14. 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 Life’s 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 September 30, 2013 and December 31, 2012, and for the nine months ended September 30, 2013 and 2012.

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in PFS, (ii) Principal Life’s interest in all direct subsidiaries of Principal Life and (iii) PFS’s 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 parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, Principal Life and PFS and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” 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

September 30, 2013

Principal

Principal Life

Principal Financial

Principal

Financial

Insurance

Services, Inc. and

Financial

Group, Inc.

Company

Other Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Assets

Fixed maturities, available-for-sale

—

42,736.2

6,567.9

(389.2

)

48,914.9

Fixed maturities, trading

—

254.9

318.0

—

572.9

Equity securities, available-for-sale

—

103.3

10.7

—

114.0

Equity securities, trading

—

0.3

665.9

—

666.2

Mortgage loans

—

10,857.9

1,334.5

(324.3

)

11,868.1

Real estate

—

8.0

1,270.6

—

1,278.6

Policy loans

—

829.1

30.5

—

859.6

Investment in unconsolidated entities

11,642.3

3,392.1

4,396.6

(18,530.6

)

900.4

Other investments

9.3

2,024.1

1,263.5

(1,203.3

)

2,093.6

Cash and cash equivalents

50.8

651.6

934.8

69.9

1,707.1

Accrued investment income

—

508.8

63.9

(1.5

)

571.2

Premiums due and other receivables

—

1,022.2

1,648.1

(1,509.6

)

1,160.7

Deferred acquisition costs

—

2,790.2

217.4

—

3,007.6

Property and equipment

—

401.5

77.6

—

479.1

Goodwill

—

54.3

1,073.2

—

1,127.5

Other intangibles

—

27.1

1,470.3

—

1,497.4

Separate account assets

—

78,819.5

44,981.0

—

123,800.5

Other assets

66.7

893.1

1,859.7

(1,751.5

)

1,068.0

Total assets

11,769.1

145,374.2

68,184.2

(23,640.1

)

201,687.4

Liabilities

Contractholder funds

—

35,435.4

1,254.4

(287.1

)

36,402.7

Future policy benefits and claims

—

17,888.0

4,709.9

(273.7

)

22,324.2

Other policyholder funds

—

703.3

50.8

(0.5

)

753.6

Short-term debt

—

175.5

—

175.5

Long-term debt

2,448.7

99.4

369.6

(324.4

)

2,593.3

Income taxes currently payable

—

80.8

(72.9

)

7.9

Deferred income taxes

—

(66.2

)

869.3

(168.5

)

634.6

Separate account liabilities

—

78,819.5

44,981.0

—

123,800.5

Other liabilities

42.0

5,138.6

3,716.6

(3,510.0

)

5,387.2

Total liabilities

2,490.7

138,018.0

56,207.9

(4,637.1

)

192,079.5

Redeemable noncontrolling interest

—

234.5

—

234.5

Stockholders’ equity

Series A preferred stock

—

Series B preferred stock

0.1

—

0.1

Common stock

4.6

2.5

—

(2.5

)

4.6

Additional paid-in capital

9,749.3

5,505.9

9,160.8

(14,666.7

)

9,749.3

Retained earnings

5,249.9

1,643.8

2,467.0

(4,110.8

)

5,249.9

Accumulated other comprehensive income (loss)

(17.7

)

204.0

14.5

(218.5

)

(17.7

)

Treasury stock, at cost

(5,707.8

)

—

(5,707.8

)

Total stockholders’ equity attributable to PFG

9,278.4

7,356.2

11,642.3

(18,998.5

)

9,278.4

Noncontrolling interest

—

99.5

(4.5

)

95.0

Total stockholders’ equity

9,278.4

7,356.2

11,741.8

(19,003.0

)

9,373.4

Total liabilities and stockholders’ equity

11,769.1

145,374.2

68,184.2

(23,640.1

)

201,687.4

Condensed Consolidating Statements of Financial Position

December 31, 2012

	Principal			Principal Life		Principal Financial					Principal
	Financial			Insurance		Services, Inc. and					Financial
	Group, Inc.			Company		Other Subsidiaries					Group, Inc.
	Parent Only			Only		Combined		Eliminations			Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	—		$	44,614.6	$	6,681.7	$	(357.0	)	$	50,939.3
Fixed maturities, trading	10.5			284.4		331.8		—			626.7
Equity securities, available-for-sale	—			131.3		5.2		—			136.5
Equity securities, trading	—			0.3		252.5		—			252.8
Mortgage loans	—			10,054.2		1,775.5		(310.0		)	11,519.7
Real estate	—			8.4		1,171.9		—			1,180.3
Policy loans	—			834.0		30.9		—			864.9
Investment in unconsolidated entities	11,853.3			3,309.2		4,808.3		(19,101.8		)	869.0
Other investments	11.1			2,834.0		1,208.4		(1,631.4		)	2,422.1
Cash and cash equivalents	207.1			1,698.4		2,286.9		(15.2		)	4,177.2
Accrued investment income	—			521.6		64.5		(1.7		)	584.4
Premiums due and other receivables	0.1			916.7		1,327.1		(1,159.5		)	1,084.4
Deferred acquisition costs	—			2,394.8		195.2		—			2,590.0
Property and equipment	—			402.2		62.0		—			464.2
Goodwill	—			54.3		489.1		—			543.4
Other intangibles	—			27.9		886.8		—			914.7
Separate account assets	—			69,217.8		12,436.0		—			81,653.8
Other assets	78.0			947.8		1,567.7		(1,586.7		)	1,006.8
Total assets	$	12,160.1		$	138,251.9	$	35,581.5	$	(24,163.3	)	$	161,830.2
Liabilities
Contractholder funds	$	—		$	37,053.3	$	1,011.9	$	(278.7	)	$	37,786.5
Future policy benefits and claims	—			17,944.9		4,679.6		(188.3		)	22,436.2
Other policyholder funds	—			676.5		40.3		(0.4		)	716.4
Short-term debt	—			—		40.8		—			40.8
Long-term debt	2,448.6			99.4		433.3		(310.0		)	2,671.3
Income taxes currently payable	—			—		84.7		(69.4		)	15.3
Deferred income taxes	—			324.5		378.4		(102.9		)	600.0
Separate account liabilities	—			69,217.8		12,436.0		—			81,653.8
Other liabilities	28.1			5,375.1		4,538.4		(3,795.5		)	6,146.1
Total liabilities	2,476.7			130,691.5		23,643.4		(4,745.2		)	152,066.4

Redeemable noncontrolling interest	—			—		60.4		—			60.4

Stockholders’ equity
Series A preferred stock	—			—		—		—			—
Series B preferred stock	0.1			—		—		—			0.1
Common stock	4.5			2.5		—		(2.5		)	4.5
Additional paid-in capital	9,730.9			5,747.6		9,393.8		(15,141.4		)	9,730.9
Retained earnings	4,862.0			1,167.7		1,783.4		(2,951.1		)	4,862.0
Accumulated other comprehensive income	640.3			642.6		676.1		(1,318.7		)	640.3
Treasury stock, at cost	(5,554.4		)	—		—		—			(5,554.4		)
Total stockholders’ equity attributable to PFG	9,683.4			7,560.4		11,853.3		(19,413.7		)	9,683.4
Noncontrolling interest	—			—		24.4		(4.4		)	20.0
Total stockholders’ equity	9,683.4			7,560.4		11,877.7		(19,418.1		)	9,703.4
Total liabilities and stockholders’ equity	$	12,160.1		$	138,251.9	$	35,581.5	$	(24,163.3	)	$	161,830.2

Condensed Consolidating Statements of Operations

For the nine months September 30, 2013

Principal

Principal Life

Principal Financial

Principal

Financial

Insurance

Services, Inc. and

Financial

Group, Inc.

Company

Other Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Revenues

Premiums and other considerations

—

1,853.6

281.3

—

2,134.9

Fees and other revenues

—

1,272.3

1,325.8

(257.7

)

2,340.4

Net investment income

0.4

1,775.7

526.5

20.9

2,323.5

Net realized capital gains (losses), excluding impairment losses on available-for-sale securities

6.3

(630.7

)

514.8

0.1

(109.5

)

Total other-than-temporary impairment losses on available-for-sale securities

—

(75.4

)

(5.8

)

—

(81.2

)

Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income

—

11.4

(2.6

)

—

8.8

Net impairment losses on available-for-sale securities

—

(64.0

)

(8.4

)

—

(72.4

)

Net realized capital gains (losses)

6.3

(694.7

)

506.4

0.1

(181.9

)

Total revenues

6.7

4,206.9

2,640.0

(236.7

)

6,616.9

Expenses

Benefits, claims and settlement expenses

—

2,828.8

466.7

(9.1

)

3,286.4

Dividends to policyholders

—

144.3

—

144.3

Operating expenses

105.2

1,378.6

1,113.2

(224.9

)

2,372.1

Total expenses

105.2

4,351.7

1,579.9

(234.0

)

5,802.8

Income (loss) before income taxes

(98.5

)

(144.8

)

1,060.1

(2.7

)

814.1

Income taxes (benefits)

(39.4

)

(136.0

)

304.0

(0.2

)

128.4

Equity in the net income (loss) of subsidiaries

730.1

530.2

(11.2

)

(1,249.1

)

—

Net income

671.0

521.4

744.9

(1,251.6

)

685.7

Net income attributable to noncontrolling interest

—

14.8

(0.1

)

14.7

Net income attributable to PFG

671.0

521.4

730.1

(1,251.5

)

671.0

Preferred stock dividends

24.7

—

24.7

Net income available to common stockholders

646.3

521.4

730.1

(1,251.5

)

646.3

Net income

671.0

521.4

744.9

(1,251.6

)

685.7

Other comprehensive loss

(683.9

)

(438.6

)

(225.6

)

679.8

(668.3

)

Comprehensive income (loss)

(12.9

)

82.8

519.3

(571.8

)

17.4

Condensed Consolidating Statements of Operations

For the nine months September 30, 2012

	Principal			Principal Life			Principal Financial						Principal
	Financial			Insurance			Services, Inc. and						Financial
	Group, Inc.			Company			Other Subsidiaries						Group, Inc.
	Parent Only			Only			Combined			Eliminations			Consolidated
	(in millions)
Revenues
Premiums and other considerations	$	—		$	2,265.7		$	253.6		$	—		$	2,519.3
Fees and other revenues	0.3			1,115.0			1,018.9			(225.1		)	1,909.1
Net investment income	2.7			1,869.8			521.9			15.2			2,409.6
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities	—			(296.9		)	496.8			(23.5		)	176.4
Total other-than-temporary impairment losses on available-for-sale securities	—			(111.5		)	(14.8		)	(0.1		)	(126.4		)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income	—			27.1			4.1			—			31.2
Net impairment losses on available-for-sale securities	—			(84.4		)	(10.7		)	(0.1		)	(95.2		)
Net realized capital gains (losses)	—			(381.3		)	486.1			(23.6		)	81.2
Total revenues	3.0			4,869.2			2,280.5			(233.5		)	6,919.2
Expenses
Benefits, claims and settlement expenses	—			3,542.3			436.7			(9.5		)	3,969.5
Dividends to policyholders	—			149.5			—			—			149.5
Operating expenses	90.8			1,286.3			920.2			(196.2		)	2,101.1
Total expenses	90.8			4,978.1			1,356.9			(205.7		)	6,220.1

Income (loss) before income taxes	(87.8		)	(108.9		)	923.6			(27.8		)	699.1
Income taxes (benefits)	(34.4		)	(126.4		)	261.7			(0.5		)	100.4
Equity in the net income (loss) of subsidiaries	636.8			438.6			(9.7		)	(1,065.7		)	—
Net income	583.4			456.1			652.2			(1,093.0		)	598.7
Net income attributable to noncontrolling interest	—			—			15.4			(0.1		)	15.3
Net income attributable to PFG	583.4			456.1			636.8			(1,092.9		)	583.4
Preferred stock dividends	24.7			—			—			—			24.7
Net income available to common stockholders	$	558.7		$	456.1		$	636.8		$	(1,092.9	)	$	558.7

Net income	$	583.4		$	456.1		$	652.2		$	(1,093.0	)	$	598.7
Other comprehensive income	564.6			546.2			104.7			(597.4		)	618.1
Comprehensive income	$	1,148.0		$	1,002.3		$	756.9		$	(1,690.4	)	$	1,216.8

Condensed Consolidating Statements of Cash Flows

For the nine months September 30, 2013

Principal

Principal Life

Principal Financial

Principal

Financial

Insurance

Services, Inc. and

Financial

Group, Inc.

Company

Other Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Operating activities

Net cash provided by (used in) operating activities

(12.8

)

1,412.5

(132.2

)

130.4

1,397.9

Investing activities

Available-for-sale securities:

Purchases

—

(6,094.0

)

(926.7

)

8.4

(7,012.3

)

Sales

—

1,281.4

370.1

(24.8

)

1,626.7

Maturities

—

5,186.5

596.7

—

5,783.2

Mortgage loans acquired or originated

—

(2,226.3

)

(175.6

)

381.9

(2,020.0

)

Mortgage loans sold or repaid

—

1,408.3

583.2

(420.7

)

1,570.8

Real estate acquired

—

(59.0

)

—

(59.0

)

Net purchases of property and equipment

—

(20.2

)

(2.5

)

—

(22.7

)

Purchases of interests in subsidiaries, net of cash acquired

—

(1,268.3

)

—

(1,268.3

)

Dividends and returns of capital received from unconsolidated entities

169.3

157.9

169.3

(496.5

)

—

Net change in other investments

(3.2

)

76.1

(128.4

)

24.3

(31.2

)

Net cash provided by (used in) investing activities

166.1

(230.3

)

(841.2

)

(527.4

)

(1,432.8

)

Financing activities

Issuance of common stock

80.2

—

80.2

Acquisition of treasury stock

(153.4

)

—

(153.4

)

Proceeds from financing element derivatives

—

46.7

—

46.7

Payments for financing element derivatives

—

(36.9

)

—

(36.9

)

Excess tax benefits from share-based payment arrangements

—

2.5

6.1

—

8.6

Purchase of subsidiary shares from noncontrolling interest

—

(51.7

)

—

(51.7

)

Sale of subsidiary shares to noncontrolling interest

—

32.1

—

32.1

Dividends to common stockholders

(211.7

)

—

(211.7

)

Dividends to preferred stockholders

(24.7

)

—

(24.7

)

Issuance of long-term debt

—

24.1

—

24.1

Principal repayments of long-term debt

—

(197.8

)

(14.4

)

(212.2

)

Net proceeds from short-term borrowings

—

131.6

—

131.6

Dividends and capital paid to parent

—

(169.3

)

(327.2

)

496.5

—

Investment contract deposits

—

4,985.4

284.8

—

5,270.2

Investment contract withdrawals

—

(7,051.1

)

(4.5

)

—

(7,055.6

)

Net decrease in banking operation deposits

—

(276.2

)

—

(276.2

)

Other

—

(6.3

)

—

(6.3

)

Net cash used in financing activities

(309.6

)

(2,229.0

)

(378.7

)

482.1

(2,435.2

)

Net decrease in cash and cash equivalents

(156.3

)

(1,046.8

)

(1,352.1

)

85.1

(2,470.1

)

Cash and cash equivalents at beginning of period

207.1

1,698.4

2,286.9

(15.2

)

4,177.2

Cash and cash equivalents at end of period

50.8

651.6

934.8

69.9

1,707.1

Condensed Consolidating Statements of Cash Flows

For the nine months September 30, 2012

	Principal			Principal Life			Principal Financial						Principal
	Financial			Insurance			Services, Inc. and						Financial
	Group, Inc.			Company			Other Subsidiaries						Group, Inc.
	Parent Only			Only			Combined			Eliminations			Consolidated
	(in millions)
Operating activities
Net cash provided by (used in) operating activities	$	49.2		$	2,369.3		$	(204.2	)	$	159.4		$	2,373.7
Investing activities
Available-for-sale securities:
Purchases	—			(5,753.7		)	(739.5		)	25.7			(6,467.5		)
Sales	—			862.7			98.8			(15.0		)	946.5
Maturities	—			4,058.9			643.8			—			4,702.7
Mortgage loans acquired or originated	—			(1,687.2		)	(177.4		)	52.8			(1,811.8		)
Mortgage loans sold or repaid	—			1,104.6			280.3			(218.2		)	1,166.7
Real estate acquired	—			—			(114.8		)	—			(114.8		)
Net purchases of property and equipment	—			(22.4		)	(13.2		)	—			(35.6		)
Purchases of interests in subsidiaries, net of cash acquired	—			—			(62.5		)	—			(62.5		)
Dividends and returns of capital received from unconsolidated entities	539.8			435.0			539.8			(1,514.6		)	—
Net change in other investments	(0.2		)	(14.8		)	(14.8		)	(13.1		)	(42.9		)
Net cash provided by (used in) investing activities	539.6			(1,016.9		)	440.5			(1,682.4		)	(1,719.2		)
Financing activities
Issuance of common stock	24.7			—			—			—			24.7
Acquisition of treasury stock	(272.7		)	—			—			—			(272.7		)
Proceeds from financing element derivatives	—			51.6			—			—			51.6
Payments for financing element derivatives	—			(38.3		)	—			—			(38.3		)
Excess tax benefits from share-based payment arrangements	—			4.7			5.1			—			9.8
Dividends to common stockholders	(169.6		)	—			—			—			(169.6		)
Dividends to preferred stockholders	(16.5		)	—			—			—			(16.5		)
Issuance of long-term debt	593.8			—			9.1			—			602.9
Principal repayments of long-term debt	—			—			(45.7		)	43.6			(2.1		)
Net repayments of short-term borrowings	—			—			(81.0		)	—			(81.0		)
Dividends and capital paid to parent	—			(539.8		)	(974.8		)	1,514.6			—
Investment contract deposits	—			4,481.7			317.0			—			4,798.7
Investment contract withdrawals	—			(6,123.8		)	(2.2		)	—			(6,126.0		)
Net increase in banking operation deposits	—			—			14.9			—			14.9
Other	—			(5.8		)	—			—			(5.8		)
Net cash provided by (used in) financing activities	159.7			(2,169.7		)	(757.6		)	1,558.2			(1,209.4		)
Net increase (decrease) in cash and cash equivalents	748.5			(817.3		)	(521.3		)	35.2			(554.9		)
Cash and cash equivalents at beginning of period	226.7			1,344.5			1,277.6			(14.9		)	2,833.9
Cash and cash equivalents at end of period	$	975.2		$	527.2		$	756.3		$	20.3		$	2,279.0

On May 24, 2011, our shelf registration statement was filed with the SEC and became effective. The shelf registration replaces the shelf registration that had been in effect since June 2008, as it was scheduled to expire in June 2011. Under our current shelf registration, we have the ability to issue unsecured senior debt securities or subordinated debt securities, junior subordinated debt, preferred stock, common stock, warrants, depository shares, stock purchase contracts and stock purchase units of PFG, trust preferred securities of three subsidiary trusts and guarantees by PFG of these trust preferred securities. Our wholly owned subsidiary, PFS, may guarantee, fully and unconditionally or otherwise, our obligations with respect to any non-convertible securities, other than common stock, described in the shelf registration statement.

The following tables set forth condensed consolidating financial information of (i) PFG, (ii) PFS, (iii) Principal Life 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 September 30, 2013 and December 31, 2012, and for the nine months ended September 30, 2013 and 2012.

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in PFS and (ii) PFS’s interest in Principal Life and all other subsidiaries, where applicable, even though all such subsidiaries meet the requirements to be consolidated under U.S. GAAP. Earnings of subsidiaries are, therefore, reflected in the parent’s investment and earnings. All intercompany balances and transactions, including elimination of the parent’s investment in subsidiaries, between PFG, PFS and Principal Life and all other subsidiaries have been eliminated, as shown in the column “Eliminations.” 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

September 30, 2013

Principal Life

Principal

Insurance Company

Principal

Financial

and Other

Financial

Group, Inc.

Services, Inc.

Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Assets

Fixed maturities, available-for-sale

—

48,914.9

—

48,914.9

Fixed maturities, trading

—

572.9

—

572.9

Equity securities, available-for-sale

—

114.0

—

114.0

Equity securities, trading

—

666.2

—

666.2

Mortgage loans

—

11,868.1

—

11,868.1

Real estate

—

1,278.6

—

1,278.6

Policy loans

—

859.6

—

859.6

Investment in unconsolidated entities

11,642.3

11,404.6

900.3

(23,046.8

)

900.4

Other investments

9.3

55.8

2,028.6

(0.1

)

2,093.6

Cash and cash equivalents

50.8

491.0

1,822.1

(656.8

)

1,707.1

Accrued investment income

—

571.2

—

571.2

Premiums due and other receivables

—

0.9

2,261.2

(1,101.4

)

1,160.7

Deferred acquisition costs

—

3,007.6

—

3,007.6

Property and equipment

—

479.1

—

479.1

Goodwill

—

1,127.5

—

1,127.5

Other intangibles

—

1,497.4

—

1,497.4

Separate account assets

—

123,800.5

—

123,800.5

Other assets

66.7

88.1

1,116.4

(203.2

)

1,068.0

Total assets

11,769.1

12,040.4

202,886.2

(25,008.3

)

201,687.4

Liabilities

Contractholder funds

—

36,402.7

—

36,402.7

Future policy benefits and claims

—

22,324.2

—

22,324.2

Other policyholder funds

—

753.6

—

753.6

Short-term debt

—

453.9

(278.4

)

175.5

Long-term debt

2,448.7

—

1,228.9

(1,084.3

)

2,593.3

Income taxes currently payable

—

10.9

55.2

(58.2

)

7.9

Deferred income taxes

—

776.0

(141.4

)

634.6

Separate account liabilities

—

123,800.5

—

123,800.5

Other liabilities

42.0

387.2

5,357.1

(399.1

)

5,387.2

Total liabilities

2,490.7

398.1

191,152.1

(1,961.4

)

192,079.5

Redeemable noncontrolling interest

—

234.5

—

234.5

Stockholders’ equity

Series A preferred stock

—

Series B preferred stock

0.1

—

0.1

Common stock

4.6

—

17.8

(17.8

)

4.6

Additional paid-in capital

9,749.3

9,160.8

9,068.4

(18,229.2

)

9,749.3

Retained earnings

5,249.9

2,467.0

2,327.3

(4,794.3

)

5,249.9

Accumulated other comprehensive income (loss)

(17.7

)

14.5

(6.9

)

(7.6

)

(17.7

)

Treasury stock, at cost

(5,707.8

)

—

(2.0

)

2.0

(5,707.8

)

Total stockholders’ equity attributable to PFG

9,278.4

11,642.3

11,404.6

(23,046.9

)

9,278.4

Noncontrolling interest

—

95.0

—

95.0

Total stockholders’ equity

9,278.4

11,642.3

11,499.6

(23,046.9

)

9,373.4

Total liabilities and stockholders’ equity

11,769.1

12,040.4

202,886.2

(25,008.3

)

201,687.4

Condensed Consolidating Statements of Financial Position

December 31, 2012

						Principal Life
	Principal			Principal		Insurance Company						Principal
	Financial			Financial		and Other						Financial
	Group, Inc.			Services, Inc.		Subsidiaries						Group, Inc.
	Parent Only			Only		Combined			Eliminations			Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	—		$	—	$	50,939.3		$	—		$	50,939.3
Fixed maturities, trading	10.5			—		616.2			—			626.7
Equity securities, available-for-sale	—			—		136.5			—			136.5
Equity securities, trading	—			—		252.8			—			252.8
Mortgage loans	—			—		11,519.7			—			11,519.7
Real estate	—			—		1,180.3			—			1,180.3
Policy loans	—			—		864.9			—			864.9
Investment in unconsolidated entities	11,853.3			10,632.1		860.2			(22,476.6		)	869.0
Other investments	11.1			39.6		2,371.4			—			2,422.1
Cash and cash equivalents	207.1			612.5		4,241.3			(883.7		)	4,177.2
Accrued investment income	—			—		584.4			—			584.4
Premiums due and other receivables	0.1			1,122.1		2,206.7			(2,244.5		)	1,084.4
Deferred acquisition costs	—			—		2,590.0			—			2,590.0
Property and equipment	—			—		464.2			—			464.2
Goodwill	—			—		543.4			—			543.4
Other intangibles	—			—		914.7			—			914.7
Separate account assets	—			—		81,653.8			—			81,653.8
Other assets	78.0			51.0		1,003.5			(125.7		)	1,006.8
Total assets	$	12,160.1		$	12,457.3	$	162,943.3		$	(25,730.5	)	$	161,830.2

Liabilities
Contractholder funds	$	—		$	—	$	37,786.5		$	—		$	37,786.5
Future policy benefits and claims	—			—		22,436.2			—			22,436.2
Other policyholder funds	—			—		716.4			—			716.4
Short-term debt	—			—		2,564.1			(2,523.3		)	40.8
Long-term debt	2,448.6			—		222.7			—			2,671.3
Income taxes currently payable	—			0.1		47.2			(32.0		)	15.3
Deferred income taxes	—			—		686.1			(86.1		)	600.0
Separate account liabilities	—			—		81,653.8			—			81,653.8
Other liabilities	28.1			603.9		6,117.8			(603.7		)	6,146.1
Total liabilities	2,476.7			604.0		152,230.8			(3,245.1		)	152,066.4

Redeemable noncontrolling interest	—			—		60.4			—			60.4

Stockholders’ equity
Series A preferred stock	—			—		—			—			—
Series B preferred stock	0.1			—		—			—			0.1
Common stock	4.5			—		17.8			(17.8		)	4.5
Additional paid-in capital	9,730.9			9,393.8		8,287.7			(17,681.5		)	9,730.9
Retained earnings	4,862.0			1,783.4		1,666.7			(3,450.1		)	4,862.0
Accumulated other comprehensive income	640.3			676.1		661.9			(1,338.0		)	640.3
Treasury stock, at cost	(5,554.4		)	—		(2.0		)	2.0			(5,554.4		)
Total stockholders’ equity attributable to PFG	9,683.4			11,853.3		10,632.1			(22,485.4		)	9,683.4
Noncontrolling interest	—			—		20.0			—			20.0
Total stockholders’ equity	9,683.4			11,853.3		10,652.1			(22,485.4		)	9,703.4
Total liabilities and stockholders’ equity	$	12,160.1		$	12,457.3	$	162,943.3		$	(25,730.5	)	$	161,830.2

Condensed Consolidating Statements of Operations

For the nine months September 30, 2013

Principal Life

Principal

Insurance

Principal

Financial

Company and

Financial

Group, Inc.

Services, Inc.

Other Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Revenues

Premiums and other considerations

—

2,134.9

—

2,134.9

Fees and other revenues

—

0.9

2,357.8

(18.3

)

2,340.4

Net investment income

0.4

1.1

2,321.8

0.2

2,323.5

Net realized capital gains (losses), excluding impairment losses on available-for-sale securities

6.3

2.6

(118.4

)

—

(109.5

)

Total other-than-temporary impairment losses on available-for-sale securities

—

(81.2

)

—

(81.2

)

Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income

—

8.8

—

8.8

Net impairment losses on available-for-sale securities

—

(72.4

)

—

(72.4

)

Net realized capital gains (losses)

6.3

2.6

(190.8

)

—

(181.9

)

Total revenues

6.7

4.6

6,623.7

(18.1

)

6,616.9

Expenses

Benefits, claims and settlement expenses

—

3,286.4

—

3,286.4

Dividends to policyholders

—

144.3

—

144.3

Operating expenses

105.2

8.4

2,276.6

(18.1

)

2,372.1

Total expenses

105.2

8.4

5,707.3

(18.1

)

5,802.8

Income (loss) before income taxes

(98.5

)

(3.8

)

916.4

—

814.1

Income taxes (benefits)

(39.4

)

(2.2

)

170.0

—

128.4

Equity in the net income of subsidiaries

730.1

731.7

—

(1,461.8

)

—

Net income

671.0

730.1

746.4

(1,461.8

)

685.7

Net income attributable to noncontrolling interest

—

14.7

—

14.7

Net income attributable to PFG

671.0

730.1

731.7

(1,461.8

)

671.0

Preferred stock dividends

24.7

—

24.7

Net income available to common stockholders

646.3

730.1

731.7

(1,461.8

)

646.3

Net income

671.0

730.1

746.4

(1,461.8

)

685.7

Other comprehensive loss

(683.9

)

(671.8

)

(679.2

)

1,366.6

(668.3

)

Comprehensive income (loss)

(12.9

)

58.3

67.2

(95.2

)

17.4

Condensed Consolidating Statements of Operations

For the nine months September 30, 2012

							Principal Life
	Principal			Principal			Insurance						Principal
	Financial			Financial			Company and						Financial
	Group, Inc.			Services, Inc.			Other Subsidiaries						Group, Inc.
	Parent Only			Only			Combined			Eliminations			Consolidated
	(in millions)
Revenues
Premiums and other considerations	$	—		$	—		$	2,519.3		$	—		$	2,519.3
Fees and other revenues	0.3			—			1,909.6			(0.8		)	1,909.1
Net investment income	2.7			0.1			2,406.4			0.4			2,409.6
Net realized capital gains, excluding impairment losses on available-for-sale securities	—			1.0			175.4			—			176.4
Total other-than-temporary impairment losses on available-for-sale securities	—			—			(126.4		)	—			(126.4		)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income	—			—			31.2			—			31.2
Net impairment losses on available-for-sale securities	—			—			(95.2		)	—			(95.2		)
Net realized capital gains	—			1.0			80.2			—			81.2
Total revenues	3.0			1.1			6,915.5			(0.4		)	6,919.2
Expenses
Benefits, claims and settlement expenses	—			—			3,969.5			—			3,969.5
Dividends to policyholders	—			—			149.5			—			149.5
Operating expenses	90.8			4.4			2,006.3			(0.4		)	2,101.1
Total expenses	90.8			4.4			6,125.3			(0.4		)	6,220.1

Income (loss) before income taxes	(87.8		)	(3.3		)	790.2			—			699.1
Income taxes (benefits)	(34.4		)	(4.7		)	139.5			—			100.4
Equity in the net income of subsidiaries	636.8			635.4			—			(1,272.2		)	—
Net income	583.4			636.8			650.7			(1,272.2		)	598.7
Net income attributable to noncontrolling interest	—			—			15.3			—			15.3
Net income attributable to PFG	583.4			636.8			635.4			(1,272.2		)	583.4
Preferred stock dividends	24.7			—			—			—			24.7
Net income available to common stockholders	$	558.7		$	636.8		$	635.4		$	(1,272.2	)	$	558.7

Net income	$	583.4		$	636.8		$	650.7		$	(1,272.2	)	$	598.7
Other comprehensive income	564.6			615.4			578.3			(1,140.2		)	618.1
Comprehensive income	$	1,148.0		$	1,252.2		$	1,229.0		$	(2,412.4	)	$	1,216.8

Condensed Consolidating Statements of Cash Flows

For the nine months September 30, 2013

Principal Life

Principal

Insurance

Principal

Financial

Company and

Financial

Group, Inc.

Services, Inc.

Other Subsidiaries

Group, Inc.

Parent Only

Only

Combined

Eliminations

Consolidated

(in millions)

Operating activities

Net cash provided by (used in) operating activities

(12.8

)

870.9

1,473.4

(933.6

)

1,397.9

Investing activities

Available-for-sale securities:

Purchases

—

(7,012.3

)

—

(7,012.3

)

Sales

—

1,626.7

—

1,626.7

Maturities

—

5,783.2

—

5,783.2

Mortgage loans acquired or originated

—

(2,020.0

)

—

(2,020.0

)

Mortgage loans sold or repaid

—

1,570.8

—

1,570.8

Real estate acquired

—

(59.0

)

—

(59.0

)

Net purchases of property and equipment

—

(22.7

)

—

(22.7

)

Purchases of interests in subsidiaries, net of cash acquired

—

(1,268.3

)

—

(1,268.3

)

Dividends and returns of capital received from (contributions to) unconsolidated entities

169.3

(809.2

)

—

639.9

—

Net change in other investments

(3.2

)

(13.9

)

(14.1

)

—

(31.2

)

Net cash provided by (used in) investing activities

166.1

(823.1

)

(1,415.7

)

639.9

(1,432.8

)

Financing activities

Issuance of common stock

80.2

—

80.2

Acquisition of treasury stock

(153.4

)

—

(153.4

)

Proceeds from financing element derivatives

—

46.7

—

46.7

Payments for financing element derivatives

—

(36.9

)

—

(36.9

)

Excess tax benefits from share-based payment arrangements

—

8.6

—

8.6

Purchase of subsidiary shares from noncontrolling interest

—

(51.7

)

—

(51.7

)

Sale of subsidiary shares to noncontrolling interest

—

32.1

—

32.1

Dividends to common stockholders

(211.7

)

—

(211.7

)

Dividends to preferred stockholders

(24.7

)

—

(24.7

)

Issuance of long-term debt

—

1,108.4

(1,084.3

)

24.1

Principal repayments of long-term debt

—

(212.2

)

—

(212.2

)

Net proceeds from (repayments of) short-term borrowings

—

(2,113.2

)

2,244.8

131.6

Capital received from (dividends and capital paid to) parent

—

(169.3

)

809.2

(639.9

)

—

Investment contract deposits

—

5,270.2

—

5,270.2

Investment contract withdrawals

—

(7,055.6

)

—

(7,055.6

)

Net decrease in banking operation deposits

—

(276.2

)

—

(276.2

)

Other

—

(6.3

)

—

(6.3

)

Net cash used in financing activities

(309.6

)

(169.3

)

(2,476.9

)

520.6

(2,435.2

)

Net decrease in cash and cash equivalents

(156.3

)

(121.5

)

(2,419.2

)

226.9

(2,470.1

)

Cash and cash equivalents at beginning of period

207.1

612.5

4,241.3

(883.7

)

4,177.2

Cash and cash equivalents at end of period

50.8

491.0

1,822.1

(656.8

)

1,707.1

Condensed Consolidating Statements of Cash Flows

For the nine months September 30, 2012

							Principal Life
	Principal			Principal			Insurance						Principal
	Financial			Financial			Company and						Financial
	Group, Inc.			Services, Inc.			Other Subsidiaries						Group, Inc.
	Parent Only			Only			Combined			Eliminations			Consolidated
	(in millions)
Operating activities
Net cash provided by (used in) operating activities	$	49.2		$	(164.6	)	$	2,303.2		$	185.9		$	2,373.7
Investing activities
Available-for-sale securities:
Purchases	—			—			(6,467.5		)	—			(6,467.5		)
Sales	—			—			946.5			—			946.5
Maturities	—			—			4,702.7			—			4,702.7
Mortgage loans acquired or originated	—			—			(1,811.8		)	—			(1,811.8		)
Mortgage loans sold or repaid	—			—			1,166.7			—			1,166.7
Real estate acquired	—			—			(114.8		)	—			(114.8		)
Net purchases of property and equipment	—			—			(35.6		)	—			(35.6		)
Purchases of interests in subsidiaries, net of cash acquired	—			—			(62.5		)	—			(62.5		)
Dividends and returns of capital received from unconsolidated entities	539.8			538.6			—			(1,078.4		)	—
Net change in other investments	(0.2		)	(27.1		)	(15.6		)	—			(42.9		)
Net cash provided by (used in) investing activities	539.6			511.5			(1,691.9		)	(1,078.4		)	(1,719.2		)
Financing activities
Issuance of common stock	24.7			—			—			—			24.7
Acquisition of treasury stock	(272.7		)	—			—			—			(272.7		)
Proceeds from financing element derivatives	—			—			51.6			—			51.6
Payments for financing element derivatives	—			—			(38.3		)	—			(38.3		)
Excess tax benefits from share-based payment arrangements	—			—			9.8			—			9.8
Dividends to common stockholders	(169.6		)	—			—			—			(169.6		)
Dividends to preferred stockholders	(16.5		)	—			—			—			(16.5		)
Issuance of long-term debt	593.8			—			9.1			—			602.9
Principal repayments of long-term debt	—			—			(2.1		)	—			(2.1		)
Net repayments of short-term borrowings	—			(50.0		)	(13.6		)	(17.4		)	(81.0		)
Dividends and capital paid to parent	—			(539.8		)	(538.6		)	1,078.4			—
Investment contract deposits	—			—			4,798.7			—			4,798.7
Investment contract withdrawals	—			—			(6,126.0		)	—			(6,126.0		)
Net increase in banking operation deposits	—			—			14.9			—			14.9
Other	—			—			(5.8		)	—			(5.8		)
Net cash provided by (used in) financing activities	159.7			(589.8		)	(1,840.3		)	1,061.0			(1,209.4		)
Net increase (decrease) in cash and cash equivalents	748.5			(242.9		)	(1,229.0		)	168.5			(554.9		)
Cash and cash equivalents at beginning of period	226.7			702.4			2,787.9			(883.1		)	2,833.9
Cash and cash equivalents at end of period	$	975.2		$	459.5		$	1,558.9		$	(714.6	)	$	2,279.0