16. Segment Information

We provide financial products and services through the following segments: Retirement and Investor Services, Principal Global Investors, Principal International and U.S. Insurance Solutions. In addition, we have 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 Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals.

The Principal Global Investors segment provides asset management services to our asset accumulation business, our insurance operations, the Corporate segment and third party clients.

The Principal International segment has operations in Brazil, Chile, China, Hong Kong Special Administrative Region, India, Mexico and Southeast Asia. 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 U.S. Insurance Solutions segment provides individual life insurance and specialty benefits insurance, which consists of group dental and vision insurance, individual and group disability insurance, group life insurance and non-medical fee-for-service claims administration, 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. Results of our exited group medical insurance business are reported in this segment.

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 DAC and related actuarial balances, recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services, amortization of hedge accounting book value adjustments for certain discontinued hedges, 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 and realized capital gains (losses) associated with our exited group medical insurance business. Segment operating revenues exclude net realized capital gains (losses) (except periodic settlements and accruals on derivatives not designated as hedging instruments), including their impact on recognition of front-end fee revenues, certain market value adjustments to fee revenues and amortization of hedge accounting book value adjustments for certain discontinued hedges, and revenue from our exited group medical insurance business. Segment operating revenues include operating revenues from real estate properties that qualify for discontinued operations. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of segment operating earnings enhances the understanding of our results of operations by highlighting earnings attributable to the normal, ongoing operations of the business.

The accounting policies of the segments are consistent with the accounting policies for the consolidated financial statements, with the exception of income tax allocation. The Corporate segment functions to absorb the risk inherent in interpreting and applying tax law. The segments are allocated tax adjustments consistent with the positions we took on tax returns. The Corporate segment results reflect any differences between the tax returns and the estimated resolution of any disputes.

The following tables summarize select financial information by segment and reconcile segment totals to those reported in the consolidated financial statements:

	December 31, 2014		December 31, 2013
	(in millions)
Assets:
Retirement and Investor Services	$	138,549.4	$	128,736.7
Principal Global Investors		1,175.1		1,312.1
Principal International		53,531.8		54,243.6
U.S. Insurance Solutions		21,554.5		20,033.6
Corporate		4,276.2		3,865.4

Total consolidated assets	$	219,087.0	$	208,191.4

	For the year ended December 31,
	2014			2013			2012
	(in millions)
Operating revenues by segment:
Retirement and Investor Services	$	5,523.3		$	4,847.6		$	4,834.9
Principal Global Investors		725.9			719.2			591.2
Principal International		1,275.4			1,150.0			942.7
U.S. Insurance Solutions		3,262.6			3,106.4			2,994.7
Corporate		(232.4	)		(215.8	)		(188.1	)

Total segment operating revenues		10,554.8			9,607.4			9,175.4
Net realized capital gains (losses), net of related revenue adjustments		(77.4	)		(320.0	)		14.7
Exited group medical insurance business		0.2			2.1			25.0

Total revenues per consolidated statements of operations	$	10,477.6		$	9,289.5		$	9,215.1


Operating earnings (loss) by segment, net of related income taxes:
Retirement and Investor Services	$	828.1		$	694.4		$	575.1
Principal Global Investors		116.0			102.6			81.2
Principal International		268.0			215.2			154.1
U.S. Insurance Solutions		231.3			196.6			138.2
Corporate		(125.5	)		(148.9	)		(139.8	)

Total segment operating earnings, net of related income taxes		1,317.9			1,059.9			808.8
Net realized capital gains (losses), as adjusted (1)		(100.5	)		(179.1	)		39.0
Other after-tax adjustments (2)		(106.3	)		(1.1	)		(74.2	)

Net income available to common stockholders per consolidated statements of operations	$	1,111.1		$	879.7		$	773.6

(1)	Net realized capital gains (losses), as adjusted, is derived as follows:

		For the year ended December 31,
		2014			2013			2012
		(in millions)
Net realized capital gains (losses):
Net realized capital gains (losses)		$	14.7		$	(225.2	)	$	114.1
Certain derivative and hedging-related adjustments			(92.8	)		(93.9	)		(98.9	)
Certain market value adjustments to fee revenues			—			—			(0.3	)
Recognition of front-end fee (revenue) expense			0.7			(0.9	)		(0.2	)

Net realized capital gains (losses), net of related revenue adjustments			(77.4	)		(320.0	)		14.7
Amortization of deferred acquisition costs and other actuarial balances			(49.3	)		47.1			36.6
Capital gains distributed			(21.2	)		(25.8	)		(12.2	)
Certain market value adjustments of embedded derivatives			4.8			18.4			(0.6	)
Net realized capital losses associated with exited group medical insurance business			—			—			0.2
Noncontrolling interest capital gains			(1.0	)		(0.2	)		(8.3	)
Income tax effect			43.6			101.4			8.6

Net realized capital gains (losses), as adjusted		$	(100.5	)	$	(179.1	)	$	39.0


(2)	For the year ended December 31, 2014, other after-tax adjustments included the negative effect of (a) an increase in net deferred tax liabilities resulting from third quarter 2014 enactment of tax legislation in Chile ($58.1 million) (b) the impact of a court ruling on some uncertain tax positions ($47.5 million) and (c) the effect of losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP ($0.7 million). For the year ended December 31, 2013, other after-tax adjustments included the negative effect of losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP. For the year ended December 31, 2012, other after-tax adjustments included the negative effect of (a) a contribution made to The Principal Financial Group Foundation, Inc. ($39.8 million), (b) one-time costs incurred to extinguish long-term debt that was scheduled to mature in 2014 ($24.8 million) and (c) losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP ($9.6 million).

The following is a summary of income tax expense (benefit) allocated to our segments for purposes of determining operating earnings. Segment income taxes are reconciled to income taxes reported on our consolidated statements of operations.

	For the year ended December 31,
	2014			2013			2012
	(in millions)
Income tax expense (benefit) by segment:
Retirement and Investor Services	$	200.5		$	195.6		$	150.0
Principal Global Investors		63.8			55.5			43.5
Principal International		30.3			28.0			0.6
U.S. Insurance Solutions		112.8			94.0			61.3
Corporate		(89.6	)		(83.2	)		(69.6	)

Total segment income taxes from operating earnings		317.8			289.9			185.8
Tax benefit related to net realized capital losses, as adjusted		(43.6	)		(101.4	)		(8.6	)
Tax expense (benefit) related to other after-tax adjustments		44.3			(0.6	)		(42.6	)

Total income taxes expense per consolidated statements of operations	$	318.5		$	187.9		$	134.6

The following is a summary of depreciation and amortization expense allocated to our segments for purposes of determining operating earnings. Segment depreciation and amortization is reconciled to depreciation and amortization included in operating expenses in our consolidated statements of operations.

	For the year ended December 31,
	2014		2013		2012
	(in millions)
Depreciation and amortization expense by segment:
Retirement and Investor Services	$	31.1	$	26.7	$	26.3
Principal Global Investors		14.8		11.8		13.3
Principal International		51.6		47.8		18.9
U.S. Insurance Solutions		21.2		17.2		17.0
Corporate		4.0		4.6		5.4

Total segment depreciation and amortization expense included in operating earnings		122.7		108.1		80.9

Depreciation and amortization expense related to other after-tax adjustments		—		1.4		6.1

Total depreciation and amortization expense included in our consolidated statements of operations	$	122.7	$	109.5	$	87.0

The following table summarizes operating revenues for our products and services:

	For the year ended December 31,
	2014			2013			2012
	(in millions)
Retirement and Investor Services:
Full service accumulation	$	1,563.0		$	1,470.7		$	1,357.0
Principal Funds		861.9			765.8			619.6
Individual annuities		1,488.9			1,366.5			1,162.4
Bank and trust services		84.2			95.2			101.6
Eliminations		(155.2	)		(146.8	)		(120.3	)

Total Accumulation		3,842.8			3,551.4			3,120.3
Investment only		308.1			341.0			431.6
Full service payout		1,372.4			955.2			1,283.0

Total Guaranteed		1,680.5			1,296.2			1,714.6

Total Retirement and Investor Services		5,523.3			4,847.6			4,834.9
Principal Global Investors (1)		725.9			719.2			591.2
Principal International		1,275.4			1,150.0			942.7
U.S. Insurance Solutions:
Individual life insurance		1,535.7			1,483.0			1,423.3
Specialty benefits insurance		1,727.1			1,623.6			1,571.4
Eliminations		(0.2	)		(0.2	)		—

Total U.S. Insurance Solutions		3,262.6			3,106.4			2,994.7
Corporate		(232.4	)		(215.8	)		(188.1	)

Total operating revenues	$	10,554.8		$	9,607.4		$	9,175.4


Total operating revenues	$	10,554.8		$	9,607.4		$	9,175.4
Net realized capital gains (losses), net of related revenue adjustments		(77.4	)		(320.0	)		14.7
Exited group medical insurance business		0.2			2.1			25.0

Total revenues per consolidated statements of operations	$	10,477.6		$	9,289.5		$	9,215.1

(1)	Reflects inter-segment revenues of $292.5 million, $243.7 million and $217.6 million for the years ended December 31, 2014, 2013 and 2012, respectively.