16. 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) 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 June 30, 2018 and December 31, 2017, and for the six months ended June 30, 2018 and 2017.

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in all direct subsidiaries of PFG, (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.

PFG sponsors nonqualified benefit plans for select employees and agents and is responsible for the obligations of these plans. Nonqualified plan assets are held in Rabbi trusts for the benefit of all nonqualified plan participants. The Rabbi trusts are separate legal entities and are not a part of PFG on a stand-alone basis. The plan assets are available to satisfy the claims of general creditors only in the event of bankruptcy and are, therefore, consolidated in our statements of financial position.

Condensed Consolidating Statements of Financial Position

June 30, 2018

	Principal		Principal Life		Principal Financial				Principal
	Financial		Insurance		Services, Inc. and				Financial
	Group, Inc.		Company		Other Subsidiaries				Group, Inc.
	Parent Only		Only		Combined (1)		Eliminations		Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	200.9	$	52,355.9	$	7,123.1	$	(368.2)	$	59,311.7
Fixed maturities, trading	327.4		170.1		190.6		—		688.1
Equity securities	—		95.1		1,774.2		—		1,869.3
Mortgage loans	—		13,634.1		1,481.9		(748.1)		14,367.9
Real estate	—		2.0		1,726.9		—		1,728.9
Policy loans	—		759.4		44.6		—		804.0
Investment in unconsolidated entities	14,187.5		2,607.4		6,564.1		(22,500.7)		858.3
Other investments	10.2		4,843.7		2,305.1		(4,382.4)		2,776.6
Cash and cash equivalents	250.7		833.4		1,558.4		(300.5)		2,342.0
Accrued investment income	1.4		548.6		80.7		(2.9)		627.8
Premiums due and other receivables	—		1,778.6		3,559.7		(3,882.7)		1,455.6
Deferred acquisition costs	—		3,559.9		14.5		—		3,574.4
Property and equipment	—		660.0		102.9		—		762.9
Goodwill	—		54.3		1,048.9		—		1,103.2
Other intangibles	—		20.7		1,334.7		—		1,355.4
Separate account assets	—		117,099.7		39,889.3		—		156,989.0
Other assets	398.8		1,177.1		4,428.1		(4,515.1)		1,488.9

Total assets	$	15,376.9	$	200,200.0	$	73,227.7	$	(36,700.6)	$	252,104.0

Liabilities
Contractholder funds	$	—	$	36,325.3	$	3,150.8	$	(347.4)	$	39,128.7
Future policy benefits and claims	—		28,158.7		6,267.7		(1,035.7)		33,390.7
Other policyholder funds	—		704.9		147.0		(2.2)		849.7
Short-term debt	—		—		64.5		—		64.5
Long-term debt	3,128.9		—		809.0		(718.0)		3,219.9
Income taxes currently payable	—		—		147.9		(128.1)		19.8
Deferred income taxes	—		414.8		1,049.2		(576.1)		887.9
Separate account liabilities	—		117,099.7		39,889.3		—		156,989.0
Other liabilities	608.7		8,450.8		7,427.7		(10,778.8)		5,708.4

Total liabilities	3,737.6		191,154.2		58,953.1		(13,586.3)		240,258.6

Redeemable noncontrolling interest	—		—		138.9		—		138.9

Stockholders’ equity
Common stock	4.8		2.5		—		(2.5)		4.8
Additional paid-in capital	9,993.6		6,318.5		9,054.1		(15,372.6)		9,993.6
Retained earnings	9,904.3		2,342.1		5,677.3		(8,019.4)		9,904.3
Accumulated other comprehensive income (loss)	(1,137.9)		382.7		(668.0)		285.3		(1,137.9)
Treasury stock, at cost	(7,125.5)		—		—		—		(7,125.5)

Total stockholders’ equity attributable to PFG	11,639.3		9,045.8		14,063.4		(23,109.2)		11,639.3
Noncontrolling interest	—		—		72.3		(5.1)		67.2

Total stockholders’ equity	11,639.3		9,045.8		14,135.7		(23,114.3)		11,706.5

Total liabilities and stockholders’ equity	$	15,376.9	$	200,200.0	$	73,227.7	$	(36,700.6)	$	252,104.0

(1)

PFG sponsors nonqualified benefit plans. Nonqualified benefit plan assets and liabilities held in Rabbi trusts were $669.4 million and $545.3 million, respectively.

Condensed Consolidating Statements of Financial Position

December 31, 2017

	Principal		Principal Life		Principal Financial				Principal
	Financial		Insurance		Services, Inc. and				Financial
	Group, Inc.		Company		Other Subsidiaries				Group, Inc.
	Parent Only		Only		Combined (1)		Eliminations		Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	—	$	52,632.1	$	7,120.3	$	(364.0)	$	59,388.4
Fixed maturities, trading	351.8		49.1		165.1		—		566.0
Equity securities	—		100.1		1,766.5		—		1,866.6
Mortgage loans	—		13,389.6		1,449.6		(688.7)		14,150.5
Real estate	—		3.0		1,733.7		—		1,736.7
Policy loans	—		765.7		42.6		—		808.3
Investment in unconsolidated entities	15,063.2		2,658.2		7,491.4		(24,392.2)		820.6
Other investments	10.2		4,986.0		2,231.9		(4,462.5)		2,765.6
Cash and cash equivalents	842.8		426.7		1,526.4		(325.1)		2,470.8
Accrued investment income	1.1		538.8		77.7		(7.0)		610.6
Premiums due and other receivables	—		1,720.1		3,362.4		(3,612.7)		1,469.8
Deferred acquisition costs	—		3,331.5		209.2		—		3,540.7
Property and equipment	—		653.3		106.2		—		759.5
Goodwill	—		54.3		1,014.5		—		1,068.8
Other intangibles	—		21.6		1,293.1		—		1,314.7
Separate account assets	—		117,300.8		41,971.9		—		159,272.7
Other assets	389.7		1,177.5		4,346.0		(4,582.3)		1,330.9

Total assets	$	16,658.8	$	199,808.4	$	75,908.5	$	(38,434.5)	$	253,941.2

Liabilities
Contractholder funds	$	—	$	35,330.2	$	3,092.8	$	(340.5)	$	38,082.5
Future policy benefits and claims	—		27,794.0		6,155.0		(929.7)		33,019.3
Other policyholder funds	—		794.5		128.6		(0.8)		922.3
Short-term debt	—		—		39.5		—		39.5
Long-term debt	3,128.1		—		710.4		(660.1)		3,178.4
Income taxes currently payable	—		—		166.2		(149.5)		16.7
Deferred income taxes	—		731.6		986.9		(626.0)		1,092.5
Separate account liabilities	—		117,300.8		41,971.9		—		159,272.7
Other liabilities	681.4		7,910.9		7,533.6		(10,831.8)		5,294.1

Total liabilities	3,809.5		189,862.0		60,784.9		(13,538.4)		240,918.0

Redeemable noncontrolling interest	—		—		101.3		—		101.3

Stockholders’ equity
Common stock	4.7		2.5		—		(2.5)		4.7
Additional paid-in capital	9,925.2		6,346.0		9,053.5		(15,399.5)		9,925.2
Retained earnings	9,482.9		2,238.1		5,311.7		(7,549.8)		9,482.9
Accumulated other comprehensive income	165.5		1,359.8		579.4		(1,939.2)		165.5
Treasury stock, at cost	(6,729.0)		—		—		—		(6,729.0)

Total stockholders’ equity attributable to PFG	12,849.3		9,946.4		14,944.6		(24,891.0)		12,849.3
Noncontrolling interest	—		—		77.7		(5.1)		72.6

Total stockholders’ equity	12,849.3		9,946.4		15,022.3		(24,896.1)		12,921.9

Total liabilities and stockholders’ equity	$	16,658.8	$	199,808.4	$	75,908.5	$	(38,434.5)	$	253,941.2

(1)

PFG sponsors nonqualified benefit plans. Nonqualified benefit plan assets and liabilities held in Rabbi trusts were $643.3 million and $524.7 million, respectively.

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2018

	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	$	—	$	1,941.7	$	319.3	$	—	$	2,261.0
Fees and other revenues	—		1,091.3		1,126.7		(194.1)		2,023.9
Net investment income	11.8		1,282.0		1,152.8		(655.3)		1,791.3
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities	(8.6)		(98.6)		168.4		—		61.2
Net other-than-temporary impairment losses on available-for-sale securities	—		(4.6)		(2.3)		—		(6.9)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income	—		(11.4)		(0.6)		—		(12.0)

Net impairment losses on available-for-sale securities	—		(16.0)		(2.9)		—		(18.9)

Net realized capital gains (losses)	(8.6)		(114.6)		165.5		—		42.3

Total revenues	3.2		4,200.4		2,764.3		(849.4)		6,118.5
Expenses
Benefits, claims and settlement expenses	—		2,640.6		475.3		(5.6)		3,110.3
Dividends to policyholders	—		60.7		—		—		60.7
Operating expenses	95.2		1,144.3		916.7		(181.1)		1,975.1

Total expenses	95.2		3,845.6		1,392.0		(186.7)		5,146.1


Income (loss) before income taxes	(92.0)		354.8		1,372.3		(662.7)		972.4
Income taxes (benefits)	(41.0)		7.2		144.5		(0.3)		110.4
Equity in the net income (loss) of subsidiaries	904.7		313.2		(320.3)		(897.6)		—

Net income	853.7		660.8		907.5		(1,560.0)		862.0
Net income attributable to noncontrolling interest	—		—		8.3		—		8.3

Net income attributable to PFG	$	853.7	$	660.8	$	899.2	$	(1,560.0)	$	853.7



Net income	$	853.7	$	660.8	$	907.5	$	(1,560.0)	$	862.0
Other comprehensive loss	(1,398.2)		(1,219.2)		(1,500.5)		2,709.5		(1,408.4)

Comprehensive loss	$	(544.5)	$	(558.4)	$	(593.0)	$	1,149.5	$	(546.4)

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2017

	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	$	—	$	2,485.7	$	215.0	$	—	$	2,700.7
Fees and other revenues	7.8		1,038.0		1,058.7		(208.8)		1,895.7
Net investment income	4.3		1,211.4		963.3		(435.2)		1,743.8
Net realized capital losses, excluding impairment losses on available-for-sale securities	—		(14.5)		(54.3)		(0.7)		(69.5)
Net other-than-temporary impairment losses on available-for-sale securities	—		(29.5)		(0.2)		—		(29.7)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income	—		(11.4)		(1.9)		—		(13.3)

Net impairment losses on available-for-sale securities	—		(40.9)		(2.1)		—		(43.0)

Net realized capital losses	—		(55.4)		(56.4)		(0.7)		(112.5)

Total revenues	12.1		4,679.7		2,180.6		(644.7)		6,227.7
Expenses
Benefits, claims and settlement expenses	—		3,159.1		362.3		(5.3)		3,516.1
Dividends to policyholders	—		60.1		—		—		60.1
Operating expenses	102.0		1,035.2		910.9		(176.2)		1,871.9

Total expenses	102.0		4,254.4		1,273.2		(181.5)		5,448.1


Income (loss) before income taxes	(89.9)		425.3		907.4		(463.2)		779.6
Income taxes (benefits)	(36.3)		44.4		106.0		(2.9)		111.2
Equity in the net income (loss) of subsidiaries (1)	712.0		92.8		(82.4)		(722.4)		—

Net income	658.4		473.7		719.0		(1,182.7)		668.4
Net income attributable to noncontrolling interest	—		—		10.0		—		10.0

Net income attributable to PFG	$	658.4	$	473.7	$	709.0	$	(1,182.7)	$	658.4



Net income	$	658.4	$	473.7	$	719.0	$	(1,182.7)	$	668.4
Other comprehensive income	557.0		434.1		588.2		(1,019.5)		559.8

Comprehensive income	$	1,215.4	$	907.8	$	1,307.2	$	(2,202.2)	$	1,228.2

(1)

Principal Life Insurance Company Only includes income from discontinued operations of $35.5 million related to its sale of Principal Global Investors, LLC to PFS in connection with a corporate reorganization.

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2018

	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	$	(81.4)	$	1,891.4	$	805.3	$	(977.1)	$	1,638.2
Investing activities
Fixed maturities available-for-sale and equity securities with operating intent:
Purchases	(200.8)		(6,188.8)		(980.3)		5.5		(7,364.4)
Sales	—		1,623.7		498.3		—		2,122.0
Maturities	0.8		3,005.7		285.6		—		3,292.1
Mortgage loans acquired or originated	—		(1,207.9)		(204.8)		86.5		(1,326.2)
Mortgage loans sold or repaid	—		960.7		158.0		(24.7)		1,094.0
Real estate acquired	—		—		(36.4)		—		(36.4)
Real estate sold	—		—		63.5		—		63.5
Net purchases of property and equipment	—		(25.4)		(18.2)		—		(43.6)
Purchase of interests in subsidiaries, net of cash acquired	—		—		(141.5)		—		(141.5)
Dividends and returns of capital received from unconsolidated entities	336.5		42.6		371.5		(750.6)		—
Net change in other investments	0.5		(207.1)		(786.7)		992.3		(1.0)

Net cash provided by (used in) investing activities	137.0		(1,996.5)		(791.0)		309.0		(2,341.5)
Financing activities
Issuance of common stock	44.6		—		—		—		44.6
Acquisition of treasury stock	(396.5)		—		—		—		(396.5)
Payments for financing element derivatives	—		(37.9)		—		—		(37.9)
Purchase of subsidiary shares from noncontrolling interest	—		—		(23.0)		—		(23.0)
Dividends to common stockholders	(295.8)		—		—		—		(295.8)
Issuance of long-term debt	—		—		123.9		(82.6)		41.3
Principal repayments of long-term debt	—		—		(25.4)		24.7		(0.7)
Net proceeds from short-term borrowings	—		—		27.6		—		27.6
Dividends and capital paid to parent	—		(371.5)		(379.1)		750.6		—
Investment contract deposits	—		3,985.9		211.0		—		4,196.9
Investment contract withdrawals	—		(3,066.7)		(43.3)		—		(3,110.0)
Net increase in banking operation deposits	—		—		126.0		—		126.0
Other	—		2.0		—		—		2.0

Net cash provided by (used in) financing activities	(647.7)		511.8		17.7		692.7		574.5

Net increase (decrease) in cash and cash equivalents	(592.1)		406.7		32.0		24.6		(128.8)
Cash and cash equivalents at beginning of period	842.8		426.7		1,526.4		(325.1)		2,470.8

Cash and cash equivalents at end of period	$	250.7	$	833.4	$	1,558.4	$	(300.5)	$	2,342.0

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2017

	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	$	(33.0)	$	3,345.2	$	(1,621.3)	$	138.2	$	1,829.1
Investing activities
Fixed maturities available-for-sale and equity securities with intent to hold:
Purchases	—		(6,599.1)		(637.8)		—		(7,236.9)
Sales	—		615.7		253.3		(15.7)		853.3
Maturities	—		4,167.0		454.5		—		4,621.5
Mortgage loans acquired or originated	—		(1,263.0)		(168.5)		66.2		(1,365.3)
Mortgage loans sold or repaid	—		743.7		127.6		(28.2)		843.1
Real estate acquired	—		—		(96.8)		—		(96.8)
Real estate sold	—		—		47.1		—		47.1
Net purchases of property and equipment	—		(63.8)		(40.3)		—		(104.1)
Dividends and returns of capital received from (contributed to) unconsolidated entities	249.9		(15.0)		1,243.3		(1,478.2)		—
Net change in other investments	(2.4)		14.2		(198.6)		120.6		(66.2)

Net cash provided by (used in) investing activities	247.5		(2,400.3)		983.8		(1,335.3)		(2,504.3)
Financing activities
Issuance of common stock	113.3		—		—		—		113.3
Acquisition of treasury stock	(169.2)		—		—		—		(169.2)
Proceeds from financing element derivatives	—		0.1		—		—		0.1
Payments for financing element derivatives	—		(40.9)		—		—		(40.9)
Purchase of subsidiary shares from noncontrolling interest	—		—		(1.3)		1.3		—
Sale of subsidiary shares to noncontrolling interest	—		—		1.3		(1.3)		—
Dividends to common stockholders	(262.7)		—		—		—		(262.7)
Issuance of long-term debt	—		—		61.6		(61.6)		—
Principal repayments of long-term debt	—		—		(28.2)		28.2		—
Net repayments of short-term borrowings	—		—		(9.8)		—		(9.8)
Dividends and capital paid to parent	—		(1,243.3)		(234.9)		1,478.2		—
Investment contract deposits	—		6,773.5		176.0		—		6,949.5
Investment contract withdrawals	—		(6,606.6)		(14.8)		—		(6,621.4)
Net decrease in banking operation deposits	—		—		(0.6)		—		(0.6)
Other	—		3.7		—		—		3.7

Net cash used in financing activities	(318.6)		(1,113.5)		(50.7)		1,444.8		(38.0)

Net decrease in cash and cash equivalents	(104.1)		(168.6)		(688.2)		247.7		(713.2)
Cash and cash equivalents at beginning of period	882.6		675.1		2,082.8		(920.9)		2,719.6

Cash and cash equivalents at end of period	$	778.5	$	506.5	$	1,394.6	$	(673.2)	$	2,006.4

Under our current shelf registration that was filed with the SEC and became effective May 3, 2017, we have the ability to issue, in unlimited amounts, unsecured senior debt securities or subordinated debt securities, junior subordinated debt, preferred stock, common stock, warrants, depositary shares, purchase contracts and purchase units of PFG. 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.

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 June 30, 2018 and December 31, 2017, and for the six months ended June 30, 2018 and 2017.

In presenting the condensed consolidating financial statements, the equity method of accounting has been applied to (i) PFG’s interest in all direct subsidiaries of PFG 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

June 30, 2018

					Principal Life
	Principal		Principal		Insurance Company				Principal
	Financial		Financial		and Other				Financial
	Group, Inc.		Services, Inc.		Subsidiaries				Group, Inc.
	Parent Only		Only		Combined (1)		Eliminations		Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	200.9	$	—	$	59,110.8	$	—	$	59,311.7
Fixed maturities, trading	327.4		—		360.7		—		688.1
Equity securities	—		5.7		1,863.6		—		1,869.3
Mortgage loans	—		—		14,367.9		—		14,367.9
Real estate	—		—		1,728.9		—		1,728.9
Policy loans	—		—		804.0		—		804.0
Investment in unconsolidated entities	14,187.5		14,542.5		722.6		(28,594.3)		858.3
Other investments	10.2		97.8		2,668.6		—		2,776.6
Cash and cash equivalents	250.7		530.4		2,448.7		(887.8)		2,342.0
Accrued investment income	1.4		3.0		623.4		—		627.8
Premiums due and other receivables	—		0.6		1,844.4		(389.4)		1,455.6
Deferred acquisition costs	—		—		3,574.4		—		3,574.4
Property and equipment	—		—		762.9		—		762.9
Goodwill	—		—		1,103.2		—		1,103.2
Other intangibles	—		—		1,355.4		—		1,355.4
Separate account assets	—		—		156,989.0		—		156,989.0
Other assets	398.8		106.0		1,698.0		(713.9)		1,488.9

Total assets	$	15,376.9	$	15,286.0	$	252,026.5	$	(30,585.4)	$	252,104.0

Liabilities
Contractholder funds	$	—	$	—	$	39,128.7	$	—	$	39,128.7
Future policy benefits and claims	—		—		33,390.7		—		33,390.7
Other policyholder funds	—		—		849.7		—		849.7
Short-term debt	—		—		64.5		—		64.5
Long-term debt	3,128.9		389.7		91.0		(389.7)		3,219.9
Income taxes currently payable	—		20.2		126.0		(126.4)		19.8
Deferred income taxes	—		13.3		1,449.6		(575.0)		887.9
Separate account liabilities	—		—		156,989.0		—		156,989.0
Other liabilities	608.7		799.4		5,128.9		(828.6)		5,708.4

Total liabilities	3,737.6		1,222.6		237,218.1		(1,919.7)		240,258.6

Redeemable noncontrolling interest	—		—		138.9		—		138.9

Stockholders’ equity
Common stock	4.8		—		11.0		(11.0)		4.8
Additional paid-in capital	9,993.6		9,054.1		11,572.6		(20,626.7)		9,993.6
Retained earnings	9,904.3		5,677.3		3,515.7		(9,193.0)		9,904.3
Accumulated other comprehensive loss	(1,137.9)		(668.0)		(495.0)		1,163.0		(1,137.9)
Treasury stock, at cost	(7,125.5)		—		(2.0)		2.0		(7,125.5)

Total stockholders’ equity attributable to PFG	11,639.3		14,063.4		14,602.3		(28,665.7)		11,639.3
Noncontrolling interest	—		—		67.2		—		67.2

Total stockholders’ equity	11,639.3		14,063.4		14,669.5		(28,665.7)		11,706.5

Total liabilities and stockholders’ equity	$	15,376.9	$	15,286.0	$	252,026.5	$	(30,585.4)	$	252,104.0

(1)

PFG sponsors nonqualified benefit plans. Nonqualified benefit plan assets and liabilities held in Rabbi trusts were $669.4 million and $545.3 million, respectively.

Condensed Consolidating Statements of Financial Position

December 31, 2017

					Principal Life
	Principal		Principal		Insurance Company				Principal
	Financial		Financial		and Other				Financial
	Group, Inc.		Services, Inc.		Subsidiaries				Group, Inc.
	Parent Only		Only		Combined (1)		Eliminations		Consolidated
	(in millions)
Assets
Fixed maturities, available-for-sale	$	—	$	—	$	59,388.4	$	—	$	59,388.4
Fixed maturities, trading	351.8		—		214.2		—		566.0
Equity securities	—		5.7		1,860.9		—		1,866.6
Mortgage loans	—		—		14,150.5		—		14,150.5
Real estate	—		—		1,736.7		—		1,736.7
Policy loans	—		—		808.3		—		808.3
Investment in unconsolidated entities	15,063.2		15,449.7		706.7		(30,399.0)		820.6
Other investments	10.2		131.3		2,624.1		—		2,765.6
Cash and cash equivalents	842.8		617.4		2,001.1		(990.5)		2,470.8
Accrued investment income	1.1		0.2		609.3		—		610.6
Premiums due and other receivables	—		2.0		1,880.3		(412.5)		1,469.8
Deferred acquisition costs	—		—		3,540.7		—		3,540.7
Property and equipment	—		—		759.5		—		759.5
Goodwill	—		—		1,068.8		—		1,068.8
Other intangibles	—		—		1,314.7		—		1,314.7
Separate account assets	—		—		159,272.7		—		159,272.7
Other assets	389.7		94.8		1,619.4		(773.0)		1,330.9

Total assets	$	16,658.8	$	16,301.1	$	253,556.3	$	(32,575.0)	$	253,941.2

Liabilities
Contractholder funds	$	—	$	—	$	38,082.5	$	—	$	38,082.5
Future policy benefits and claims	—		—		33,019.3		—		33,019.3
Other policyholder funds	—		—		922.3		—		922.3
Short-term debt	—		—		39.5		—		39.5
Long-term debt	3,128.1		412.7		50.3		(412.7)		3,178.4
Income taxes currently payable	—		37.3		105.9		(126.5)		16.7
Deferred income taxes	—		12.4		1,705.1		(625.0)		1,092.5
Separate account liabilities	—		—		159,272.7		—		159,272.7
Other liabilities	681.4		894.1		4,760.7		(1,042.1)		5,294.1

Total liabilities	3,809.5		1,356.5		237,958.3		(2,206.3)		240,918.0

Redeemable noncontrolling interest	—		—		101.3		—		101.3

Stockholders’ equity
Common stock	4.7		—		11.0		(11.0)		4.7
Additional paid-in capital	9,925.2		9,053.5		11,336.0		(20,389.5)		9,925.2
Retained earnings	9,482.9		5,311.7		3,394.1		(8,705.8)		9,482.9
Accumulated other comprehensive income	165.5		579.4		685.0		(1,264.4)		165.5
Treasury stock, at cost	(6,729.0)		—		(2.0)		2.0		(6,729.0)

Total stockholders’ equity attributable to PFG	12,849.3		14,944.6		15,424.1		(30,368.7)		12,849.3
Noncontrolling interest	—		—		72.6		—		72.6

Total stockholders’ equity	12,849.3		14,944.6		15,496.7		(30,368.7)		12,921.9

Total liabilities and stockholders’ equity	$	16,658.8	$	16,301.1	$	253,556.3	$	(32,575.0)	$	253,941.2

(1)

PFG sponsors nonqualified benefit plans. Nonqualified benefit plan assets and liabilities held in Rabbi trusts were $643.3 million and $524.7 million, respectively.

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2018

					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	$	—	$	—	$	2,261.0	$	—	$	2,261.0
Fees and other revenues	—		0.3		2,030.5		(6.9)		2,023.9
Net investment income (loss)	11.8		(3.0)		1,776.1		6.4		1,791.3
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities	(8.6)		(0.5)		70.2		0.1		61.2
Net other-than-temporary impairment losses on available-for-sale securities	—		—		(6.9)		—		(6.9)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income	—		—		(12.0)		—		(12.0)

Net impairment losses on available-for-sale securities	—		—		(18.9)		—		(18.9)

Net realized capital gains (losses)	(8.6)		(0.5)		51.3		0.1		42.3

Total revenues	3.2		(3.2)		6,118.9		(0.4)		6,118.5
Expenses
Benefits, claims and settlement expenses	—		—		3,110.3		—		3,110.3
Dividends to policyholders	—		—		60.7		—		60.7
Operating expenses	95.2		16.7		1,869.1		(5.9)		1,975.1

Total expenses	95.2		16.7		5,040.1		(5.9)		5,146.1


Income (loss) before income taxes	(92.0)		(19.9)		1,078.8		5.5		972.4
Income taxes (benefits)	(41.0)		(2.9)		154.3		—		110.4
Equity in the net income of subsidiaries	904.7		916.2		—		(1,820.9)		—

Net income	853.7		899.2		924.5		(1,815.4)		862.0
Net income attributable to noncontrolling interest	—		—		8.3		—		8.3

Net income attributable to PFG	$	853.7	$	899.2	$	916.2	$	(1,815.4)	$	853.7


Net income	$	853.7	$	899.2	$	924.5	$	(1,815.4)	$	862.0
Other comprehensive loss	(1,398.2)		(1,424.8)		(1,447.6)		2,862.2		(1,408.4)

Comprehensive loss	$	(544.5)	$	(525.6)	$	(523.1)	$	1,046.8	$	(546.4)

Condensed Consolidating Statements of Operations

For the six months ended June 30, 2017

					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	$	—	$	—	$	2,700.7	$	—	$	2,700.7
Fees and other revenues	7.8		0.1		1,891.6		(3.8)		1,895.7
Net investment income (loss)	4.3		(1.1)		1,738.0		2.6		1,743.8
Net realized capital gains (losses), excluding impairment losses on available-for-sale securities	—		5.0		(74.5)		—		(69.5)
Net other-than-temporary impairment losses on available-for-sale securities	—		—		(29.7)		—		(29.7)
Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified from other comprehensive income	—		—		(13.3)		—		(13.3)

Net impairment losses on available-for-sale securities	—		—		(43.0)		—		(43.0)

Net realized capital gains (losses)	—		5.0		(117.5)		—		(112.5)

Total revenues	12.1		4.0		6,212.8		(1.2)		6,227.7
Expenses
Benefits, claims and settlement expenses	—		—		3,516.1		—		3,516.1
Dividends to policyholders	—		—		60.1		—		60.1
Operating expenses	102.0		29.8		1,743.4		(3.3)		1,871.9

Total expenses	102.0		29.8		5,319.6		(3.3)		5,448.1


Income (loss) before income taxes	(89.9)		(25.8)		893.2		2.1		779.6
Income taxes (benefits)	(36.3)		(11.7)		160.1		(0.9)		111.2
Equity in the net income of subsidiaries	712.0		723.1		—		(1,435.1)		—

Net income	658.4		709.0		733.1		(1,432.1)		668.4
Net income attributable to noncontrolling interest	—		—		10.0		—		10.0

Net income attributable to PFG	$	658.4	$	709.0	$	723.1	$	(1,432.1)	$	658.4


Net income	$	658.4	$	709.0	$	733.1	$	(1,432.1)	$	668.4
Other comprehensive income	557.0		534.5		532.0		(1,063.7)		559.8

Comprehensive income	$	1,215.4	$	1,243.5	$	1,265.1	$	(2,495.8)	$	1,228.2

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2018

					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	$	(81.4)	$	87.1	$	1,675.4	$	(42.9)	$	1,638.2
Investing activities
Fixed maturities available-for-sale and equity securities with intent to hold:
Purchases	(200.8)		—		(7,163.6)		—		(7,364.4)
Sales	—		—		2,122.0		—		2,122.0
Maturities	0.8		—		3,291.3		—		3,292.1
Mortgage loans acquired or originated	—		—		(1,326.2)		—		(1,326.2)
Mortgage loans sold or repaid	—		—		1,094.0		—		1,094.0
Real estate acquired	—		—		(36.4)		—		(36.4)
Real estate sold	—		—		63.5		—		63.5
Net purchases of property and equipment	—		—		(43.6)		—		(43.6)
Purchase of interests in subsidiaries, net of cash acquired	—		—		(141.5)		—		(141.5)
Dividends and returns of capital received from unconsolidated entities	336.5		259.8		—		(596.3)		—
Net change in other investments	0.5		(74.4)		(49.7)		122.6		(1.0)

Net cash provided by (used in) investing activities	137.0		185.4		(2,190.2)		(473.7)		(2,341.5)
Financing activities
Issuance of common stock	44.6		—		—		—		44.6
Acquisition of treasury stock	(396.5)		—		—		—		(396.5)
Payments for financing element derivatives	—		—		(37.9)		—		(37.9)
Purchase of subsidiary shares from noncontrolling interest	—		—		(23.0)		—		(23.0)
Dividends to common stockholders	(295.8)		—		—		—		(295.8)
Issuance of long-term debt	—		5.7		41.3		(5.7)		41.3
Principal repayments of long-term debt	—		(28.7)		(0.7)		28.7		(0.7)
Net proceeds from short-term borrowings	—		—		27.6		—		27.6
Dividends and capital paid to parent	—		(336.5)		(259.8)		596.3		—
Investment contract deposits	—		—		4,196.9		—		4,196.9
Investment contract withdrawals	—		—		(3,110.0)		—		(3,110.0)
Net increase in banking operation deposits	—		—		126.0		—		126.0
Other	—		—		2.0		—		2.0

Net cash provided by (used in) financing activities	(647.7)		(359.5)		962.4		619.3		574.5

Net increase (decrease) in cash and cash equivalents	(592.1)		(87.0)		447.6		102.7		(128.8)
Cash and cash equivalents at beginning of period	842.8		617.4		2,001.1		(990.5)		2,470.8

Cash and cash equivalents at end of period	$	250.7	$	530.4	$	2,448.7	$	(887.8)	$	2,342.0

Condensed Consolidating Statements of Cash Flows

For the six months ended June 30, 2017

					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	$	(33.0)	$	154.1	$	1,815.9	$	(107.9)	$	1,829.1
Investing activities
Fixed maturities available-for-sale and equity securities with intent to hold:
Purchases	—		—		(7,236.9)		—		(7,236.9)
Sales	—		—		853.3		—		853.3
Maturities	—		—		4,621.5		—		4,621.5
Mortgage loans acquired or originated	—		—		(1,365.3)		—		(1,365.3)
Mortgage loans sold or repaid	—		—		843.1		—		843.1
Real estate acquired	—		—		(96.8)		—		(96.8)
Real estate sold	—		—		47.1		—		47.1
Net purchases of property and equipment	—		—		(104.1)		—		(104.1)
Dividends and returns of capital received
from (contributed to) unconsolidated entities	249.9		(227.1)		—		(22.8)		—
Net change in other investments	(2.4)		(236.4)		(162.9)		335.5		(66.2)

Net cash provided by (used in) investing activities	247.5		(463.5)		(2,601.0)		312.7		(2,504.3)
Financing activities
Issuance of common stock	113.3		—		—		—		113.3
Acquisition of treasury stock	(169.2)		—		—		—		(169.2)
Proceeds from financing element derivatives	—		—		0.1		—		0.1
Payments for financing element derivatives	—		—		(40.9)		—		(40.9)
Dividends to common stockholders	(262.7)		—		—		—		(262.7)
Issuance of long-term debt	—		3.4		—		(3.4)		—
Principal repayments of long-term debt	—		(9.8)		—		9.8		—
Net repayments of short-term borrowings	—		—		(9.4)		(0.4)		(9.8)
Dividends and capital received from (paid to) parent	—		(249.9)		227.1		22.8		—
Investment contract deposits	—		—		6,949.5		—		6,949.5
Investment contract withdrawals	—		—		(6,621.4)		—		(6,621.4)
Net decrease in banking operation deposits	—		—		(0.6)		—		(0.6)
Other	—		—		3.7		—		3.7

Net cash provided by (used in) financing activities	(318.6)		(256.3)		508.1		28.8		(38.0)

Net decrease in cash and cash equivalents	(104.1)		(565.7)		(277.0)		233.6		(713.2)
Cash and cash equivalents at beginning of period	882.6		1,203.4		2,114.8		(1,481.2)		2,719.6

Cash and cash equivalents at end of period	$	778.5	$	637.7	$	1,837.8	$	(1,247.6)	$	2,006.4