16. Segment Information

We provide financial products and services through the following segments: Retirement and Income Solutions, 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.

Prior to fourth quarter 2015, Principal Funds, which included our mutual fund business and Princor, our retail broker-dealer and registered investment advisor, as well as PFA were previously reported in our Retirement and Investor Services segment, which has been renamed to Retirement and Income Solutions. Our mutual fund business and PFA are now reported as part of our Principal Global Investors segment, while Princor is now reported as part of our Corporate segment. The new segment presentation has been applied retrospectively to our segment financial information but did not impact our consolidated financial statements.

The Retirement and Income Solutions 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. This segment also includes our mutual fund business.

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 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, and individual 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 adjustments not allocated to the segments based on the nature of such items. Results of Princor, our retail broker-dealer and registered investment advisor, and our exited group medical insurance business are reported in this segment.

Concurrent with the changes in our organizational structure, we changed our measure of segment profit or loss to pre-tax operating earnings. Management uses segment pre-tax operating earnings in evaluating performance and is consistent with the financial results provided to and discussed with securities analysts. We determine segment pre-tax operating earnings by adjusting U.S. GAAP income before income taxes for pre-tax net realized capital gains (losses), as adjusted, pre-tax other adjustments that management believes are not indicative of overall operating trends and certain adjustments related to equity method investments. Pre-tax net realized capital gains (losses), as adjusted, are net of 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, certain adjustments related to seed money and certain market value adjustments to fee revenues. Pre-tax 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, certain adjustments related to seed money and amortization of hedge accounting book value adjustments for certain discontinued hedges; certain adjustments related to equity method investments and revenue from our exited group medical insurance business. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of segment pre-tax operating earnings enhances the understanding of our results of operations by highlighting pre-tax earnings attributable to the normal, ongoing operations of the business. The change to our new measure of segment profit or loss has been applied retrospectively.

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. For purposes of determining operating earnings, 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, including operating revenues for our products and services, and reconcile segment totals to those reported in the consolidated financial statements:

	December 31, 2015		December 31, 2014
	(in millions)
Assets:
Retirement and Income Solutions	$	139,678.5	$	137,860.7
Principal Global Investors		1,880.4		1,875.2
Principal International		50,588.6		53,531.8
U.S. Insurance Solutions		22,156.9		21,554.5
Corporate		4,381.5		4,264.8

Total consolidated assets	$	218,685.9	$	219,087.0

	For the year ended December 31,
	2015			2014			2013
	(in millions)
Operating revenues by segment:
Retirement and Income Solutions:
Retirement and Income Solutions — Fee	$	1,774.0		$	1,778.9		$	1,645.8
Retirement and Income Solutions — Spread		4,392.9			3,020.8			2,566.7

Total Retirement and Income Solutions		6,166.9			4,799.7			4,212.5
Principal Global Investors (1)		1,343.5			1,257.4			1,189.7
Principal International		1,220.6			1,329.8			1,201.2
U.S. Insurance Solutions:
Specialty benefits insurance		1,868.1			1,727.1			1,623.6
Individual life insurance		1,572.7			1,535.7			1,483.0
Eliminations		(0.2	)		(0.2	)		(0.2	)

Total U.S. Insurance Solutions		3,440.6			3,262.6			3,106.4
Corporate		(50.5	)		(40.3	)		(51.2	)

Total segment operating revenues		12,121.1			10,609.2			9,658.6
Net realized capital losses, net of related revenue adjustments		(162.7	)		(77.4	)		(320.0	)
Certain adjustments related to equity method investments		(55.5	)		(54.4	)		(51.2	)
Other income on a tax indemnification		60.2			—			—
Exited group medical insurance business		1.3			0.2			2.1

Total revenues per consolidated statements of operations	$	11,964.4		$	10,477.6		$	9,289.5


Pre-tax operating earnings (losses) by segment:
Retirement and Income Solutions	$	740.1		$	851.2		$	752.5
Principal Global Investors		388.5			350.1			289.6
Principal International		271.3			352.7			294.4
U.S. Insurance Solutions		429.5			344.1			290.6
Corporate		(192.3	)		(175.0	)		(193.1	)

Total segment pre-tax operating earnings		1,637.1			1,723.1			1,434.0
Pre-tax net realized capital losses, as adjusted (2)		(170.7	)		(143.1	)		(280.3	)
Pre-tax other adjustments (3)		11.7			(63.1	)		(1.7	)
Certain adjustments related to equity method investments and noncontrolling interest		(47.3	)		(22.0	)		(28.0	)

Income before income taxes per consolidated statements of operations	$	1,430.8		$	1,494.9		$	1,124.0


(1)	Reflects inter-segment revenues of $220.6 million, $206.3 million and $169.5 million for the years ended December 31, 2015, 2014 and 2013, respectively.
(2)	Pre-tax net realized capital gains (losses), as adjusted, is derived as follows:

	For the year ended December 31,
	2015			2014			2013
	(in millions)
Net realized capital gains (losses):
Net realized capital gains (losses)	$	(51.1	)	$	14.7		$	(225.2	)
Certain derivative and hedging-related adjustments		(111.7	)		(92.8	)		(93.9	)
Certain market value adjustments to fee revenues		(1.1	)		—			—
Certain adjustments related to seed money		1.3			—			—
Recognition of front-end fee (revenue) expense		(0.1	)		0.7			(0.9	)

Net realized capital losses, net of related revenue adjustments		(162.7	)		(77.4	)		(320.0	)
Amortization of deferred acquisition costs and other actuarial balances		(14.0	)		(49.3	)		47.1
Capital (gains) losses distributed		6.2			(21.2	)		(25.8	)
Certain market value adjustments of embedded derivatives		(0.2	)		4.8			18.4

Pre-tax net realized capital losses, as adjusted (a)	$	(170.7	)	$	(143.1	)	$	(280.3	)


(a)	As adjusted before noncontrolling interest capital gains (losses) and net realized capital gains (losses) associated with exited group medical insurance business.

(3)	For the year ended December 31, 2015, pre-tax other adjustments included the positive effect of the impact of a court ruling on some uncertain tax positions ($15.1 million) and the negative effect of losses associated with our exited group medical insurance business that did not qualify for discontinued operations accounting treatment under U.S. GAAP ($3.4 million).

For the year ended December 31, 2014, pre-tax other adjustments included the negative effect of the impact of (a) a court ruling on some uncertain tax positions ($62.2 million) and (b) the effect of losses associated with our exited group medical insurance business that did not qualify for discontinued operations accounting treatment under U.S. GAAP ($0.9 million).

For the year ended December 31, 2013, pre-tax other adjustments included the negative effect of losses associated with our exited group medical insurance business that did not qualify for discontinued operations accounting treatment under U.S. GAAP.

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,
	2015			2014			2013
	(in millions)
Income tax expense (benefit) by segment:
Retirement and Income Solutions	$	76.1		$	128.5		$	139.2
Principal Global Investors		148.4			132.9			109.5
Principal International		51.5			84.7			79.2
U.S. Insurance Solutions		143.1			112.8			94.0
Corporate		(77.2	)		(86.7	)		(80.8	)

Total segment income taxes from operating earnings		341.9			372.2			341.1
Tax benefit related to net realized capital losses, as adjusted		(45.6	)		(43.6	)		(101.4	)
Tax expense (benefit) related to other after-tax adjustments		(63.2	)		44.3			(0.6	)
Certain adjustments related to equity method investments and noncontrolling interest		(55.5	)		(54.4	)		(51.2	)

Total income taxes per consolidated statements of operations	$	177.6		$	318.5		$	187.9

The following is a summary of depreciation and amortization expense allocated to our segments for purposes of determining pre-tax 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,
	2015		2014		2013
	(in millions)
Depreciation and amortization expense by segment:
Retirement and Income Solutions	$	28.3	$	27.5	$	23.1
Principal Global Investors		16.5		17.1		14.3
Principal International		69.3		51.6		47.8
U.S. Insurance Solutions		23.1		21.2		17.2
Corporate		6.5		5.3		5.7

Total segment depreciation and amortization expense included in pre-tax operating earnings		143.7		122.7		108.1
Depreciation and amortization expense related to pre-tax other adjustments		—		—		1.4

Total depreciation and amortization expense included in our consolidated statements of operations	$	143.7	$	122.7	$	109.5