stock at a price of $19.75 per share. Net proceeds from the issuance were $1,109.1 million. The proceeds from this offering will be used for general corporate purposes. Comprehensive income is as follows: Forthethreemonthsended March31, 2010 2009 (in millions) Net income $ 203.6 $ 122.6 Net change in unrealized gains on fixed maturities, available-for-sale 962.6 10.8 Net change in noncredit component of impairment losses on fixed maturities, available-for-sale (5.4 ) (50.6 ) Net change in unrealized gains (losses) on equity securities, available-for-sale 1.3 (52.3 ) Net change in unrealized gains (losses) on equity method subsidiaries and noncontrolling interest adjustments (24.1 ) 64.9 Adjustments for assumed changes in amortization patterns (203.5 ) 171.8 Adjustment for assumed changes in liability for policyholder benefits and claims (43.4 ) (39.3 ) Net change in unrealized gains (losses) on derivative instruments 1.1 (25.6 ) Change in net foreign currency translation adjustment (5.8 ) 24.1 Change in unrecognized postretirement benefit obligation 15.2 23.1 Provision for deferred income taxes (244.4 ) (46.7 ) Comprehensive income $ 657.2 $ 202.8

Fair Value Measurements

Fair Value Measurements
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Fair Value Measurements	9. Fair Value Measurements We use fair value measurements to record fair value of certain assets and liabilities and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value. Certain financial instruments, particularly policyholder liabilities other than investment-type insurance contracts, are excluded from these fair value disclosure requirements. Fair value of financial instruments The carrying value and estimated fair value of financial instruments were as follows: March31,2010 December31,2009 Carryingamount Fairvalue Carryingamount Fairvalue (inmillions) Assets (liabilities) Fixed maturities, available-for-sale $ 47,765.4 $ 47,765.4 $ 46,220.6 $ 46,220.6 Fixed maturities, trading 1,359.4 1,359.4 1,032.4 1,032.4 Equity securities, available-for-sale 181.9 181.9 214.0 214.0 Equity securities, trading 235.4 235.4 221.5 221.5 Mortgage loans 11,559.2 11,413.0 11,845.6 11,407.8 Policy loans 895.7 976.8 902.5 1,022.6 Other investments 301.6 301.6 188.5 188.5 Cash and cash equivalents 1,629.7 1,629.7 2,240.4 2,240.4 Derivative assets 1,178.7 1,178.7 1,232.2 1,232.2 Separate account assets 65,245.7 65,245.7 62,738.5 62,738.5 Collateral received 248.9 248.9 386.4 386.4 Investment-type insurance contracts (35,127.4 ) (33,841.8 ) (35,672.8 ) (34,181.0 ) Short-term debt (131.6 ) (131.6 ) (101.6 ) (101.6 ) Long-term debt (1,578.3 ) (1,673.7 ) (1,584.6 ) (1,608.4 ) Separate account liabilities (59,125.8 ) (58,066.9 ) (56,897.4 ) (55,867.5 ) Derivative liabilities (1,188.2 ) (1,188.2 ) (1,050.8 ) (1,050.8 ) Bank deposits (2,224.3 ) (2,232.3 ) (2,185.8 ) (2,188.5 ) Collateral posted (248.9 ) (248.9 ) (367.8 ) (367.8 ) Other liabilities (246.0 ) (246.0 ) (99.2 ) (99.2 ) Valuation hierarchy Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. Level 1 Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities primarily include exchange traded equity securities, mutual funds and U.S. Treasury bonds. Level 2 Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Our Level 2 assets and liabilities primarily include fixed maturity securities (including public and private bonds), equity securities, over-the-counter derivatives and other investments for whi

Segment Information

Segment Information
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Segment Information	10. Segment Information We provide financial products and services through the following segments: U.S. Asset Accumulation, Global Asset Management, International Asset Management and Accumulation and Life and Health Insurance. In addition, there is a Corporate segment. The segments are managed and reported separately because they provide different products and services, have different strategies or have different markets and distribution channels. The U.S. Asset Accumulation segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals. The Global Asset Management segment provides asset management services to our asset accumulation business, our life and health insurance operations, the Corporate segment and third-party clients. The International Asset Management and Accumulation segment consists of Principal International, which has operations in Brazil, Chile, China, Hong Kong Special Administrative Region, India, Indonesia, Malaysia, Mexico and Singapore. We focus on countries with large middle classes, favorable demographics and growing long-term savings, ideally with defined contribution markets. We entered these countries through acquisitions, start-up operations and joint ventures. The Life and Health insurance segment provides individual life insurance, group health insurance and specialty benefits, which consists of group dental and vision insurance, individual and group disability insurance and group life insurance, throughout the United States. The Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect our financing activities (including interest expense and preferred stock dividends), income on capital not allocated to other segments, inter-segment eliminations, income tax risks and certain income, expenses and other after-tax adjustments not allocated to the segments based on the nature of such items. Management uses segment operating earnings in goal setting, as a basis for determining employee compensation and in evaluating performance on a basis comparable to that used by securities analysts. We determine segment operating earnings by adjusting U.S. GAAP net income for net realized capital gains (losses), as adjusted, and other after-tax adjustments which management believes are not indicative of overall operating trends. Net realized capital gains (losses), as adjusted, are net of income taxes, related changes in the amortization pattern of DPAC and sales inducements, recognition of deferred front-end fee revenues for sales charges on retirement products and services, net realized capital gains and losses distributed, noncontrolling interest capital gains and losses and certain market value adjustments to fee revenues. Net realized capital gains (losses), as adjusted, exclude periodic settlements and accruals on derivative instruments not designated as hedging instruments and exclude certain market value adjustments of embedded derivatives. Segment operating revenues exclude net realized capital gains (losses) (excep

Stock-Based Compensation Plans

Stock-Based Compensation Plans
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Stock-Based Compensation Plans	11. Stock-Based Compensation Plans As of March31, 2010, we have the 2010 Stock Incentive Plan (formerly known as the 2005 Stock Incentive Plan), the Employee Stock Purchase Plan, the 2005 Directors Stock Plan, the Stock Incentive Plan, the Directors Stock Plan and the Long-Term Performance Plan (Stock-Based Compensation Plans). As of May17, 2005, no new grants will be made under the Stock Incentive Plan, the Directors Stock Plan or the Long-Term Performance Plan. As of March31, 2010, the maximum number of new shares of common stock that were available for grant under the 2010 Stock Incentive Plan and the 2005 Directors Stock Plan was 11.9 million. The compensation cost that was charged against income for stock-based awards granted under the Stock-Based Compensation Plans is as follows: Forthethreemonthsended March31, 2010 2009 (inmillions) Compensation cost $ 12.9 $ 13.8 Related income tax benefit 4.0 4.5 Capitalized as part of an asset 0.5 1.2 Nonqualified Stock Options Nonqualified stock options were granted to certain employees under the 2010 Stock Incentive Plan. Total options granted were 0.8 million for the three months ended March31, 2010. The fair value of these options was determined using the Black-Scholes option valuation model assuming a weighted-average dividend yield of 2.3 percent, a weighted-average expected volatility of 66.6 percent, a weighted-average risk-free interest rate of 2.8 percent and a weighted-average expected term of 6 years. The weighted-average estimated fair value of stock options granted during the three months ended March31, 2010, was $11.48 per share. As of March31, 2010, there were $11.7 million of total unrecognized compensation costs related to nonvested stock options. The costs are expected to be recognized over a weighted-average service period of approximately 1.9 years. Performance Share Awards Performance share awards were granted to certain employees under the 2010 Stock Incentive Plan. Total performance share awards granted were 0.4 million for the three months ended March31, 2010. The performance share awards granted represent initial target awards and do not reflect potential increases or decreases resulting from the final performance objective to be determined at the end of the performance period. The actual number of shares to be awarded at the end of each performance period will range between 0% and 150% of the initial target awards. The fair value of performance share awards is determined based on the closing stock price of our common shares on the grant date. The weighted-average grant date fair value of these performance share awards granted was $22.21 per common share. As of March31, 2010, there were $9.2 million of total unrecognized compensation costs related to nonvested performance share awards granted. The costs are expected to be recognized over a weighted-average service period of approximately 1.8 years. Restricted Stock Units Restricted stock units were issued to certain employees and agents pursuant to the 2010 Stock Incentive Plan. Total restricted stock units granted were 1.1

Earnings Per Common Share

Earnings Per Common Share
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Earnings Per Common Share	12. Earnings Per Common Share The computations of the basic and diluted per share amounts were as follows: Forthethreemonthsended March31, 2010 2009 (inmillions,exceptpersharedata) Net income $ 203.6 $ 122.6 Subtract: Net income attributable to noncontrolling interest 4.6 1.6 Preferred stock dividends 8.2 8.2 Net income available to common stockholders $ 190.8 $ 112.8 Weighted-average shares outstanding Basic 319.8 260.0 Dilutive effects: Stock options 0.9 Restricted stock units 1.4 0.5 Diluted 322.1 260.5 Net income per common share: Basic $ 0.60 $ 0.43 Diluted $ 0.59 $ 0.43 The calculation of diluted earnings per share for the three months ended March31, 2010 and 2009, excludes the incremental effect related to certain outstanding stock-based compensation grants due to their anti-dilutive effect.

Condensed Consolidating Financi

Condensed Consolidating Financial Information
	3 Months Ended Mar. 31, 2010
Notes to Consolidated Financial Statements
Condensed Consolidating Financial Information	13. Condensed Consolidating Financial Information Principal Life has established special purpose entities to issue secured medium-term notes. Under the program, the payment obligations of principal and interest on the notes are secured by funding agreements issued by Principal Life. Principal Lifes payment obligations on the funding agreements are fully and unconditionally guaranteed by PFG. All of the outstanding stock of Principal Life is indirectly owned by PFG and PFG is the only guarantor of the payment obligations of the funding agreements. The following tables set forth condensed consolidating financial information of (i)PFG, (ii)Principal Life, (iii)Principal Financial Services,Inc. (PFS) and all other direct and indirect subsidiaries of PFG on a combined basis and (iv)the eliminations necessary to arrive at the information for PFG on a consolidated basis as of March31, 2010 and December31, 2009, and for the three months ended March31, 2010 and 2009. In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i)PFGs interest in PFS, (ii)Principal Lifes interest in all direct subsidiaries of Principal Life and (iii)PFSs interest in Principal Life even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parents investment and earnings. All intercompany balances and transactions, including elimination of the parents investment in subsidiaries, between PFG, Principal Life and PFS and all other subsidiaries have been eliminated, as shown in the column Eliminations and Other. These condensed consolidating financial statements should be read in conjunction with the consolidated financial statements. The financial information may not necessarily be indicative of results of operations, cash flows or financial position had the subsidiaries operated as independent entities. Condensed Consolidating Statements of Financial Position March31, 2010 Principal Financial Group,Inc. ParentOnly PrincipalLife Insurance Company Only PrincipalFinancial Services,Inc.and OtherSubsidiaries Combined Eliminationsand Other Principal Financial Group,Inc. Consolidated (inmillions) Assets Fixed maturities, available-for-sale $ 10.0 $ 42,611.9 $ 5,576.1 $ (432.6 ) $ 47,765.4 Fixed maturities, trading 490.9 452.3 416.2 1,359.4 Equity securities, available-for-sale 179.5 2.4 181.9 Equity securities, trading 0.3 235.1 235.4 Mortgage loans 9,724.3 2,263.4 (428.5 ) 11,559.2 Real estate 19.4 1,031.2 (2.1 ) 1,048.5 Policy loans 874.7 21.0 895.7 Investment in unconsolidated entities 9,096.2 3,395.2 3,672.0 (15,570.4 ) 593.0 Other investments 7.0 1,663.7 858.2 (642.6 ) 1,886.3 Cash and cash equivalents 283.8 491.2 1,008.2 (153.5 ) 1,629.7 Accrued investment income 1.4 667.1 60.3 (4.8 ) 724.0 Premiums due and other receivables 88.2

Document and Entity Information

Document and Entity Information
	3 Months Ended Mar. 31, 2010	Apr. 28, 2010
Document and Entity Information
Entity Registrant Name	PRINCIPAL FINANCIAL GROUP INC
Entity Central Index Key	0001126328
Document Type	10-Q
Document Period End Date	2010-03-31
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		319,728,326
Document Fiscal Year Focus	2,010
Document Fiscal Period Focus	Q1