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, 2001 and 2000, and for each
of the three years in the period ended December 31, 2001, and have issued our
report thereon dated February 1, 2002 (included elsewhere in this Form S-6). Our
audits also included the financial statement schedules listed as Item 3 of the
Exhibits of this Form S-6. 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 1, 2002
Schedule I - Summary of Investments - Other Than Investments in Related Parties
As of December 31, 2001
Amount as shown
in the Statement
of Financial
Type of Investment Cost Value Position
- --------------------------------------------------------------------- ------------ ------------------ --------------
(in millions)
Fixed maturities, available-for-sale:
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies........................ $ 15.1 $ 15.1 $ 15.1
States, municipalities and political subdivisions.............. 302.1 317.6 317.6
Foreign governments............................................ 555.5 603.5 603.5
Public utilities............................................... 3,242.5 3,280.5 3,280.5
Convertibles and bonds with warrants attached.................. - - -
Redeemable preferred........................................... 373.9 374.5 374.5
All other corporate bonds...................................... 18,045.8 18,552.2 18,552.2
Mortgage-backed and other asset-backed securities................. 5,642.5 5,864.0 5,864.0
------------- ------------- ----------------
Total fixed maturities, available-for-sale.................. 28,177.4 29,007.4 29,007.4
Fixed maturities, trading......................................... 17.0 17.8 17.8
Equity securities, available-for-sale Common stocks:
Banks, trust and insurance companies........................... 9.0 12.0 12.0
Industrial, miscellaneous and all other........................ 595.9 531.6 531.6
Non-redeemable preferred stock.................................... 255.7 255.1 255.1
------------- ------------- ----------------
Total equity securities, available-for-sale................. 860.6 798.7 798.7
Mortgage loans.................................................... 10,976.9 xxxx 10,884.6
Real estate, net:
Real estate acquired in satisfaction of debt(1)................ 49.8 xxxx 45.2
Other real estate(1)........................................... 920.5 xxxx 905.3
Policy loans...................................................... 831.9 xxxx 831.9
Other investments(2).............................................. 615.0 xxxx 615.5
------------- ----------------
Total investments........................................... $ 42,449.1 xxxx $ 43,106.4
============= ------------- ================
<FN>
(1) The amounts shown in the Statement of Financial Position for real estate
differ from cost due to properties which were determined to be impaired. The
cost bases of these properties are reduced to fair value. Real estate expected
to be disposed is carried at the lower of cost or fair value, less cost to sell,
with valuation allowances established.
(2) The amount shown in the Statement of Financial Position for other
investments differs from cost due to accumulated earnings from minority
interests in unconsolidated entities and properties owned jointly with venture
partners and operated by the partners.
</FN>
See accompanying report of independent auditors.
Schedule III - Supplementary Insurance
Information As of December 31, 2001, 2000 and 1999
and for each of the years then ended
Future
Deferred Policy Contractholder
Policy Benefits and Other
Acquisition and Claims Policyholder
Segment Costs Funds
-------------- ------------- ------------------
(in millions)
2001:
U.S. Asset Management and Accumulation........................ $ 411.6 $ 6,463.2 $ 23,421.7
Life and Health Insurance..................................... 910.7 6,544.4 1,880.2
Mortgage Banking.............................................. - - -
Corporate and Other........................................... - 4.1 (60.7)
------------ ------------ ------------
Total...................................................... $ 1,322.3 $ 13,011.7 $ 25,241.2
============== ============ ===========
2000:
U.S. Asset Management and Accumulation........................ $ 368.9 $ 6,065.5 $ 23,046.1
Life and Health Insurance..................................... 926.6 6,304.5 1,799.0
Mortgage Banking.............................................. - - -
Corporate and Other........................................... 37.8 209.6 52.5
------------ ------------ ------------
Total...................................................... $ 1,333.3 $ 12,579.6 $ 24,897.6
============ ============ ===========
1999:
U.S. Asset Management and Accumulation........................ $ 426.2 $ 5,675.1 $ 23,515.7
Life and Health Insurance..................................... 983.1 6,097.1 1,623.2
Mortgage Banking.............................................. - - -
Corporate and Other........................................... 21.6 840.0 57.8
------------ ------------ ------------
Total...................................................... $ 1,430.9 $ 12,612.2 $ 25,196.7
============ ============ ===========
See accompanying report of independent auditors.
Schedule III - Supplementary Insurance
Information, (continued) As of December 31, 2001,
2000 and 1999 and for each of the years then ended
Amortization
Benefits, of Deferred
Premiums and Net Claims and Policy Other
Other Investment Settlement Acquisition Operating
Segment Considerations Income (1) Expenses Costs Expenses(1)
- ------- -------------- ---------- -------- ------------- -----------
(in millions)
2001:
U.S. Asset Management and Accumulation........ $ 766.3 $ 2,399.9 $ 2,583.1 $ 64.8 $ 620.2
Life and Health Insurance..................... 3,011.1 678.6 2,491.0 92.0 740.6
Mortgage Banking.............................. - (11.9) - - 552.3
Corporate and Other........................... 18.3 144.1 18.3 0.8 69.0
--------------------------------------------------------------------------
Total .................................... $ 3,795.7 $ 3,210.7 $ 5,092.4 $ 157.6 $ 1,982.1
==========================================================================
2000:
U.S. Asset Management and Accumulation........ $ 525.4 $ 2,302.8 $ 2,310.6 $ 123.6 $ 529.2
Life and Health Insurance..................... 3,250.5 642.1 2,659.4 113.0 798.6
Mortgage Banking.............................. - (16.1) - - 282.7
Corporate and Other........................... 153.4 186.7 177.1 2.0 211.8
--------------------------------------------------------------------------
Total .................................... $ 3,929.3 $ 3,115.5 $ 5,147.1 $ 238.6 $ 1,822.3
==========================================================================
1999:
U.S. Asset Management and Accumulation........ $ 566.7 $ 2,289.0 $ 2,335.3 $ 60.3 $ 499.9
Life and Health Insurance..................... 3,190.6 614.7 2,714.9 111.7 760.4
Mortgage Banking.............................. - 3.3 - - 310.8
Corporate and Other........................... 180.3 138.8 210.7 1.8 122.4
-------------------------------------------------------------------------
Total .................................... $ 3,937.6 $ 3,045.8 $ 5,260.9 $ 173.8 $ 1,693.5
=========================================================================
<FN>
(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.
</FN>
See accompanying report of independent auditors.
Schedule IV - Reinsurance
As of December 31, 2001, 2000 and 1999 and for each of the years then ended
Percentage
Ceded to Assumed of Amount
Gross Other from Other Net Assumed to
Amount Companies Companies Amount Net
------ --------- ----------- ----------- ------------
($ in millions)
2001:
Life insurance in force....................... $ 154,964.9 $ 25,813.0 $ 1,391.9 $ 130,543.8 1.1%
============= ============= =========== ============
Premiums:
Life insurance............................. $ 1,756.5 $ 48.9 $ 56.0 $ 1,763.6 3.2%
Accident and health insurance.............. 2,243.3 211.2 - 2,032.1 -%
------------- ------------- ----------- ------------
Total................................... $ 3,999.8 $ 260.1 $ 56.0 $ 3,795.7 1.5%
============= ============= =========== ============
2000:
Life insurance in force....................... $ 165,912.8 $ 23,094.5 $ 1,173.9 $ 143,992.2 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%
============= ============= =========== ============
1999:
Life insurance in force....................... $ 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%
============= ============= =========== ============
See accompanying report of independent auditors.