SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: FEBRUARY 4, 2008
(Date of earliest event reported)
PRINCIPAL FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-16725 42-1520346
(State or other jurisdiction (Commission file number) (I.R.S. Employer
of incorporation) Identification Number)
711 HIGH STREET, DES MOINES, IOWA 50392
(Address of principal executive offices)
(515) 247-5111
(Registrant's telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 4, 2008, Principal Financial Group, Inc. publicly announced
information regarding its results of operations and financial condition for the
quarter ended December 31, 2007. The text of the announcement is included
herewith as Exhibit 99.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
99 Fourth Quarter 2007 Earnings Release
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINCIPAL FINANCIAL GROUP, INC.
By: /S/ MICHAEL H. GERSIE
------------------------------------
Name: Michael H. Gersie
Title: Executive Vice President and Chief
Financial Officer
Date: February 5, 2008
2
EXHIBIT 99
RELEASE: On receipt
MEDIA CONTACT: Jeff Rader, 515-247-7883, RADER.JEFF@PRINCIPAL.COM
INVESTOR RELATIONS CONTACT: Tom Graf, 515-235-9500,
investor-relations@principal.com
PRINCIPAL FINANCIAL GROUP, INC. REPORTS FOURTH QUARTER 2007 AND FULL YEAR
RESULTS
Des Moines, IA (February 4, 2008) - Principal Financial Group, Inc. (NYSE:
PFG) today announced net income available to common stockholders of $34.1
million(1), or $0.13 per diluted share for the three months ended December
31, 2007, compared to $284.1 million, or $1.04 per diluted share for the
three months ended December 31, 2006. The company reported operating
earnings of $225.8 million for fourth quarter 2007, compared to $252.0
million for fourth quarter 2006. Operating earnings per diluted share (EPS)
for fourth quarter 2007 were $0.86 compared to $0.93 for the same period in
2006. Operating revenues for fourth quarter 2007 were $2,901.8 million
compared to $2,537.0 million for the same period last year.(2)
Principal Financial Group, Inc. also announced full year results.
The company reported net income available to common stockholders of $827.3
million, or $3.09 per diluted share for the twelve months ended December
31, 2007, compared to $1,031.3 million, or $3.74 per diluted share for the
twelve months ended December 31, 2006. The company reported record
operating earnings of $1,058.4 million for 2007, compared to $972.1 million
for 2006. EPS for 2007 was a record $3.95 compared to $3.53 for 2006.
Operating revenues for 2007 were a record $11,249.8 million compared to
$9,825.8 million for 2006.
"In a year marked by adverse credit conditions and volatile equity
markets, The Principal delivered a strong operating result - 9 percent
growth in earnings and 12 percent EPS growth," said J. Barry Griswell,
chairman and chief executive officer. "Excluding the health division, which
had a difficult year, total company earnings improved 15 percent."
"In 2007, our three key growth engines - U.S. Asset Accumulation,
Principal Global Investors and Principal International - continued to
demonstrate strong fundamentals," said Griswell. "Total company assets
under management (AUM) increased $54 billion, or 21 percent, including
nearly $20 billion of net cash flows, and each of our three asset
management and accumulation segments delivered record earnings, improving
$111 million or 15 percent for the year on a combined basis(3)."
"The continued strength of these segments was also evident in the
fourth quarter," said Griswell. "Our key asset management and accumulation
businesses again delivered some outstanding results, performance that
supports our outlook for continued strong long-term growth."
3
Added Larry Zimpleman, president and chief operating officer,
"Sales of our three key retirement and investment offerings - Full Service
Accumulation, Principal Funds and Individual Annuities - were $5.6 billion
in total in the fourth quarter and $21.7 billion for the year, up 63
percent and 61 percent respectively over the prior year periods. Principal
Global Investors' fee mandate business earnings improved 20 percent from
the year ago quarter and 44 percent for the year, reflecting continued
strong growth in third party AUM, which increased 24 percent on an organic
basis. And Principal International's earnings improved 70 percent from a
year ago, a tremendous finish to a breakout year that included 54 percent
growth in earnings, 50 percent growth in AUM, 32 percent growth in
operating revenues and a 290 basis point improvement in return on equity."
"While earnings for the health division fell short of our
expectations in the fourth quarter, earnings in our asset management and
accumulation businesses remained solid, particularly in light of spread
widening in the commercial mortgage securitization market and declining
equity markets, which included a 3.8 percent drop in the S&P 500 Index,"
said Zimpleman. "While we can't control equity and credit market
conditions, we continue to intensify our turnaround efforts in the health
business, focusing on network discounts, claims costs and expense
management."
Additional highlights include:
o Record annual operating revenues in all four operating segments,
driving a $1.4 billion or 14 percent increase for 2007.
o Continued strong organic sales of the company's key retirement and
investment products. For 2007: full service accumulation sales were
$9.5 billion, an increase of 31 percent (sales of $2.4 billion in
fourth quarter 2007); mutual funds sales were $8.8 billion, up 130
percent (sales of $2.1 billion in fourth quarter 2007); and individual
annuities sales were $3.5 billion, up 40 percent (sales of $1.2
billion in fourth quarter 2007).
o Return on equity improved 110 basis points, from 15.3 percent at
December 31, 2006 to 16.4 percent at December 31, 2007.
"Looking forward, our 2008 results will clearly be impacted by difficult
market conditions - continued uncertainty around the economy, continued
adverse credit conditions, and continued equity market volatility,
including a 6 percent decline in the S&P 500 Index in the month of
January," said Zimpleman. "That said we expect market conditions to improve
over time, and we remain committed to and confident we can achieve our
longer-term performance objectives - 11 to 13 percent average annual growth
in EPS, and roughly 50 basis points average annual improvement in operating
ROE."
NET INCOME Net income available to common stockholders of $34.1 million
reflects net realized/unrealized capital losses of $211.5 million, which
includes: $134.8 million of losses related to impairments of fixed maturity
securities (including $49.4 million related to subprime); $33.5 million of
impairments on equity securities; unrealized capital losses of $26.3
million, primarily from the mark to market of interest rate and credit
default swaps; and $21.3 million of realized capital losses related to
derivative positions (including $7.9 million related to subprime). Net
income also includes a $19.8 million gain from other after-tax adjustments,
primarily related to a gain on sale of real estate. Between the fixed
maturity and equity security impairments, $84.8 million of losses relates
to certain structured assets. The company believes the fundamental outlook
for these assets remains strong and that values will ultimately recover.
With market illiquidity reducing fair values, at year-end the company also
conservatively valued its collateralized debt obligations, which generated
the $49.4 million of losses, identified above. The company believes current
4
fair value is significantly below the value it will ultimately recover on
these assets.
SEGMENT HIGHLIGHTS
U.S. ASSET ACCUMULATION
Segment operating earnings for fourth quarter 2007 were $149.9
million, compared to $146.6 million for the same period in 2006. Earnings
growth from higher account values was dampened by: a $16.5 million pre-tax
increase over the same period a year ago in deferred policy acquisition
cost amortization expense between the Full Service Accumulation and
Individual Annuities businesses, primarily due to experience true-ups
related to equity market declines in fourth quarter 2007 as compared to
equity market gains in fourth quarter 2006.
Operating revenues for the fourth quarter increased to $1,300.3
million compared to $1,085.3 million for the same period in 2006, primarily
due to solid growth in the Principal Funds and Individual Annuities
businesses.
Segment assets under management were a record $178.1 billion as of
December 31, 2007, compared to $161.9 billion as of December 31, 2006.
GLOBAL ASSET MANAGEMENT
Segment operating earnings for fourth quarter 2007 were $27.4
million, compared to $32.1 million in the prior year quarter. Earnings
growth from the fee mandate business, which increased $4.8 million, or 20
percent compared to fourth quarter 2006, was more than offset by the impact
on the spread and securitization business from unfavorable conditions in
the commercial mortgage-backed securities ("CMBS") market.
Operating revenues for fourth quarter increased to a record $174.1
million compared to $149.5 million for the same period in 2006, as a result
of higher management fees across all lines of business.
Third party assets under management for the segment were a record
$87.4 billion as of December 31, 2007, compared to $59.2 billion as of
December 31, 2006.
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for fourth quarter 2007 were $25.4
million, compared to $14.9 million for the same period in 2006, reflecting
solid earnings growth in Brazil, Hong Kong, Chile, and China. Fourth
quarter 2007 earnings also included a $5.6 million tax charge, due to new
tax regulations in Mexico, partially offset by a $3.8 million after-tax
benefit from higher yields on invested assets in Chile, due to unusually
high inflation.
Operating revenues were a record $255.4 million for fourth quarter
2007, compared to $128.6 million for the same period last year. The
increase was primarily the result of higher yields on invested assets and
increased sales of single premium group annuities in Chile.
Segment assets under management were a record $28.7 billion as of
December 31, 2007, compared to $19.1 billion as of December 31, 2006.
5
LIFE AND HEALTH INSURANCE
Segment operating earnings for fourth quarter 2007 were $42.1
million, compared to $64.9 million for the same period in 2006. Specialty
Benefits division earnings increased $4.1 million to $25.5 million,
reflecting growth in the business and effective expense management.
Individual Life earnings were $26.0 million, compared to $30.4 million for
the same period in 2006. Adjusting fourth quarter 2006 results for
investment earnings on a higher capital base and lower than normal deferred
policy acquisition cost amortization expense, Individual Life earnings
improved modestly from a year ago. The Health division had a loss of $9.4
million in fourth quarter 2007, reflecting claim seasonality in higher
deductible health plans, as well as adverse claims experience overall. This
compared to earnings of $13.1 million in fourth quarter 2006, or losses of
$1.9 million after adjusting fourth quarter 2006 for the development of
year-end 2006 claims, as previously communicated.
Operating revenues were a record $1,221.6 million, an increase of
one percent from the same period in 2006. Specialty Benefits continued to
achieve strong growth, with revenues improving 11 percent from a year ago.
Individual Life revenues increased 3 percent, reflecting solid growth in
fee-based universal life and variable universal life products. Health
revenues decreased seven percent, primarily due to a 12 percent decrease in
insured medical covered members.
CORPORATE AND OTHER
Operating losses for the segment in fourth quarter 2007 were $19.0
million, compared to operating losses of $6.5 million for the same period
in 2006. Although many items contributed to the variance, the main
contributors were lower earnings on reduced invested capital in the segment
and higher interest expense, due in part to the company's fourth quarter
2006 issuance of long-term debt.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This press release contains forward-looking statements, including, without
limitation, statements as to sales targets, sales and earnings trends, and
management's beliefs, expectations, goals and opinions. The company does
not undertake to update these statements, which are based on a number of
assumptions concerning future conditions that may ultimately prove to be
inaccurate. Future events and their effects on the company may not be those
anticipated, and actual results may differ materially from the results
anticipated in these forward-looking statements. The risks, uncertainties
and factors that could cause or contribute to such material differences are
discussed in the company's annual report on Form 10-K for the year ended
December 31, 2006, and in the company's quarterly report on Form 10-Q for
the quarter ended September 30, 2007, filed by the company with the
Securities and Exchange Commission. These risks and uncertainties include,
without limitation: competitive factors; volatility of financial markets;
decrease in ratings; interest rate changes; inability to attract and retain
sales representatives; international business risks; foreign currency
exchange rate fluctuations; a pandemic, terrorist attack or other
catastrophic event; default of the company's re-insurers; and investment
portfolio risks.
6
USE OF NON-GAAP FINANCIAL MEASURES
The company uses a number of non-GAAP financial measures that management
believes are useful to investors because they illustrate the performance of
normal, ongoing operations, which is important in understanding and
evaluating the company's financial condition and results of operations.
They are not, however, a substitute for U.S. GAAP financial measures.
Therefore, the company has provided reconciliations of the non-GAAP
measures to the most directly comparable U.S. GAAP measure at the end of
the release. The company adjusts U.S. GAAP measures for items not directly
related to ongoing operations. However, it is possible these adjusting
items have occurred in the past and could recur in the future. Management
also uses non-GAAP measures for goal setting, determining employee and
senior management awards and compensation, and evaluating performance on a
basis comparable to that used by investors and securities analysts.
SHARE REPURCHASES
In October 2007, the company repurchased 1.1 million shares for $70
million, which completed the Board's May 2007 authorization of up to $250
million. In November 2007, following the Board's share repurchase
authorization of up to $500 million, the company entered into an
accelerated common stock repurchase agreement with an investment bank.
Under this agreement, the company paid $250 million and received the
initial delivery of approximately 2.9 million common shares, while
retaining the right to receive additional common shares depending on the
volume weighted average share price of the company's common stock over the
program's execution period. The accelerated agreement was completed in
January 2008, at which time the company received approximately 0.9 million
additional shares.
EARNINGS CONFERENCE CALL
At 9:00 A.M. (CDT) tomorrow, Chairman and CEO J. Barry Griswell, President
and COO Larry Zimpleman, and Executive Vice President and CFO Mike Gersie
will lead a discussion during a live conference call. Parties interested in
listening to the conference call live may access the webcast on the
company's Investor Relations (IR) website (www.principal.com/investor) or
by dialing (800) 374-1609 (U.S. callers) or (706) 643-7701 (International
callers) approximately 10 minutes prior to the start of the call. To access
the call, leader name is Tom Graf. Listeners can access an audio replay of
the call on the IR website, or by calling (800) 642-1687 (US callers) or
(706) 645-9291 (International callers). The access code for the replay is
28483992. Replays will be available through February 12, 2008. The
financial supplement is currently available on our website and may be
referred to during the conference call.
ABOUT THE PRINCIPAL FINANCIAL GROUP
The Principal Financial Group(R) (The Principal (R))(4) is a leader in
offering businesses, individuals and institutional clients a wide range of
financial products and services, including retirement and investment
services, life and health insurance, and banking through its diverse family
of financial services companies. A member of the Fortune 500, the Principal
Financial Group has $311.1 billion in assets under management(5) and serves
some 18.6 million customers worldwide from offices in Asia, Australia,
Europe, Latin America and the United States. Principal Financial Group,
Inc. is traded on the New York Stock Exchange under the ticker symbol PFG.
For more information, visit WWW.PRINCIPAL.COM.
###
7
SUMMARY OF SEGMENT AND PRINCIPAL FINANCIAL GROUP, INC. RESULTS
OPERATING EARNINGS (LOSS)* IN MILLIONS
-------------------------------------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
-------------------------------------------------------------
SEGMENT 12/31/07 12/31/06 12/31/07 12/31/06
---------------------------------------------------- ---------------- -------------- -------------- --------------
U.S. ASSET ACCUMULATION $ 149.9 $146.6 $ 655.8 $ 542.6
---------------------------------------------------- ---------------- -------------- -------------- --------------
GLOBAL ASSET MANAGEMENT 27.4 32.1 108.5 102.5
---------------------------------------------------- ---------------- -------------- -------------- --------------
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION 25.4 14.9 110.7 71.8
---------------------------------------------------- ---------------- -------------- -------------- --------------
LIFE AND HEALTH INSURANCE 42.1 64.9 221.1 282.5
---------------------------------------------------- ---------------- -------------- -------------- --------------
CORPORATE AND OTHER (19.0) (6.5) (37.7) (27.3)
---------------------------------------------------- ---------------- -------------- -------------- --------------
OPERATING EARNINGS 225.8 252.0 1,058.4 972.1
---------------------------------------------------- ---------------- -------------- -------------- --------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED (211.5) 9.7 (229.7) 18.0
---------------------------------------------------- ---------------- -------------- -------------- --------------
OTHER AFTER-TAX ADJUSTMENTS 19.8 22.4 (1.4) 41.2
---------------------------------------------------- ---------------- -------------- -------------- --------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 34.1 $284.1 $ 827.3 $1,031.3
---------------------------------------------------- ---------------- -------------- -------------- --------------
PER DILUTED SHARE
-------------------------------------------------------------
THREE MONTHS ENDED, TWELVE MONTHS ENDED,
-------------------------------------------------------------
12/31/07 12/31/06 12/31/07 12/31/06
---------------- -------------- -------------- --------------
OPERATING EARNINGS $ 0.86 $ 0.93 $ 3.95 $ 3.53
---------------------------------------------------- ---------------- -------------- -------------- --------------
NET REALIZED/UNREALIZED CAPITAL (0.81) 0.04 (0.85) 0.07
GAINS (LOSSES), AS ADJUSTED
---------------------------------------------------- ---------------- -------------- -------------- --------------
OTHER AFTER-TAX ADJUSTMENTS 0.08 0.07 (0.01) 0.14
---------------------------------------------------- ---------------- -------------- -------------- --------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 0.13 $ 1.04 $ 3.09 $ 3.74
---------------------------------------------------- ---------------- -------------- -------------- --------------
WEIGHTED-AVERAGE DILUTED COMMON SHARES OUTSTANDING 263.9 272.1 268.1 275.5
---------------------------------------------------- ---------------- -------------- -------------- --------------
*OPERATING EARNINGS VERSUS U.S. GAAP (GAAP) NET INCOME AVAILABLE TO COMMON
STOCKHOLDERS Management uses operating earnings, which excludes the effect of
net realized/unrealized capital gains and losses, as adjusted, and other
after-tax adjustments, for goal setting, determining employee compensation, and
evaluating performance on a basis comparable to that used by investors and
securities analysts. Segment operating earnings are determined by adjusting U.S.
GAAP net income available to common stockholders for net realized/unrealized
capital gains and losses, as adjusted, and other after-tax adjustments the
company believes are not indicative of overall operating trends. Note: after-tax
adjustments have occurred in the past and could recur in future reporting
periods. While these items may be significant components in understanding and
assessing our 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 company's businesses.
8
PRINCIPAL FINANCIAL GROUP, INC.
RESULTS OF OPERATIONS
(IN MILLIONS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------- ---------------------------------
12/31/07 12/31/06 12/31/07 12/31/06
---------------- --------------- --------------- ----------------
Premiums and other considerations $1,178.1 $1,098.9 $ 4,634.1 $ 4,305.3
Fees and other revenues 680.8 515.0 2,634.7 1,902.5
Net investment income 1,037.7 924.1 3,966.5 3,620.6
Net realized/unrealized capital gains
(losses) (332.5) 21.6 (328.8) 44.7
---------------- --------------- --------------- ----------------
TOTAL REVENUES 2,564.1 2,559.6 10,906.5 9,873.1
---------------- --------------- --------------- ----------------
Benefits, claims, and settlement expenses 1,709.4 1,464.8 6,435.3 5,692.4
Dividends to policyholders 71.9 73.3 293.8 290.7
Operating expenses 813.2 692.9 3,129.2 2,558.7
---------------- --------------- --------------- ----------------
TOTAL EXPENSES 2,594.5 2,231.0 9,858.3 8,541.8
---------------- --------------- --------------- ----------------
Income (loss) from continuing operations
before income taxes (30.4) 328.6 1,048.2 1,331.3
Income taxes (benefit) (52.2) 66.2 208.1 295.9
---------------- --------------- --------------- ----------------
Income from continuing operations, net of
related income taxes 21.8 262.4 840.1 1,035.4
Income from discontinued operations, net of
related taxes 20.6 30.0 20.2 28.9
---------------- --------------- --------------- ----------------
NET INCOME 42.4 292.4 860.3 1,064.3
Preferred stock dividends 8.3 8.3 33.0 33.0
---------------- --------------- --------------- ----------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS $ 34.1 $ 284.1 $ 827.3 $ 1,031.3
Less:
Net realized/unrealized capital gains
(losses), as adjusted (211.5) 9.7 (229.7) 18.0
Other after-tax adjustments 19.8 22.4 (1.4) 41.2
---------------- --------------- --------------- ----------------
OPERATING EARNINGS $ 225.8 $ 252.0 $ 1,058.4 $ 972.1
================ =============== =============== ================
SELECTED BALANCE SHEET STATISTICS
PERIOD ENDED
------------------------------------------------------------
12/31/07 12/31/06 12/31/05
-------------------- --------------------- -----------------
Total assets (in billions) $ 154.5 $ 143.7 $ 127.0
Total common equity (in millions) $6,879.7 $ 7,318.8 $ 7,265.2
Total common equity excluding accumulated other
comprehensive income (in millions) $6,459.5 $ 6,471.9 $ 6,270.4
End of period common shares outstanding
(in millions) 259.1 268.4 280.6
Book value per common share $ 26.55 $ 27.27 $ 25.89
Book value per common share excluding
accumulated other comprehensive income $ 24.93 $ 24.11 $ 22.35
9
PRINCIPAL FINANCIAL GROUP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO U.S. GAAP
(IN MILLIONS, EXCEPT AS INDICATED)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------------------------------------------------------
12/31/07 12/31/06 12/31/07 12/31/06
----------------- --------------- --------------- ----------------
DILUTED EARNINGS PER COMMON SHARE:
Operating Earnings 0.86 0.93 3.95 3.53
Net realized/unrealized capital gains (losses) (0.81) 0.04 (0.85) 0.07
Other after-tax adjustments 0.08 0.07 (0.01) 0.14
----------------- --------------- --------------- ----------------
Net income available to common stockholders 0.13 1.04 3.09 3.74
================= =============== =============== ================
BOOK VALUE PER COMMON SHARE EXCLUDING ACCUMULATED
OTHER COMPREHENSIVE INCOME:
Book value per common share excluding accumulated
other comprehensive income 24.93 24.11 24.93 24.11
Net unrealized capital gains 1.22 3.21 1.22 3.21
Foreign currency translation 0.14 (0.10) 0.14 (0.10)
Net unrecognized post-retirement benefit obligations 0.26 0.05 0.26 0.05
----------------- --------------- --------------- ----------------
Book value per common share including accumulated
other comprehensive income 26.55 27.27 26.55 27.27
================= =============== =============== ================
OPERATING REVENUES:
USAA 1,300.3 1,085.3 5,150.2 4,107.0
GAM 174.1 149.5 603.0 488.1
IAMA 255.4 128.6 796.3 605.4
Life and Health 1,221.6 1,210.1 4,857.1 4,736.2
Corporate and Other (49.6) (36.5) (156.8) (110.9)
----------------- --------------- --------------- ----------------
Total operating revenues 2,901.8 2,537.0 11,249.8 9,825.8
Add: Net realized/unrealized capital gains (losses)
and related fee adjustments (337.0) 20.6 (343.0) 44.2
Less: Operating revenues from discontinued real estate 0.7 (2.0) 0.3 (3.1)
Total GAAP revenues ---------------- --------------- -------------- ----------------
2,564.1 2,559.6 10,906.5 9,873.1
================= =============== =============== ================
OPERATING EARNINGS:
USAA 149.9 146.6 655.8 542.6
GAM 27.4 32.1 108.5 102.5
IAMA 25.4 14.9 110.7 71.8
Life and Health 42.1 64.9 221.1 282.5
Corporate and Other (19.0) (6.5) (37.7) (27.3)
----------------- --------------- --------------- ----------------
Total operating earnings 225.8 252.0 1,058.4 972.1
Net realized/unrealized capital gains (losses) (211.5) 9.7 (229.7) 18.0
Other after-tax adjustments 19.8 22.4 (1.4) 41.2
Net income available to common stockholders ----------------- --------------- -------------- ----------------
34.1 284.1 827.3 1,031.3
================= =============== =============== ================
NET REALIZED/UNREALIZED CAPITAL GAINS (LOSSES):
Net realized/unrealized capital gains (losses), as
adjusted (211.5) 9.7 (229.7) 18.0
Add:
Periodic settlements and accruals on non-hedge
derivatives 4.0 - 18.9 -
Amortization of DPAC and sale inducement costs (15.3) (1.5) (10.4) (5.4)
Capital gains distributed 3.3 6.0 11.0 11.8
Tax impacts (118.4) 3.5 (125.5) 12.1
Minority interest capital gains 4.9 2.9 11.6 7.7
Less related fee adjustments:
Unearned front-end fee income - (0.8) 8.7 0.8
Certain market value adjustments to fee revenues (0.5) (0.2) (4.0) (1.3)
--------------- --------------- --------------- ----------------
GAAP net realized/unrealized capital gains (losses) (332.5) 21.6 (328.8) 44.7
=============== =============== =============== ================
OTHER AFTER TAX ADJUSTMENTS:
Gain on disposal of discontinued real estate
investments 20.0 30.9 20.0 30.9
Tax refinements related to prior years (0.2) - (21.4) -
Contribution to foundation - (8.5) - (8.5)
IRS audit Issue - - - 18.8
--------------- --------------- --------------- ----------------
Total other after-tax adjustments 19.8 22.4 (1.4) 41.2
=============== =============== =============== ================
10
(1) Fourth quarter 2007 net income discussed in this release before Segment
Highlights.
(2) Use of non-GAAP financial measures is discussed in this release after
Segment Highlights.
(3) The increase was $158 million or 22 percent on a reported basis, $111
million or 15 percent excluding $28 million of net benefiting items for
Full Service Accumulation in 2007, and $19 million of net benefiting items
for Principal International.
(4) "The Principal Financial Group" and "The Principal" are registered service
marks of Principal Financial Services, Inc., a member of the Principal
Financial Group.
(5) As of December 31, 2007
11