Report of Independent Auditors on Schedules
The Board of Directors and Stockholder
Principal Life Insurance Company
We have audited the consolidated financial statements of Principal Life
Insurance Company (the Company) as of December 31, 2000 and 1999, and for each
of the three years in the period ended December 31, 2000, and have issued our
report thereon dated February 2, 2001, except for Note 17 to the consolidated
financial statements as to which the date is October 26, 2001 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedules listed as Exhibits in Part II of this Registration
Statement. These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
/s/Ernst & Young LLP
Des Moines, Iowa
February 2, 2001
Principal Life Insurance Company
Schedule I -- Summary of Investments
Other than Investments in Related Parties
As of December 31, 2000
Amount at Which
Shown in the
Statement of
Type of investment Cost Value Financial Position
- --------------------------------------------------------------------- ------------- -----------------------
(In Millions)
Fixed maturities, available-for-sale:
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $ 23.2 $ 23.1 $ 23.1
States, municipalities and political subdivisions
287.4 295.7 295.7
Foreign governments
692.8 712.5 712.5
Public utilities 2,381.8 2,434.8
2,434.8
Convertibles and bonds with warrants attached
40.0 33.7 33.7
Redeemable preferred
21.4 21.2 21.2
All other corporate bonds 16,159.6 16,203.2
16,203.2
Mortgage-backed and other asset-backed securities 6,244.2 6,417.9
6,417.9
-------------- ------------- -----------------------
Total fixed maturities, available for sale 25,850.4 26,142.1
26,142.1
Equity securities, available-for-sale
Common stocks:
Banks, trust and insurance companies
58.2 57.8 57.8
Industrial, miscellaneous and all other
628.9 570.1 570.1
Non-redeemable preferred stock
86.8 82.4 82.4
-------------- ------------- -----------------------
Total equity securities, available-for-sale
773.9 710.3 710.3
Mortgage loans 11,436.2 XXXX
11,325.8
Real estate, net:
Real estate acquired in satisfaction of debt XXXX
133.1 109.6
Other real estate 1,299.5 XXXX
1,282.1
Policy loans XXXX
803.6 803.6
Other investments XXXX
511.6 532.8
-------------- ------------- -----------------------
Total investments $ 40,808.3 XXXX $ 40,906.3
============== ============= =======================
<FN>
See accompanying report of independent auditors.
</FN>
Principal Life Insurance Company
Schedule III -- Supplementary Insurance Information
As of December 31, 2000, 1999 and 1998 and for each of the years then ended
Deferred Future Contractholder
Policy Policy and Other
Acquisition Benefits Policyholder
Segment Costs and Claims Funds
- ---------------------------------------------------------------------- --------------------- --------------------------
(In Millions)
December 31, 2000:
U.S. Asset Management and Accumulation $ 368.9 $ 6,065.4 $ 23,046.2
Life & Health Insurance 926.6 6,304.5 1,799.0
Mortgage Banking - - -
Corporate and Other 37.8 209.7 52.4
--------------- --------------------- --------------------------
Total $ 1,333.3 $ 12,579.6 $ 24,897.6
=============== ===================== ==========================
December 31, 1999:
U.S. Asset Management and Accumulation $ 426.2 $ 5,675.2 $ 23,515.6
Life & Health Insurance 983.1 6,097.1 1,623.2
Mortgage Banking - - -
Corporate and Other 21.6 839.9 57.9
--------------- --------------------- --------------------------
Total $ 1,430.9 $ 12,612.2 $ 25,196.7
=============== ===================== ==========================
December 31, 1998:
U.S. Asset Management and Accumulation $ 248.7 $ 5,472.4 $ 22,295.0
Life & Health Insurance 846.3 5,749.7 1,616.0
Mortgage Banking - - -
Corporate and Other 9.7 751.8 0.2
--------------- --------------------- --------------------------
Total $ 1,104.7 $ 11,973.9 $ 23,911.2
=============== ===================== ==========================
Principal Life Insurance Company
Schedule III -- Supplementary Insurance Information (Continued)
As of December 31, 2000, 1999 and 1998 and for each of the years then ended
Amortization
Benefits, of Deferred
Premiums Net Claims and Policy Other
and Other Investment Settlement Acquisition Operating
Segment Considerations Income (1) Expenses Costs Expenses (1)
- --------------------------------------------------------------------------------------------------------------------------------
(In Millions)
December 31, 2000:
U.S. Asset Management and Accumulation $ 525.5 $ 2,302.8 $ 2,310.6 $ 123.6 $ 529.1
Life & Health Insurance 3,250.5 642.1 2,659.4 113.0 798.6
Mortgage Banking - (16.1) - - 282.7
Corporate and Other 153.3 186.7 177.1 2.0 211.9
---------------- -------------- ------------------ ----------- -----------------
Total $ 3,929.3 $ 3,115.5 $ 5,147.1 $ 238.6 $ 1,822.3
================ ============== ================== =========== =================
December 31, 1999:
U.S. Asset Management and Accumulation $ 566.7 $ 2,289.0 $ 2,335.4 $ 60.2 $ 500.0
Life & Health Insurance 3,190.6 614.7 2,714.9 111.8 760.3
Mortgage Banking - 3.3 - - 310.8
Corporate and Other 180.3 138.8 210.6 1.7 122.5
---------------- -------------- ------------------ ----------- -----------------
Total $ 3,937.6 $ 3,045.8 $ 5,260.9 $ 173.7 $ 1,693.6
================ ============== ================== =========== =================
December 31, 1998:
U.S. Asset Management and Accumulation $ 281.7 $ 2,200.6 $ 2,047.1 $ 65.7 $ 513.4
Life & Health Insurance 3,126.6 619.8 2,605.3 153.2 747.9
Mortgage Banking - 12.5 - - 250.2
Corporate and Other 410.1 100.9 436.6 0.1 339.7
---------------- -------------- ------------------ ----------- -----------------
Total $ 3,818.4 $ 2,933.8 $ 5,089.0 $ 219.0 $ 1,851.2
================ ============== ================== =========== =================
- --------------------------
(1) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying report of independent auditors.
Principal Life Insurance Company
Schedule IV -- Reinsurance
As of December 31, 2000, 1999 and 1998 and for each of the years then ended
Percentage
Ceded to Assumed of Amount
Gross Other from Other Assumed to
Amount Companies Companies Net Amount Net
------------------- ------------------- ------------------- -------------------------------
($ In Millions)
December 31, 2000:
Life insurance inforce $ 165,912.8 $ 21,935.3 $ 1,173.9 $ 145,151.4 0.8%
=================== =================== =================== ====================
Premiums:
Life insurance $ 1,750.4 $ 48.5 $ 24.6 $ 1,726.5 1.4%
Accident and health insurance 2,324.4 121.6 - 2,202.8 - %
------------------- ------------------- ------------------- --------------------
Total $ 4,074.8 $ 170.1 $ 24.6 $ 3,929.3 0.6%
=================== =================== =================== ====================
December 31, 1999:
Life insurance inforce $ 167,173.0 $ 17,529.2 $ 243.8 $ 149,887.6 0.2%
=================== =================== =================== ====================
Premiums:
Life insurance $ 1,829.9 $ 38.5 $ 3.8 $ 1,795.2 0.2%
Accident and health insurance 2,160.1 18.0 0.3 2,142.4 - %
------------------- ------------------- ------------------- --------------------
Total $ 3,990.0 $ 56.5 $ 4.1 $ 3,937.6 0.1%
=================== =================== =================== ====================
December 31, 1998:
Life insurance inforce $ 161,144.2 $ 9,663.4 $ 92.8 $ 151,573.6 0.1%
=================== =================== =================== ====================
Premiums:
Life insurance $ 1,545.3 $ 37.3 $ 58.8 $ 1,566.8 3.8%
Accident and health insurance 2,254.6 6.4 3.4 2,251.6 0.2%
------------------- ------------------- ------------------- --------------------
Total $ 3,799.9 $ 43.7 $ 62.2 $ 3,818.4 1.6%
=================== =================== =================== ====================
See accompanying report of independent auditors.