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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

Check the appropriate box:

o

 

Preliminary Proxy Statement

o

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

ý

 

Definitive Proxy Statement

o

 

Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

PRINCIPAL FINANCIAL GROUP, INC.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

ý

 

No fee required.

o

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
    (1)   Title of each class of securities to which transaction applies:
        
 
    (2)   Aggregate number of securities to which transaction applies:
        
 
    (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
        
 
    (4)   Proposed maximum aggregate value of transaction:
        
 
    (5)   Total fee paid:
        
 

o

 

Fee paid previously with preliminary materials.

o

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

 

Amount Previously Paid:
        
 
    (2)   Form, Schedule or Registration Statement No.:
        
 
    (3)   Filing Party:
        
 
    (4)   Date Filed:
        
 

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PHOTO

April 10, 2013

Dear Shareholder:

              You are cordially invited to attend the annual meeting of shareholders on Tuesday, May 21, 2013, at 9:00 a.m., Central Daylight Time, at 711 High Street, Des Moines, Iowa.

              The notice of annual meeting and proxy statement provide an outline of the business to be conducted at the meeting. I will also report on the progress of the Company during the past year and answer shareholder questions.

              We encourage you to read this proxy statement and vote your shares. You do not need to attend the annual meeting to vote. You may complete, date and sign a proxy or voting instruction card and return it in the envelope provided (if these materials were received by mail) or vote by using the telephone or the Internet. Thank you for acting promptly.

Distribution of annual meeting materials

              As we've done in the past, The Principal is taking advantage of the Securities and Exchange Commission's rule that allows companies to furnish proxy materials for the annual meeting via the Internet to registered shareholders. For each shareholder selecting to receive these materials electronically in the future, the Principal Financial Group and the Arbor Day Foundation will plant the same number of trees in a U.S. forest. In 2012, 1,870 trees were planted.

    Sincerely,

 

 


SIGNATURE
    LARRY D. ZIMPLEMAN
Chairman, President and Chief Executive Officer

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PRINCIPAL FINANCIAL GROUP, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

May 21, 2013



              The annual meeting of shareholders of Principal Financial Group, Inc. (the "Company") will be held at 711 High Street, Des Moines, Iowa, on Tuesday, May 21, 2013, at 9:00 a.m., Central Daylight Time. Matters to be voted on are:

              These items are fully described in the proxy statement, which is part of this notice. The Company has not received notice of other matters that may be properly presented at the annual meeting.

              Shareholders of record at the close of business on March 25, 2013, are entitled to vote at the meeting. It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, please vote in one of the following ways:

              Shareholders will need to register at the meeting and present photo identification to attend the meeting. If your shares are not registered in your name (for example, you hold the shares through an account with your stockbroker), you will need to bring proof of your ownership of those shares to the meeting in order to register. You should ask the broker, bank or other institution that holds your shares to provide you with either a copy of an account statement or a letter that shows your ownership of Principal Financial Group, Inc. common stock on March 25, 2013. Please bring that documentation to the meeting to register.

    By Order of the Board of Directors

 

 


SIGNATURE
    JOYCE N. HOFFMAN
Senior Vice President and Corporate Secretary
April 10, 2013    
    Important Notice Regarding Availability of Proxy Materials for the Shareholder Meeting to be held on May 21, 2013. The 2012 Annual Report, 2013 Proxy Statement and other proxy materials are available at www.investorvote.com. Your vote is important! Please take a moment to vote by Internet, telephone or proxy card as explained in the How Do I Vote sections of this document.

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TABLE OF CONTENTS

Questions and Answers About the Annual Meeting   5
Proposal One — Election of Directors   9
Proposal Two — Annual Election of Directors   15
Corporate Governance   16

Board Leadership Structure

  16

Role of the Board of Directors in Risk Oversight

  16

Majority Voting

  17

Director Independence

  17

Certain Relationships and Related Transactions

  18

Board Meetings

  18

Corporate Code of Ethics

  19

Board Committees

  19

Audit Committee Report

  20

Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board

  21
Directors Compensation   23

Fees Earned by Directors in 2012

  24

Deferral of Cash Compensation

  24

Restricted Stock Unit Grants

  24

Director Perquisite and Reimbursement of Expenses

  25

Directors' Stock Ownership Guidelines

  25
Executive Compensation   26

Compensation Discussion and Analysis

  26

Summary Compensation Table

  42

Grants of Plan-Based Awards for Fiscal Year End December 31, 2012

  44

Outstanding Equity Awards at Fiscal Year End December 31, 2012

  45

Option Exercises and Stock Vesting

  46

Pension Plan Information

  47

Pension Benefits

  49

Non-Qualified Deferred Compensation

  50
Payments Upon Termination   52

Employment Agreement

  52

Severance Plans

  52

Change of Control Employment Agreements

  52

Potential Payments Upon a Termination Related to a Change of Control

  55
Proposal Three — Advisory Vote to Approve Executive Compensation   56
Proposal Four — Ratification of Appointment of Independent Registered Public Accountants   58

Audit Fees

  58

Audit Related Fees

  58

Tax Fees

  58

All Other Fees

  58
Security Ownership of Certain Beneficial Owners and Management   60

Section 16(a) Beneficial Ownership Reporting Compliance

  61
Appendix A Proposed Amended Articles to Implement the Annual Election of Directors   62
Appendix B Executive Compensation Benchmarking Study Participants   64

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PROXY STATEMENT

PRINCIPAL FINANCIAL GROUP, INC.
711 HIGH STREET
DES MOINES, IOWA 50392-0100


QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING


Why didn't I receive a copy of the paper proxy materials?

              The Securities and Exchange Commission ("SEC") rules allow companies to deliver a notice of Internet availability of proxy materials to shareholders and provide Internet access to those proxy materials. Shareholders may obtain paper copies of the proxy materials free of charge by following the instructions provided in the notice of Internet availability of proxy materials.

Why did I receive notice of and access to this proxy statement?

              The Board of Directors ("Board") of Principal Financial Group, Inc. ("Company") is soliciting proxies to be voted at the annual meeting of shareholders to be held on May 21, 2013, at 9:00 a.m., Central Daylight Time, at 711 High Street, Des Moines, Iowa, and at any adjournment or postponement of the meeting ("Annual Meeting"). When the Board asks for your proxy, it must send or provide you access to proxy materials that contain information required by law. These materials were first made available, sent or given to shareholders on April 10, 2013.

What is a proxy?

              It is your legal designation of another person to vote the stock you own. The other person is called a proxy. When you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. The Company has designated three of the Company's officers to act as proxies for the 2013 Annual Meeting: Joyce N. Hoffman, Senior Vice President and Corporate Secretary; Terrance J. Lillis, Senior Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President and General Counsel.

What will the shareholders vote on at the Annual Meeting?

Will there be any other items of business on the agenda?

              The Company does not expect any other items of business because the deadline for shareholder proposals and nominations has passed. However, if any other matter should properly come before the meeting, the people authorized by proxy will vote according to their best judgment.

Who can vote at the Annual Meeting?

              Shareholders as of the close of business on March 25, 2013 ("Record Date") can vote at the Annual Meeting.

How many votes do I have?

              You will have one vote for every share of Company common stock ("Common Stock") you owned on the Record Date.

What constitutes a quorum?

              One-third of the outstanding shares of Common Stock as of the Record Date. On the Record Date, there were 293,496,776 shares of Common Stock outstanding. A quorum must be present, in person or by proxy, before any action can be taken at the Annual Meeting, except an action to adjourn the meeting.

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How many votes are required for the approval of each item?

What are Broker Non-votes?

              If your shares are held in a brokerage account, your broker will ask you how you want your shares to be voted. If you give your broker directions, your shares will be voted as you direct. If you do not give directions, the broker may vote your shares on routine items of business, but not on non-routine items. Proxies that are returned by brokers because they did not receive directions on how to vote on non-routine items are called "broker non-votes."

How do I vote by proxy?

              Shareholders of record may vote by mail, by telephone or through the Internet. Shareholders may vote "for," "against" or "abstain" from voting for each of the Director nominees, the proposal on the annual election of Directors, the advisory vote to approve executive compensation and the proposal to ratify the appointment of the independent auditors.

How do I vote shares that are held by my broker?

              If you own shares held by a broker, you may direct your broker or other nominee to vote your shares by following the instructions that your broker provides to you. Most brokers offer voting by mail, telephone and through the Internet.

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How do I vote in person?

              If you are going to attend the Annual Meeting, you may vote your shares in person. However, we encourage you to vote in advance of the meeting by mail, telephone or through the Internet even if you plan to attend the meeting.

How do I vote my shares held in the Company's 401(k) plan?

              The trustees of the plan will vote your shares in accordance with the directions you provide by voting on the voting instruction card or the instructions in the email message that notified you of the availability of the proxy materials. Shares for which voting instructions are not received are voted in the discretion of the trustees.

How are shares held in the Demutualization separate account voted?

              The Company became a public company on October 26, 2001, when Principal Mutual Holding Company converted from a mutual insurance holding company to a stock company (the "Demutualization") and the initial public offering of shares of the Company's Common Stock was completed. The Company issued Common Stock to Principal Life Insurance Company ("Principal Life"), and Principal Life allocated this Common Stock to a separate account that was established to fund policy credits received as Demutualization compensation by certain employee benefit plans that owned group annuity contracts. Although Principal Life will vote these shares, the plans give Principal Life voting directions. A plan may give voting directions by following the instructions on the voting instruction card or the instructions in the message that notified you of the availability of proxy materials. Principal Life will vote the shares as to which it received no direction in the same manner, proportionally, as the shares in the Demutualization separate account for which it has received instructions.

Who counts the votes?

              Votes will be counted by Computershare Trust Company, N.A.

What happens if I do not vote on an issue when returning my proxy?

              If no specific instructions are given, proxies that are signed and returned will be voted as the Board of Directors recommends: "For" the election of all Director nominees, "For" the proposal on the annual election of Directors, "For" approval of the Company's executive compensation and "For" the ratification of Ernst & Young LLP as independent auditors.

How do I revoke my proxy?

              If you hold your shares in street name, you must follow the instructions of your broker or bank to revoke your voting instructions. Otherwise, you can revoke your proxy or voting instructions by voting a new proxy or instruction card or by voting at the meeting.

What should I do if I want to attend the Annual Meeting?

              Please bring photo identification and, if your stock is held by a broker or bank, evidence of your ownership of Common Stock as of March 25, 2013. The notice of Internet availability of proxy materials you received in the mail, a letter from your broker or bank or a photocopy of a current account statement will be accepted as evidence of ownership.

How do I contact the Board?

              The Company has a process for shareholders and all other interested parties to send communications to the Board through the Presiding Director. You may contact the Presiding Director of the Board through the Investor Relations section of the Company's website at www.principal.com, or by writing to:

              All emails and letters received will be categorized and processed by the Corporate Secretary and then sent to the Company's Presiding Director.

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How do I submit a shareholder proposal for the 2014 Annual Meeting?

              The Company's next annual meeting is scheduled for May 20, 2014. Proposals should be sent to the Corporate Secretary. Proposals to be considered for inclusion in next year's proxy statement must be received by December 11, 2013. In addition, the Company's By-Laws provide that any shareholder wishing to propose any other business at the annual meeting must give the Company written notice between January 21, 2014 and February 24, 2014. That notice must provide other information as described in the Company's By-Laws, which are on the Company's website, www.principal.com.

What is "householding?"

              We send shareholders of record at the same address one copy of the proxy materials unless we receive instructions from a shareholder requesting receipt of separate copies of these materials.

              If you share the same address as multiple shareholders and would like the Company to send only one copy of future proxy materials, please contact Computershare Trust Company, N.A. at 866-781-1368, or P.O. Box 43078, Providence, RI 02940-3078. You can also contact Computershare to receive individual copies of all documents.

Where can I receive more information about the Company?

              We file reports and other information with the SEC. This information is available on the Company's website at www.principal.com and at the Internet site maintained by the SEC at www.sec.gov. You may also contact the SEC at 1-800-SEC-0330. The Audit, Finance, Human Resources and Nominating and Governance Committee charters, the Company's Corporate Governance Guidelines, and the Corporate Code of Business Conduct and Ethics are also available on the Company's website, www.principal.com.

              The Board urges you to exercise your right to vote by using the Internet or telephone or by returning the proxy or voting instruction card.

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PROPOSAL ONE – ELECTION OF DIRECTORS


              The Board is divided into three classes with each class having a three year term. All of the nominees are currently Directors of the Company.


Nominees for Class III With Terms Expiring in 2016


     

PHOTO

 


Michael T. Dan
Age: 62
Director since: 2006
Committees: Human Resources (Chair)
Public Directorships/Past 5 Years The Brink's Company

Mr. Dan was Chairman, President and Chief Executive Officer of The Brink's Company, a global provider of secure transportation and cash management services, from 1999 - 2011. The Brink's Company had 70,000 employees worldwide, operations in over 100 countries and $3.8 billion in revenue in 2011. Prior to joining Brink's, Mr. Dan served as president of Armored Vehicle Builder,  Inc.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Brink's, Mr. Dan has executive-level experience in international operations, risk management, strategic planning, brand management, executive compensation, customer service, marketing and mergers and acquisitions.

He studied business and accounting at Morton College in Cicero, Illinois, and completed the advanced management program at Harvard Business School.

 


PHOTO

 


C. Daniel Gelatt
Age: 65
Director since: 1988 (Principal Life), 2001 (the Company)
Committees: Audit, Strategic Issues (Chair)
Public Directorships/Past 5 Years None

Dr. Gelatt has been President of NMT Corporation since 1987. NMT is an industry leader in mobile mapping and workforce automation software and has been providing graphic imaging services to clients worldwide for more than 40 years. He was an Assistant Professor from 1975-1979 in the Physics Department at Harvard University, where he earned his Ph.D., and was a research manager at the IBM T.J. Watson Research Center before joining the Gelatt companies in 1982.

SKILLS AND QUALIFICATIONS: In addition to leading and having financial responsibility for NMT and other Gelatt privately-owned companies, he has an extensive background in software and non-linear optimization and executive-level experience in product development, marketing and strategic planning.

He earned his bachelor's and master's degrees at the University of Wisconsin and his MA and Ph.D. at Harvard University.

 

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Sandra L. Helton
Age: 63
Director since: 2001
Committees: Audit (Chair), Finance, Executive
Public Directorships/Past 5 Years Covance,  Inc. (current), Lexmark International, Inc. (current)

Ms. Helton was Executive Vice President and Chief Financial Officer — Telephone and Data Systems, Inc. ("TDS"), a diversified telecommunications organization that includes United States Cellular Corporation, from 1998 through 2006. As of December 31, 2006, TDS served 7 million customers/units in 36 states with annual revenues of $4.5 billion. In her role, Ms. Helton had responsibility for the Finance, Information Technology, Strategic Planning, Corporate Communications, and Corporate Secretary functions. Prior to joining TDS, Ms. Helton spent 26 years with Corning Incorporated, where she held engineering, strategy and finance positions, including Senior Vice President and Treasurer from 1991 — 1997. She also served as Vice President and Corporate Controller of Compaq Computer Corporation from 1997-1998.

SKILLS AND QUALIFICATIONS: Ms. Helton has global executive-level experience in corporate strategy, finance, accounting and control, treasury, investments, information technology and other corporate administrative functions, as well as extensive corporate governance experience.

Ms. Helton graduated from the University of Kentucky in 1971 with a B.S. degree in mathematics, summa cum laude, and earned an S.M. degree from Massachusetts Institute of Technology's Sloan School in 1977 with double majors in Finance and Planning & Control.

 


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Larry D. Zimpleman
Age: 61
Director since: 2006
Committees: Executive (Chair)
Public Directorships/Past 5 Years None

Mr. Zimpleman has been Chairman, President and Chief Executive Officer of the Company and Principal Life since May 2009, and was President and Chief Executive Officer of the Company and Principal Life from May 2008 — May 2009. He was President and Chief Operating Officer of the Company and Principal Life from June 2006 to May 2008 and President, Retirement and Investor Services of the Company and Principal Life from December 2003 to June 2006. He joined Principal Life in 1971 as an actuarial intern.

SKILLS AND QUALIFICATIONS: In addition to leading the Company and Principal Life as Chief Executive Officer since 2008, Mr. Zimpleman is a member of the boards of directors of the American Council of Life Insurers and the Financial Services Roundtable and chairs the board of trustees of Drake University. He is Vice Chair of the Iowa Business Council and formerly chaired the Principal Funds Board of Directors.

He earned a bachelor's degree and master's degree in business administration from Drake University in Des Moines, Iowa.

 

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Continuing Class I Directors With Terms Expiring in 2014


     

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Betsy J. Bernard
Age: 57
Director since: 1999 (Principal Life), 2001 (the Company)
Committees: Nominating and Governance (Chair), Human Resources, Executive
Public Directorships/Past 5 Years Telular Corporation (Chair) (current), Zimmer Holdings, Inc. (current), BearingPoint, United Technologies Corporation, URS Corporation

Ms. Bernard was President of AT&T from October 2002 until December 2003 where she led more than 50,000 employees with AT&T Business, then a nearly $27 billion organization serving four million business customers. She was Chief Executive Officer of AT&T Consumer 2001-2002, which served about 40 million consumers and contributed $11.5 billion to AT&T's normalized revenue in 2002. She was head of the consumer and small-business division as Executive Vice President — National Mass Markets at Qwest Communications from 2000-2001, and responsible for all retail markets at U S West as Executive Vice President — Retail from 1998 — 2000.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of AT&T, Ms. Bernard has executive-level experience in brand management, marketing to individuals and small businesses, sales, customer care, operations, product management, electronic commerce, executive compensation, strategic planning, technology and mergers and acquisitions.

She earned her bachelor's degree from St. Lawrence University, a master's degree in business administration from Fairleigh Dickinson University, and an MA from Stanford University in the Sloan Fellow Program.

 


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Jocelyn Carter-Miller
Age: 55
Director since: 1999 (Principal Life), 2001 (the Company)
Committees: Finance (Chair), Nominating and Governance
Public Directorships/Past 5 Years Interpublic Group of Companies, Inc. (current), Netgear, Inc. (current)

Ms. Carter-Miller has been President of TechEd Ventures since 2005, a community and personal empowerment firm that develops and markets educational and community-based programs. She was Executive Vice President and Chief Marketing Officer of Office Depot, Inc. from February 2002 until March 2004, with responsibility for the company's marketing for its 846 superstores, contract, catalog and e-commerce businesses in the United States and Canada and operations in 15 other countries. Before joining Office Depot, she was Corporate Vice President and Chief Marketing Officer of Motorola, Inc. with overall responsibility for marketing across its $30 billion revenue base and diverse businesses. She also had general management responsibility while at Motorola for network operations in Latin America, Europe, the Middle East and Africa. Prior to joining Motorola, she was Vice President, Marketing and Product Development at Mattel, Inc.

SKILLS AND QUALIFICATIONS: In addition to her marketing leadership background, Ms. Carter-Miller has executive-level experience in brand management, advertising, sales, multinational companies, international operations, mergers and acquisitions, product development, project management, strategic planning, technology and leadership development and training. She is also a certified public accountant.

She earned her B.S. in Accounting at the University of Illinois and an MBA in Finance and Marketing at the University of Chicago.

 

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Gary E. Costley
Age: 69
Director since: 2002
Committees: Audit, Finance, Strategic Issues
Public Directorships/Past 5 Years Covance,  Inc. (current), Prestige Brand Holdings, Inc. (Lead Director) (current), Tiffany & Co. (current), Accelrys, Inc., Pharmacopeia Drug Discovery, Inc.

Dr. Costley was Chairman and Chief Executive Officer of International Multifoods Corporation, a manufacturer and marketer of branded consumer food and food service products, from November 1997 until June 2004. Following his retirement from International Multifoods, which had just under $1 billion in sales in 2003, he was a co-founder and managing director of C & G Capital Management which provided capital and management to health, medical and nutritional products and services companies until May 2009. He was Dean of the Babcock Graduate School of Management at Wake Forest University in Winston-Salem, North Carolina, from 1995-1997 and taught business ethics during his tenure as a professor of management. Dr. Costley also had 24 years with Kellogg Company from 1970-1994 where he most recently was President of Kellogg North America.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of International Multifoods and Kellogg North America, Dr. Costley has executive-level experience in brand management, marketing, sales, distribution, international operations, public affairs, corporate development, strategic planning, technology, quality management, executive compensation and mergers and acquisitions, and has taught business ethics.

He attended Oregon State University where he earned his bachelor's and master's degrees and a Ph.D.

 


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Dennis H. Ferro
Age: 67
Director since: 2010
Committees: Audit, Finance, Strategic Issues
Public Directorships/Past 5 Years NYMAGIC,  Inc.

Mr. Ferro served as President and Chief Executive Officer of Evergreen Investment Management Company, an asset management firm, from 2003 to 2008. Evergreen had assets under management of $175 billion on December 31, 2008, served more than four million individual and institutional investors through management of a broad range of investment products including institutional portfolios, mutual funds, variable annuities and other investments, and was led by 300 investment professionals. Mr. Ferro was the Chief Investment Officer of Evergreen from 1999 to 2003. From 1994-1999, he was Executive Vice President of Zurich Investment Management Ltd. and Head of International Equity Investments, and from 1991-1994 was Senior Managing Director of CIGNA International Investments. Prior to 1991, he held positions with Bankers Trust Company in Japan, as President and Managing Director, and in Florida and New York. Mr. Ferro is a member of the Investment Committee of the American Bankers Association. During 2009 - 2012, Mr. Ferro served as a corporate Director and Chairman of the Investment Committee of the New York Marine and General Insurance Company, a subsidiary of NYMAGIC, Inc.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Evergreen Investment Management Company, Mr. Ferro has executive-level experience in asset management, investment portfolio management, financial services, international operations, product development, marketing and distribution, strategic planning, executive compensation, risk management and mergers and acquisitions.

He earned a bachelor's degree from Villanova University and an MBA in finance from St. John's University. Mr. Ferro is a Chartered Financial Analyst ("CFA").

 

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Continuing Class II Directors With Terms Expiring in 2015


     

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Richard L. Keyser
Age: 70
Director since: 2002
Committees: Human Resources, Nominating and Governance
Public Directorships/Past 5 Years Zebra Technologies Corporation (current), W.W. Grainger, Inc., Rohm and Haas Company

Mr. Keyser was Chairman Emeritus of W.W. Grainger, Inc., an international distributor of products used by businesses to maintain, repair and operate their facilities, from April 2009 — April 2010. He had been Chairman of the Board of Grainger since September 1997 and served as Grainger's Chief Executive Officer from March 1995 — May 2008. Previously he was President and Chief Executive Officer from March 1995 — September 1997, as well as President and Chief Operating Officer from March 1994 — March 1995. Mr. Keyser was honored as the National Association of Corporate Directors 2010 Public Company Director of the Year.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Grainger, which had sales of $6.4 billion in 2007, Mr. Keyser gained executive-level experience at Grainger in international operations, notably China and Mexico, operational excellence, customer service, integrated distribution networks, marketing to individuals, businesses and institutions, electronic commerce, executive compensation, strategic planning, and mergers and acquisitions.

He earned his bachelor's degree in nuclear science at the U.S. Naval Academy and a master's degree in business administration at Harvard University.

 


PHOTO

 

Luca Maestri
Age: 49
Director since: February 1, 2012
Committees: Audit, Finance
Public Directorships/Past 5 Years None

Mr. Maestri has been Corporate Controller of Apple Inc., which designs and markets mobile communication and media devices and personal computers, since March 2013.

He was Chief Financial Officer and an Executive Vice President of Xerox Corporation from February 2011 — February 2013 and Chief Financial Officer of Nokia Siemens Networks from 2008 — February 2011. Before joining Nokia, he held senior executive finance positions with General Motors Corporation. A 20-year employee of GM, he served as CFO of GM Europe and GM Brazil, and was executive-in-charge of the Fiat Alliance for GM Europe in Switzerland. Earlier in his career, Mr. Maestri was CFO of GM Thailand, director of operations analysis for GM Asia Pacific, and CFO of GM Ireland.

SKILLS AND QUALIFICATIONS: Mr. Maestri has financial management experience, currently serving as the Corporate Controller of Apple, which had $156.5 billion in revenues for fiscal year 2012. He was the Chief Financial Officer of Xerox until February 28, 2013, which had $22.4 billion in revenues in 2012. He was responsible for all finance, treasury, investor relations, risk management, mergers and acquisitions, tax, and audit operations at Xerox. In addition to also serving as a chief financial officer at Nokia Siemens Networks and in various other financial management roles at General Motors, Mr. Maestri has extensive international and general management experience.

Mr. Maestri received a bachelor's degree in economics from LUISS University in Rome in 1988, and a master's degree in science of management from Boston University in 1991.

 

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Elizabeth E. Tallett
Age: 63
Director since: 1992 (Principal Life), 2001 (the Company)
Committees: Human Resources, Nominating and Governance, Executive
Public Directorships/Past 5 Years Coventry Health Care, Inc. (current), Meredith Corporation (current), Qiagen, N. V., (current), Immunicon, Inc., IntegraMed America, Inc., Varian, Inc. and Varian SemiConductor Equipment Associates, Inc.

Ms. Tallett has been Presiding Director since 2007 and has also served as Alternate Presiding Director.

Ms. Tallett has been a Principal of Hunter Partners, LLC, a management company for early to mid-stage pharmaceutical, biotech and medical device companies, since July 2002. She has more than 30 years' experience in the biopharmaceutical and consumer industries.

SKILLS AND QUALIFICATIONS: Ms. Tallett's senior management experience includes President and Chief Executive Officer of Transcell Technologies, Inc., President of Centocor Pharmaceuticals, member of the Parke-Davis Executive Committee, and Director of Worldwide Strategic Planning for Warner-Lambert. In addition to her leadership and financial management in pharmaceutical and biotechnology firms, she has executive-level experience in multinational companies, international operations, economics, strategic planning, marketing, product development, technology, executive compensation and mergers and acquisitions.

She received a bachelor's degree with honors in mathematics and economics from the University of Nottingham in England.

 

              The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.

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PROPOSAL TWO – ANNUAL ELECTION OF DIRECTORS


              The Board of Directors is recommending that shareholders vote "For" the proposal to implement the annual election of Directors, on a phased-in basis, as set forth below.

              The Certificate of Incorporation is the governing document that describes how the Company is organized under Delaware law. The Certificate of Incorporation requires that the Directors be divided into three classes of approximately equal size, and that the classes of Directors be elected to serve staggered three-year terms. This is commonly referred to as a "classified board" structure, with only a portion of the full board standing for election each year.

              The Company adopted a classified board structure as part of our Demutualization and initial public offering in 2001. The Board of Directors recognized the advantages of a classified board structure in promoting continuity and stability in board membership. This continuity and stability allows the Company to pursue its strategy and the Board to focus on long term growth for the benefit of all shareholders. If only a portion of the Directors can be replaced in a single year's election, the Board's negotiating leverage is increased when dealing with a potential acquirer of the Company that may have a short term focus.

              The Nominating and Governance Committee and the Board regularly look at the Company's corporate governance practices for continued effectiveness in the current environment. The Committee and the Board undertook a careful review of the classified board structure, including the often cited disadvantage that it does not afford shareholders the opportunity to evaluate and hold directors accountable on an annual basis. The Nominating and Governance Committee and the Board recognized that there are both advantages and disadvantages to a classified board structure, that corporate governance trends indicate companies are moving away from classified boards and that the Principal Financial Group is committed to good corporate governance.

              The Board of Directors submitted a proposal for the annual election of Directors to be voted on at the 2011 Annual Meeting. The proposal did not receive the required approval of at least three-fourths of the outstanding shares, as required by the Certificate of Incorporation, and was not adopted. The Board's 2011 proposal provided that all current Directors would serve one more three-year term, then all Directors would be elected annually thereafter. If it had been approved by shareholders, the 2011 proposal would have resulted in all Directors being elected annually by 2016. Now, the Board is submitting a new proposal for the annual election of Directors which, if approved by shareholders, would also result in the annual election of all Directors by 2016. In addition, if the proposal is approved, a majority of the positions on the Board of Directors would be subject to election to one year terms at the 2015 Annual Meeting.

              The Board of Directors recommends the amendments to the Company's Certificate of Incorporation set forth in Appendix A to fully implement the annual election of Directors by 2016. If these amendments are approved at the Annual Meeting, the declassified Board structure would be phased-in as follows: The Class III Directors elected at this Annual Meeting will be elected for three-year terms, the Class II Directors elected at the 2012 Annual Meeting will complete their current three-year terms, and the Class I Directors elected in 2014 and all Directors elected thereafter will be elected for one-year terms. This results in the annual election of all Directors by 2016. In addition, in accordance with Delaware law and once the annual election of Directors is fully implemented under the Board's proposal, Directors may be removed by the vote of shareholders with or without cause.

              Delaware law provides that the shareholders must approve this recommendation of the Board of Directors to amend the Certificate of Incorporation before the amendments and these changes can be effective. The Certificate of Incorporation requires that at least three-fourths of the outstanding shares entitled to vote on this proposal approve the proposal for it to be adopted. If approved by the shareholders, the amendments to the Certificate of Incorporation will be effective upon filing with the Delaware Secretary of State, the Board of Directors will make conforming changes to the Company's By-Laws and the annual election of Directors will be implemented on a phased-in basis as described in this proposal.

              The Board of Directors recommends that the shareholders vote "For" this resolution: RESOLVED, that the Company's Certificate of Incorporation be amended as set forth in Appendix A.

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CORPORATE GOVERNANCE


              The Principal Financial Group® is a global investment management leader offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement services, insurance solutions and asset management. The business of the Company is managed under the direction of the Board. The Board selects, and provides advice and counsel to, the Chief Executive Officer ("CEO") and generally oversees management. The Board reviews and discusses the strategic direction of the Company, oversees risk and monitors the Company's performance against goals the Board and management establish.


Board Leadership Structure


              The Board currently has a combined position of Chairman of the Board and CEO, held by Larry D. Zimpleman, and a Presiding Director, Elizabeth E. Tallett. Betsy J. Bernard is the Alternate Presiding Director. The Presiding Director is selected by the other independent Directors and the position does not automatically rotate. The Nominating and Governance Committee reviews the assignments as Presiding Director and Alternate Presiding Director annually. The Board regularly reviews its leadership model and is flexible about whether the positions of CEO and Chairman should be separate or combined. The decision is based on the tenure and experience of the CEO and the broader economic and operating environment of the Company. The Company has followed a pattern of separating the roles of Chairman of the Board and CEO during periods of management transition, with the prior Chairman retaining that position for a period of time as the newly-appointed CEO assumes new responsibilities as the Company's chief executive. In the Company's experience, a flexible approach is preferable to an approach that either requires or disallows a combined Chairman/CEO.

              The Presiding Director and the Chairman jointly make the decisions on the Board's agenda for each regular quarterly meeting, and the Presiding Director seeks input from the other independent Directors. The Presiding Director and Chairman share the duties of presiding at each Board meeting. The Chairman presides when the Board is meeting as a full Board. The Presiding Director:


Role of the Board in Risk Oversight


              The Board believes that risk oversight is a responsibility of the full Board. The Board weighs risk versus return in the context of the organization's key risks and risk philosophy when approving corporate strategy and major business decisions, setting executive compensation and monitoring the Company's progress. Like all financial services companies, we are exposed to financial, accounting, operational and other business and industry risks. The Board uses its committees for some of its risk oversight responsibilities and the committees report to the Board on these issues:

              The Audit Committee:

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              The Finance Committee:

              The Human Resources Committee reviews all incentive compensation arrangements to confirm that they do not encourage inappropriate risk-taking and are appropriately designed to limit or mitigate risk. The Human Resources Committee also oversees succession planning for senior management.

              In selecting candidates for the Board, the Nominating and Governance Committee takes into account the need for the Board to have the collective skills and experience necessary to monitor the risks facing the Company.

              Risk management has long been an essential component of the Company's culture and operations. The Company has had a Chief Risk Officer since 2005, who oversees and coordinates the ERM Program, serves on many key management committees and operates independently of the businesses. The Chief Risk Officer regularly attends Audit and Finance Committee meetings and regularly meets in executive session with the Audit Committee along with selected other members of management and without other members of management present at least once a year.

              The Chief Risk Officer and other members of senior management make periodic reports to and have discussions with the Board and its committees on the ERM Program, and how strategy and operational initiatives integrate with the Company's risk objectives. These reports and discussions provide the Board with a greater understanding of the material risks the organization faces, whether management is responding appropriately, how certain risks relate to other risks, and the level of risk in actions presented for Board approval.

              Capital adequacy and structure are an important focus of the ERM Program. For each regular Board meeting, management reports on sources and uses of capital, satisfaction of regulatory and rating agency capital requirements, excess capital position, capital management and liquidity.


Majority Voting


              Directors are elected by the majority of votes cast in uncontested Director elections. If an incumbent Director is not elected, and no successor is elected, the Board of Directors will decide whether to accept the resignation tendered by that incumbent Director. The Board's decision and reasons for its decision will be publicly disclosed within 90 days of certification of the election results.


Director Independence


              The Board determines at least annually whether each Director is independent, using its independence standards in these determinations. These independence standards include the New York Stock Exchange requirements for independence and are on the Company's website, www.principal.com. The Board considers all commercial, banking, consulting, legal, accounting, charitable, family and other relationships (as a partner, shareholder or officer of an organization) a Director may have with the Company and its subsidiaries. The Board most recently made these determinations for each Director in February 2013, based on:

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              The Board affirmatively determined that the following Directors (and Arjun Mathrani who served on the Board during 2012) have no material relationship with the Company and are independent: Ms. Bernard, Ms. Carter-Miller, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Ms. Helton, Mr. Keyser, Mr. Maestri and Ms. Tallett. The Board also determined that all current members (and Directors who were members in 2012) of the Audit, Finance, Human Resources and Nominating and Governance Committees are independent.

              In applying the Board's independence standards, the Nominating and Governance Committee and the Board considered the following relationships and transactions to be categorically immaterial to the determination of a Director's independence due to the nature of the transaction and the amount involved (in each of the transactions described below, the annual payments made or received by the Company did not exceed the greater of $1 million or 2 percent of the recipient's gross revenues):


Certain Relationships and Related Transactions


              Nippon Life Insurance Company ("Nippon Life"), which held approximately 6% of the Company's Common Stock at the end of 2012, is the parent company of Nippon Life Insurance Company of America ("NLICA"). Nippon Life, NLICA and Principal Life have had an ongoing business relationship for more than 20 years. Principal Life assisted Nippon Life in the start up activities of NLICA, which began business in 1991. Nippon Life and NLICA purchase retirement and financial services offered by Principal Life and its subsidiaries. NLICA paid Principal Life approximately $10 million for third party administration services related to its group welfare benefit plans and approximately $3,242 for wellness services during 2012. Nippon Life and NLICA also paid Principal Global Investors, LLC ("PGI") and its subsidiaries approximately $920,597 for investment services in 2012, and paid Principal Life approximately $206,114 for service related to its retirement plans in 2012. The Company owns approximately three percent of the common stock of NLICA and Principal Life purchased public bonds with a market value of $52,814,150 during Nippon Life's $2 billion public issuance in October of 2012.

              The Company announced on April 1, 2013 an agreement by its subsidiary, PGI, to sell a 20 percent stake in Post Advisory Group, LLC ("Post") to Nippon Life and its affiliate for approximately $38 million. PGI acquired Post in 2003 and will retain an 80 percent ownership in the business moving forward. Post is an investment manager of high yield fixed income securities with approximately $11.8 billion in assets under management as of March 27, 2013. The transaction is expected to enhance Nippon Life's fixed income investment management offering to its clients and bring new distribution opportunities for Post. Post's management will continue to direct its day-to-day operations, with continued autonomy of investment decisions. The transaction is expected to close in the second quarter of 2013.

              The Nominating and Governance Committee or Chair of the Committee must approve or ratify all transactions with Related Parties that are not pre-approved under the Company's Related Party Transaction Policy. At each quarterly meeting, the Committee reviews a report of any non-material transactions with Directors or the firms of which they are an executive officer or director, and any other Related Party transactions, including those involving executive officers and shareholders who own more than five percent of the Company's Common Stock. The Committee ratifies these transactions if it determines they are appropriate. Transactions involving employment of a relative of an executive officer or Director must be approved by the Human Resources Committee. The Company's Related Party Transaction Policy may be found at www.principal.com.


Board Meetings


              The Board held 11 meetings in 2012, five of which were two day, in person meetings. Each of the Directors then in office attended more than 75 percent in the aggregate of the meetings of the Board and the committees of which the Director was a member. All of the Directors then in office attended the 2012 Annual Meeting, with the exception of Arjun Mathrani whose retirement from the Board was effective at the time of the Annual Meeting. The Company sets the date and place of Annual Meetings to coincide with a regular Board meeting so that all Directors can attend.

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Corporate Code of Business Conduct and Ethics


              Each Director and officer of the Company has certified compliance with the Corporate Code of Business Conduct and Ethics.


Board Committees


              Only independent Directors may serve on the Audit, Human Resources and Nominating and Governance Committees. Committee members and Committee chairs are recommended to the Board by the Nominating and Governance Committee. The Committees review their charters and evaluate their performance annually. Committee charters of the Audit, Finance, Human Resources and Nominating and Governance Committees are available on the Company's website, www.principal.com.

              The following table shows the current membership and responsibilities of each of the Board Committees.

                                 
 
  Committee
   
  Members
(*Committee Chair)
   
  Meetings
Held in
2012

   
  Responsibilities
   
    Audit       Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt
Sandra L. Helton*
Luca Maestri
      10       Appointing, terminating, compensating and overseeing the Company's independent auditor; reviewing and reporting to the Board on the independent auditor's activities; approving all audit engagement fees and pre-approving compensation of the independent auditor for non-audit engagements, consistent with the Company's Auditor Independence Policy; reviewing audit plans and results; reviewing and reporting to the Board on accounting policies and legal and regulatory compliance; and reviewing the Company's policies on risk assessment and management.    
    Human Resources       Betsy J. Bernard
Michael T. Dan*
Richard L. Keyser
Elizabeth E. Tallett
      5       Evaluating the performance of the CEO and determining his compensation in light of the goals and objectives approved by the Committee; reviewing and approving compensation for all other officers of the Company and Principal Life at the level of Senior Vice President and above ("Executives"); reviewing and approving any employment, severance or change of control agreements and perquisites for Executives; overseeing Executive development and succession planning; acting on management's recommendations for salary and employee compensation policies for all other employees; administering the Company's Annual Incentive Plan, Incentive Pay Plan ("PrinPay Plan"), Stock Incentive Plan, and any other compensation plans that provide compensation to Executives; acting on management's recommendations that require Director action for broad based employee pension and welfare benefit plans; and reviewing the Company's compensation programs to confirm that these programs encourage management to take appropriate risks, and to discourage inappropriate risk and behaviors that are inconsistent with the Company's business plan, policies and risk tolerance.    

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  Committee
   
  Members
(*Committee Chair)
   
  Meetings
Held in
2012

   
  Responsibilities
   
    Nominating
and
Governance
      Betsy J. Bernard*
Jocelyn Carter-Miller
Richard L. Keyser
Elizabeth E. Tallett
      5       Recommends to the Board candidates for Director, Board Committee assignments and service as Presiding Director and Alternate Presiding Director; reviews and reports to the Board on Director independence, performance of individual Directors, process for the annual self-evaluations of the Board and its Committees, content of the Company's Corporate Code of Business Conduct and Ethics, Director compensation, and the Corporate Governance Guidelines; reviews environmental and corporate social responsibility matters of significance to the Company.    
    Finance       Jocelyn Carter-Miller*
Gary E. Costley
Dennis H. Ferro
Sandra L. Helton
Luca Maestri
      10       Assists the Board with the organization's financial, investment and capital management policies; reviews the organization's capital structure and capital plan, significant financial transactions, financial policies, credit ratings, matters of corporate finance including issuance of debt and equity, shareholder dividends, and proposed mergers, acquisitions and divestitures; reviews and provides guidance to the Human Resources Committee and the Board on financial goals for the upcoming year; oversees the organization's investment policies, strategies and programs, and reviews the policies and procedures governing the use of financial instruments including derivatives; and assists the Board in overseeing and reviewing information regarding the organization's enterprise financial risk management, including the significant policies, procedures and practices used to manage liquidity risk, credit risk, market risk, tax planning and insurance risk.    
    Strategic Issues       Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt*
      4       Primarily responsible for planning the Board of Directors annual strategic retreat.    
    Executive       Betsy J. Bernard
Sandra Helton
Elizabeth E. Tallett
Larry D. Zimpleman*
      None       Generally acts only on matters delegated to it by the Board, and any actions must be approved by its independent members. Has all of the authority of the Board between Board meetings, unless the Board has directed otherwise, except it has no authority for certain matters set forth by law and in the Company's By-Laws.    


Audit Committee Report


              The Audit Committee oversees the Company's financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Committee reviewed with management the audited financial statements for the fiscal year ended December 31, 2012, including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

              The Committee discussed with Ernst & Young LLP, the Company's independent auditor, the matters required to be discussed by Statement on Auditing Standards ("SAS") 114, The Auditor's Communication with

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those Charged with Governance, as adopted by the Public Company Accounting Oversight Board (United States) ("PCAOB") in Rule 3200T. SAS 114 requires the independent auditor to communicate (i) the auditor's responsibility under standards of the PCAOB; (ii) an overview of the planned scope and timing of the audit; and (iii) significant findings from the audit, including the qualitative aspects of the entity's significant accounting practices; significant difficulties, if any, encountered in performing the audit; uncorrected misstatements identified during the audit, other than those the auditor believes are trivial, if any; any disagreements with management; and any other issues arising from the audit that are significant or relevant to those charged with governance.

              The Committee received from Ernst & Young LLP the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent auditor's communications with the Committee concerning independence. The Committee has discussed with Ernst & Young LLP its independence and Ernst & Young LLP has confirmed in its letter that, in its professional judgment, it is independent of the Company within the meaning of the federal securities laws.

              The Committee discussed with the Company's internal and independent auditors the overall scope and plans for their respective audits. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company's internal controls and the overall quality of the Company's financial reporting.

              In reliance on the reviews and discussions referred to above, the Committee recommended to the Board (and the Board approved) that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012, for filing with the SEC. The Committee has also approved, subject to shareholder ratification, the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 2013.

              The Committee does not have the responsibility to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles. That is the responsibility of the Company's independent auditor and management. In giving our recommendation to the Board, the Committee has relied on (i) management's representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles, and (ii) the report of the Company's independent auditor with respect to such financial statements.

Sandra L. Helton, Chair
Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt
Luca Maestri


Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board


              The Committee regularly assesses the appropriate mix of skills and characteristics of Directors in light of the current make up of the Board and the Company's needs. The Committee periodically uses an outside consultant to help the Committee evaluate the expertise, backgrounds and competencies of the Directors in view of the current strategic initiatives and risk factors of the Company. The results of these assessments provide direction in searches for Board candidates.

              Individual performance reviews are conducted for Directors who are eligible for re-nomination at the next annual meeting. These reviews assess Directors' contributions, present occupation and other commitments. The Committee has used outside firms to assist the Committee with these Director evaluations.

              In Director and candidate evaluations, the Committee assesses personal and professional ethics, integrity, values, expertise and ability to contribute to the Board. The Board values experience as a current or former CEO or other senior executive, in financial services, in international business and with financial management or accounting responsibilities. The following competencies are also sought: strategic orientation,

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results-orientation and comprehensive decision-making. Directors' terms must end prior to the annual meeting following their 72nd birthday.

              All Board members have:

              Several Directors have led businesses or major business divisions as CEO or President (Ms. Bernard, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Mr. Keyser, Mr. Maestri and Ms. Tallett). The following chart shows areas central to the Company's strategy, initiatives and operations for which Directors have specific training and executive-level experience that assists them in their responsibilities.

CHART

              Diversity of the Board is a valued objective. The Nominating and Governance Committee reviews the Board's needs and diversity in terms of race, gender, national origin, backgrounds, experiences and areas of expertise. The Board recognizes that diversity is an important factor in Board effectiveness, which is apparent by the Board's selection of Directors. The Board does not have a formal diversity policy. The Company's culture and commitment to diversity has been recognized by organizations such as the National Association of Female Executives, the Human Rights Campaign Corporate Equality Index, 2020 Women on Boards campaign and LATINA Style magazine. The Board's effectiveness benefits from Directors who have the skills, backgrounds and qualifications needed by the Board and who also increase the Board's diversity.

              The Committee will consider shareholder recommendations for Director candidates sent to the Nominating and Governance Committee, c/o the Corporate Secretary. Director candidates nominated by shareholders are evaluated in the same manner as Director candidates identified by the Committee and search firms it retains.

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DIRECTORS' COMPENSATION


              Directors serve on the Boards of the Company, Principal Life and Principal Financial Services, Inc. Directors who are also employees do not receive any compensation for their service as Directors. The Company provides competitive compensation to attract and retain high-quality Directors. A substantial proportion of Director compensation is provided in the form of equity to help align Directors' interests with the interests of shareholders.

              The Director compensation program is reviewed annually. The Nominating and Governance Committee uses the Board's independent compensation consultant, Frederic W. Cook & Co., Inc. ("Cook") to conduct a comprehensive review and assessment of Director compensation. Cook reviewed Director compensation in August of 2012. As a result of that review and the Committee's discussion, the Committee recommended to the Board that no changes be made to the program at that time. The Board last changed the Director compensation program in November of 2011. The Company targets Director compensation at approximately the median of the Peer Group (see page 33), which aligns with its Executive compensation philosophy.

              The following chart shows the Director fees effective January 1, 2012 which remain in effect:

                 
    Annual Cash Retainers (1)            
    -      Board       $90,000    
    -      Audit Committee Chair       $20,000    
    -      Human Resources Committee Chair       $17,500    
    -      Finance Committee Chair       $15,000    
    -      Nominating & Governance Committee Chair       $15,000    
    -      Other Committee Chairs       $5,000    
    -      Presiding Director       $25,000    
                 
    Annual Restricted Stock Unit Retainer (2)            
    -      Board       $115,000    
                 
    Meeting Attendance Fees            
    -      Regularly Scheduled Board Meeting       No Meeting fees    
    -      Non-regularly Scheduled Board Meetings (in person)       $2,500 per day    
    -      Non-regularly Scheduled Board Meetings (Telephonic)       $1,000    
    -      Committee Meeting       $1,500    
    -      Telephonic Committee Meeting       $1,000    

(1)
Annual cash retainers are paid in two semi-annual payments, in May and November, on a forward-looking basis.
(2)
Annual RSU retainers are granted at the time of the annual meeting.

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Fees Earned by Directors in 2012


              The following table summarizes the compensation earned by Directors in 2012.

                                 
 
  Director Name
   
  Fees Earned or
Paid in Cash

   
  Stock Awards
(1)

   
  Total
   
    Betsy J. Bernard       $126,000       $114,992       $240,992    
    Jocelyn Carter-Miller       $131,000       $114,992       $245,992    
    Gary E. Costley       $118,000       $114,992       $232,992    
    Michael T. Dan       $120,500       $114,992       $235,492    
    Dennis H. Ferro       $124,000       $114,992       $238,992    
    C. Daniel Gelatt       $113,500       $114,992       $228,492    
    Sandra L. Helton       $139,000       $114,992       $253,992    
    Richard L. Keyser       $108,000       $114,992       $222,992    
    Luca Maestri (2)       $145,000       $143,489       $288,489    
    Arjun Mathrani (3)       $6,000       $0       $6,000    
    Elizabeth E. Tallett       $134,000       $114,992       $248,992    

(1)
The amounts shown in this column reflect the grant date fair value of awards made in 2012, determined in accordance with FASB Accounting Standards Codification ("ASC") Topic 718. These awards do not reflect actual amounts realized or that may be realized by the recipients.
(2)
Mr. Maestri joined the Board on February 1, 2012 and was awarded a pro-rated grant of restricted stock units and cash retainer for his service as a Board member during the period of 2/1/2012 - 5/21/2012, in addition to his other fees and stock award during the year.
(3)
Mr. Mathrani retired from the Board on May 22, 2012.


Deferral of Cash Compensation


              Directors may defer the receipt of their cash compensation under the Deferred Compensation Plan for Non-Employee Directors of Principal Financial Group, Inc. This Plan has four investment options:

              All of these funds are available to participants in Principal Life's Excess Plan. The returns realized on these funds during 2012 are listed in the table, "Qualified 401(k) Plan and Excess Plan," on pages 50-51.


Restricted Stock Unit Grants


              Directors receive an annual grant of restricted stock units ("RSUs") pursuant to the Principal Financial Group, Inc. 2005 Directors Stock Plan. RSUs are granted at the time of the annual meeting, vest at the next annual meeting and are deferred until at least the date the Director leaves the Board. At payout, the RSUs are converted to shares of Common Stock. Dividend equivalents become additional RSUs, which vest and are converted to Common Stock at the same time and to the same extent as the underlying RSU. The Nominating and Governance Committee has the discretion to make a prorated grant of RSUs to Directors who join the Board other than at the annual meeting.

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              As of December 31, 2012, each Director had the following aggregate number of outstanding stock options and restricted stock units as a result of Director compensation in 2012 and prior years, including additional RSUs as the result of dividend equivalents:

                         
 
  Director Name
   
  Total Stock Options Outstanding
Fiscal year End 2012
(shares)(1)

   
  Total RSUs outstanding
Fiscal Year End 2012
(shares)

   
    Betsy J. Bernard       3,820       23,944    
    Jocelyn Carter-Miller       3,820       25,765    
    Gary E. Costley       3,820       23,944    
    Michael T. Dan       0       21,673    
    Dennis H. Ferro       0       10,117    
    C. Daniel Gelatt       3,820       28,344    
    Sandra L. Helton       3,820       23,944    
    Richard L. Keyser       3,820       27,894    
    Luca Maestri       0       5,896    
    Arjun Mathrani       3,820       0    
    Elizabeth E. Tallett       3,820       27,894    

(1)
Prior to May 2005, Directors received grants of stock options rather than RSUs.


Director Perquisites and Reimbursement of Expenses


              Directors are reimbursed for travel and other business expenses they incur while performing services for the Company.

              Principal Life matches charitable gifts up to an annual amount of $6,000 per non-employee Director, and Directors' contributions to the United Way are also matched up to $10,000 per year. These matching contributions are available during a Director's term and the following three years. Principal Life receives the charitable contribution tax deductions for the matching gifts.

              Directors' spouses/partners may accompany them to the annual Board strategic retreat. The Company pays for some of the travel expenses and amenities for Directors and their spouses/partners, such as meals and social events. In 2012, the Company paid for one non-employee Director's hotel expense for attending the Principal Charity Classic, a golf tournament sponsored by the Company that donates to children's charities. The Company supplied iPads to some Directors as part of moving to electronic delivery of Board materials and the value was reported to those Directors as income. Directors are also covered under the Company's Business Travel Accident Insurance Policy and Directors' and Officers' insurance coverage.

              In 2012, the total amount of perquisites provided to non-employee Directors was less than $10,000 in all cases.


Directors' Stock Ownership Guidelines


              To encourage Directors to accumulate a meaningful ownership level of Company stock, the Board has had a "hold until retirement" stock ownership requirement since 2005. All RSU grants must be held through a Director's service on the Board, and may only be converted to common shares when the Director's Board service ends. The Board has a guideline that Directors own interests in Common Stock equal to five times the annual Board cash retainer within five years of joining the Board. Directors have been able to achieve this level of ownership through the RSU "hold until retirement" requirement. Once this guideline is met, Directors will not need to make additional share purchases if the guideline is no longer met due to a reduction in stock price, as long as the Director's ownership level is not reduced as a result of share sales.

              Current Directors have met the ownership requirement except Mr. Maestri who was elected to the Board in February of 2012.

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EXECUTIVE COMPENSATION


Contents:       Page    
                 
    Compensation Discussion & Analysis (CD&A)       26    
   

Our Performance in 2012

      27    
   

2012 Compensation Highlights

      28    
   

Compensation Program Philosophy and Policies

      28    
   

Summary of Compensation Elements

      30    
   

How we make compensation Decisions

      31    
   

2012 Executive Compensation Decisions

      33    
   

Base Salary

      34    
   

Annual Incentive Pay

      34    
   

Long-term Incentive Compensation

      37    
   

Timing of Stock Option Awards and Other Equity Incentives

      38    
   

Benefits

      39    
   

Change of Control & Separation Pay

      39    
   

Perquisites

      40    
   

Stock Ownership Guidelines

      40    
   

Claw Back Policy

      41    
   

Trading Policy

      41    
   

Succession Planning

      41    
   

Human Resources Committee Report

      41    
   

Risk Assessment

      42    
    Compensation Tables            
   

Summary Compensation Table

      42    
   

Grants of Plan Based Awards Table

      44    
   

Outstanding Equity Awards Table

      45    
   

Option Exercises and Stock Vesting Table

      46    
   

Pension Benefits

      49    
   

Potential Payments Upon Termination Related to Change of Control

      55    


Compensation Discussion and Analysis (CD&A)


              The CD&A describes Principal Financial Group's executive compensation objectives, and philosophy. It also describes our 2012 compensation program and reviews the outcomes, including the Company's financial performance in 2012. Management prepared the CD&A on behalf of the Human Resources Committee ("Committee"). The Committee then reviewed it and provided its approval. Our Named Executive Officers in 2012 were:

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Our performance in 2012


Corporate highlights include:

Divisional highlights include:

              The Company maintains a strong capital position and finished 2012 with $2.5 billion of excess capital ($1.5 billion was earmarked for Cuprum which closed in February 2013). In 2012, the Company allocated more than $2 billion to common stock dividends, strategic acquisitions, and share repurchase. As evidence of further implementing our strategy, we announced two significant acquisitions in Latin America (Claritas and Cuprum), solidifying our position as a retirement leader in the fast-growing emerging markets in this region.

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              In 2012, the Company's total shareholder return was lower than the average of our peer group used for compensation purposes (19% vs. 28%). However, our 3-year total shareholder return continues to be higher, with a 3-year total shareholder return of 27%, compared to an average total shareholder return of 14% for companies in the peer group.

CHART


2012 Compensation Highlights



Compensation Program Philosophy and Policies


Compensation Philosophy – our compensation programs are designed to:

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Compensation Policies – Principal's executive compensation program incorporates the following best practices:

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Summary of Compensation Elements:


                         
 
  Compensation
Component

   
  Objective
   
  Description and 2012 Highlights
   
    Base Salary       Provides fixed income based on the size, scope and complexity of the Executive's role, Executive's historical performance and relative position compared to market pay information       Base salaries are generally targeted at market median, but may vary from median based on the Executive's performance, work experience, role and the difficulty of replacing the Executive.
 
In 2012, the Committee increased the Executives' base salaries, as detailed on page 34.
   
    Annual Incentive Compensation       Motivates and rewards annual corporate performance as well as the Executive's contribution to achieving our annual objectives.       A range of earnings opportunity, expressed as percentages of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each executive. Actual bonuses depend on achievement relative to the several key financial measures, corporate and divisional goals, as outlined on pages 34-37.
 
Based on the Committee's assessment of performance, actual bonuses for 2012 were slightly below target as detailed on page 37.
   
    Long Term Incentive Compensation       Motivates and rewards long-term corporate performance as well as the Executive's contribution to achieving our long term objectives. Reinforces the link between the interests of the Executives and shareholders. Encourages retention.       Each year, the Committee establishes the long-term award opportunity for each Named Executive Officer. One-half of the award is granted in stock options and one-half in performance based RSUs ("PSUs"). Having half of the award in PSUs and half in options creates a balance between achieving operating performance objectives and increases in shareholder value.
 
The PSUs vest based on both continued service and meeting financial objectives over a three-year period (with each three-year period treated as a "Performance Cycle").
 
The PSUs granted in 2012 for the 2012-2014 Performance Cycle will vest if the Company attains an average return on equity ("ROE") of 5% or cumulative operating income ("OI") of $1 billion for the three calendar years during the performance period. If neither the ROE nor the OI objective is met, no performance based PSUs will be earned or paid out. If either the ROE or OI objective is met or exceeded, the number of units earned is determined using performance scales based on average ROE and average Book Value per Share ("BV/Share") over the performance period. See pages 37-38.
 
The PSUs granted in 2010 and 2011 for the 2010-2012 and 2011-2013 Performance Cycles followed the same design as described above for 2012-2014. For the 2010 - 2012 Performance Cycle, the awards vested and paid out at 109% based on our ROE performance of 11.9% and book value per share of $29.98.1
   

   


1 Adjusted for the third quarter assumption review and costs related to the Cuprum transaction.

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  Compensation
Component

   
  Objective
   
  Description and 2012 Highlights
   
    Benefits       Protect against catastrophic expenses and provide retirement savings opportunities.       Named Executive Officers participate in most of the same benefit plans as the Company's other U. S. based employees. These include: health, life, disability income, vision and dental insurance, an employee stock purchase plan, 401(k) plan and pension plan. Executives (except investment professionals) also participate in non-qualified retirement plans (defined benefit and defined contribution).    
    Perquisites       Modest amount of additional benefits to help attract and retain Executive talent and enable Executives to focus on Company business with minimal disruption.       Executives are eligible for one physical examination per year.    
    Termination Benefits       Provide temporary income following an Executive's involuntary termination of employment, and, in the case of a change of control, to help ensure the continuity of management through the transition.       In 2010, we reduced the benefits payable under our change of control agreements and eliminated excise tax gross ups.    


How We Make Compensation Decisions


              We use a formal decision-making and review process that incorporates proper oversight, benchmarking against peers, independent advice, an annual decision-making cycle and the use of board discretion when appropriate.

Human Resources Committee Involvement

              The Human Resources Committee oversees the development and administration of the Company's compensation and benefits policies and programs, approves of all aspects of the compensation program and compensation for Executives, and makes the compensation decisions for the CEO. In addition, the Human Resources Committee:

              Each year the CEO, with input from the Human Resources Department and Cook, recommends the amount of base salary increase (if any), annual incentive award and the long term incentive award for Executives (other than himself). These recommendations are based on the Executive's performance, the performance of the business areas for which the Executive is responsible (if applicable) and considerations such as retention. The Human Resources Committee reviews these recommendations and approves compensation decisions.

              The CEO takes no part in determining his own compensation. The Human Resources Committee consults with the other independent Directors regarding the CEO's performance and then determines the compensation earned by the CEO for the current year and the CEO's compensation opportunity for the following year.

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The role of the Independent Compensation Consultant & Interaction with Management

              The Committee has the sole authority to hire, approve the compensation and terminate the engagement of the compensation consultant.

              The Committee engaged the consulting firm of Frederic W. Cook & Co., Inc. ("Cook") to advise it on the Company's Executive compensation program. Cook also advises the Nominating and Governance Committee on compensation for non-employee Directors. Cook receives compensation from the Company only for its work in advising these Committees. Cook does not and would not be allowed to perform services for management. The Committee assessed the independence factors in applicable SEC rules and NYSE Listing Standards and other facts and circumstances and concluded that the services performed by Cook did not raise any conflicts of interest.

              Cook reviews the Company's Executive compensation program every other year. In the years in which Cook does not conduct a compensation study, the Committee makes compensation decisions, in part, on survey data provided by the Human Resources Department and input provided by Cook.

              A comprehensive study was undertaken by Cook in 2011 which influenced the Committee's decisions for the 2012 Executive compensation program. The study reviewed the design and structure of the Company's total Executive compensation program, including:

              The most recent review process included:

              The goals of the review are to assist the Committee in:

              Cook also:

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Use of Compensation Data

              The Committee reviews the group of companies it uses to compare Executive compensation (the "Peer Group") every other year as part of Cook's study. Cook recommends an appropriate Peer Group of public, similarly-sized, diversified financial services, insurance and asset management companies. Cook's recommendations take into account the Company's and the competitors' strategy, mix of business and size, as measured primarily by annual revenues, market capitalization and total assets. These companies are the major competitors in one or more of the Company's businesses, but none represent the exact business mix of the Company. Some of these companies have higher or lower market capitalization and revenue than the Company. The Company targets compensation for the Named Executive Officers at the median of the compensation of the named executive officers at the Peer Group companies. The companies in the Peer Group used in Cook's 2011 analyses to assist in decisions on 2012 compensation were:

         

Affiliated Managers Group

 

Invesco

 

MetLife

Ameriprise Financial

 

Janus Capital Group

 

Prudential Financial

Eaton Vance

 

Legg Mason

 

StanCorp Financial

Franklin Resources

 

Lincoln National

 

Sun Life Financial

Hartford Financial Services

 

ManuLife

 

T. Rowe Price

              The Committee uses annual data from third party industry surveys for additional context for its compensation decisions2. Further, every two to three years, the Company's non-cash benefit programs are compared with those of more than 100 diversified financial services companies. This is a larger group than the Peer Group because the information is used in designing and evaluating our broad-based employee benefit programs. Benefit programs are also compared against those of local employers in Des Moines, Iowa, due to the Company's significant employee population there.

              Each year, the Committee reviews the total compensation paid to the Executives by reviewing tally sheets, which include:

              The Committee uses this information to analyze the value of compensation actually delivered versus the compensation opportunities established by the Committee, and it is also used in making compensation and compensation plan design decisions. The Committee made no compensation adjustments as a result of the analysis in 2012 because the program continues to meet the Company's objectives.


2012 Executive Compensation Decisions


              The Committee made compensation decisions for the Named Executive Officers based on the following factors:

   


2 The surveys used were the McLagan Investment Management survey, Towers Watson U.S. Financial Services Studies Executive Database, the Towers Watson Diversified Insurance Study of Executive Compensation. The names of the companies participating in these surveys are included in Appendix B.

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              The Committee also considers the tax and accounting consequences of each element of compensation, and tries to maximize the tax deductibility of compensation under Section 162(m) of the Internal Revenue Code ("Tax Code"). This Tax Code section limits the Company from deducting annual compensation exceeding $1,000,000 for our CEO and the three other most highly paid Named Executive Officers (other than our CFO) who are in office on the last day of the fiscal year ("Covered Employees"). There is an exception to this rule for performance-based compensation. The Committee may provide compensation to Covered Employees that is not deductible if it determines, in its discretion, that it is appropriate to do so. For 2012, Messrs. Zimpleman, Houston, McCaughan and Valdés were Covered Employees.

              The chart below shows the 2012 pay mix for our Named Executive Officers as well as the proportion of their compensation tied to the Common Share price. The majority of compensation paid to our Named Executive Officer's is variable and at risk as reflected in the chart below.

CHART


Base Salary


              When determining base salary for each Executive, the Committee considers the Peer Group median for comparable executive positions as well as the survey data referenced above, the Executive's performance, work experience, the importance of the position to the Company and how difficult it would be to replace the Executive. The table below provides the historical base salaries1 of the Named Executive Officers.

                                         
 
  Named Executive Officer
   
  2010
   
  2011
   
  2012
   
  Percent Increase
2011 to 2012

   
    Zimpleman       $800,000       $900,000       $900,000       0.0%    
    Lillis       $400,000       $436,000       $475,000       8.9%    
    Houston       $400,000       $525,000       $550,000       4.8%    
    McCaughan       $548,500       $570,500       $600,000       5.2%    
    Valdés                   $525,000          

(1)
Salaries displayed in the table are as of December 31 of the year noted. This information differs from salary information in the Summary Compensation Table as the table includes salary earned and paid in the year noted. Changes in base salary are effective in March of each year.


Annual Incentive Pay


              The Named Executive Officers may earn annual cash bonuses under the Principal Financial Group, Inc. Annual Incentive Plan. This plan was approved by shareholders in 2004, and complies with Section162(m) of the Tax Code so that these incentives to Named Executive Officers are considered performance based and are therefore fully tax deductible.

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              The maximum aggregate bonus amount for the Named Executive Officers is 2% of annual operating income ("Bonus Pool"). For 2012, the maximum bonuses were:

                         
 
  Named Executive Officer
   
  Maximum Award as
Percentage of the
Annual Incentive Pool

   
  Maximum
Potential Award
Payment

   
    CEO (Zimpleman)       35%       $5.6 million    
    Second highest Paid Covered Employee (McCaughan)       30%       $4.8 million    
    Third highest Paid Covered Employee (Houston)       15%       $2.4 million    
    Fourth highest Paid Covered Employee (Valdés)       10%       $1.6 million    
    CFO (Lillis)       10%       $1.6 million    

              The Committee sets the target and maximum annual incentive awards for each Named Executive Officer. The Committee then uses its negative discretion to reduce the awards actually payable. After this reduction, maximum annual incentive opportunities are generally 200% of the target annual incentive opportunity. The Committee approved the following target awards for Named Executive Officers in each of the past three years:


Annual Incentive Targets (as a percentage of base salary)

                                 
 
  Named Executive Officer
   
  2010
   
  2011
   
  2012
   
    Zimpleman       150%       150%       150%    
    McCaughan       250%       250%       300%    
    Houston       125%       125%       125%    
    Valdés                   75%    
    Lillis       75%       75%       100%    

              Mr. Zimpleman's target award opportunity is greater than that of the other Named Executive Officers (except Mr. McCaughan's) because Mr. Zimpleman has overall responsibility for the Company and greater responsibilities than the other Named Executive Officers. The award opportunity for Mr. McCaughan was established by the Committee to be competitive with award opportunities of senior executives within asset management firms. In establishing the target bonus for Messrs. Houston, Valdés and Lillis, the Committee considered the median incentive targets for comparable executive positions in the Peer Group companies, as well as the survey data referenced above.

Performance Goal Setting and Measurement Process

              The Board meets each September to review the Company's long-term strategy. In November, the CEO, CFO and Division Presidents recommend preliminary financial goals for the Company and business units and strategic initiatives for the next year. The Finance Committee reviews the proposed goals, underlying assumptions of the goals and initiatives, key drivers of financial performance, trends and business opportunities and advises the Board and Human Resources Committee on the appropriateness of the financial goals. The Human Resources Committee reviews and approves the final goals for the Company, the CEO and the other Executives with input from the Finance Committee and Board based on year-end financial results. All employees develop individual performance goals with their leaders that support the Company's goals.

              The Committee reviewed performance on several key financial measures and on corporate and divisional goals to determine the annual bonus for Named Executive Officers. The Committee does not use any particular weighting for these goals; these measures are used as guideposts when the Committee exercises its discretion in its subjective evaluation of these factors.

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              In determining corporate performance for 2012, the Committee reviewed Company achievements on these key financial goals:

                                                     
  
  Goal
   
  2012 Assessment
   
   
    1.   Achieve appropriate operating earnings and earnings per share.       One of management's responsibilities is to lead the Company in achieving its goals for operating earnings and earnings per diluted share. For 2012, the target for operating earnings was $925 million and the target for earnings per diluted share was $3.07. For incentive compensation purposes, operating earnings were adjusted to $905 million and EPS to $3.01. In addition, Messrs. Houston, McCaughan and Valdés had operating earnings goals specific to the business units they oversee:    
                                                     
                               
                        Named Executive Officer       Operating
Earnings Goal
      Operating
Earnings Result
           
                               
                        Houston                            
                        • Retirement & Investor Services       $570 million       $575 million            
                        • US Insurance Solutions       $225 million       $138.2 million            
                               
                        McCaughan – Principal Global Investors       $90 million       $81.2 million            
                               
                        Valdés- Principal International       $170 million       $153 million            
                               
                                                        
    2.   Capital – maintain a targeted National Association of Insurance Commissioners ("NAIC") risk based capital ratio above 350%.       At year-end, the NAIC risk based capital ratio was 415%.    
    3.   Minimize credit loss       A metric was established to measure whether the Company's invested assets (Principal Life's General Account) are appropriately managed. Ranges were established for after-tax credit losses for bond credit losses (20 – 30 basis points) and commercial mortgage loans (5 – 15 basis points). Actual 2012 after-tax credit losses for bond credit losses were 19 basis points and for mortgage loans, 9 basis points.    
    4.   Achieve identified sales growth targets                                            
                                                     
                               
                        Business Unit       Target       Result            
                               
                        Houston                            
                        • Retirement & Investor Services Sales       $23.4 billion       $27.8 billion            
                        • Life Sales       $233.0 million       $227.1 million            
                        • Specialty Benefits premium and fees       $1.48 billion       $1.44 billion            
                               
                        McCaughan                            
                        • Principal Global Investors % growth in non-affiliated management fees       15%       15%            
                               
                        Valdés                            
                        • Principal International net cash flow       $8.46 billion       $13.5 billion            
                               
                                                        

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Final Annual Incentive Pay Award Determination

              The following table shows the annual incentive award for each of the Named Executive Officers. The column "Reduction from Maximum Award" shows the amount the Committee reduced the maximum bonuses to the awards paid.

                                                 
 
  Named Executive
Officer

   
  2012 Salary
Earned

   
  2012
Target

   
  Final
Award

   
  % of
Target

   
  Reduction from
Maximum Award

   
    Zimpleman       $900,000       150%       $1,282,500       95%       $4,317,500    
    Lillis       $466,000       100%       $443,000       95%       $1,157,000    
    Houston       $544,231       125%       $612,000       90%       $1,788,000    
    McCaughan       $593,192       300%       $1,602,000       90%       $3,198,000    
    Valdés       $519,231       75%       $370,000       95%       $1,230,000    

              Executives may defer annual awards into a nonqualified supplemental savings plan ("Excess Plan"), as illustrated in the footnote to the Non Equity Incentive Compensation column of the Summary Compensation Table, on pages 42-43.


Long-term Incentive Compensation


              The long term incentive compensation program is designed to align the interests of Executives and shareholders. The compensation the Executives receive reflects the degree to which multi-year financial objectives are achieved and shareholder value is increased. The long term focus of the compensation programs supports the Company's businesses in which long term performance is critical, such as retirement products, life insurance and asset management. The long term incentive compensation program also encourages collaboration among Executives in pursuing corporate-wide goals.

              The Committee establishes a target long term incentive award opportunity for each Named Executive Officer stated as a percentage of each Executive's base salary based on Peer Group and survey data, and on the advice of its independent compensation consultant. The Committee uses the following factors to adjust the target award and determine the actual award to be awarded to each Named Executive Officer ("Award Granted"):

              The compensation ultimately received by Executives may vary considerably from the grant-date fair value of the Award Granted, due to the Company's performance and changes in share price that occur after the grant.

Long-Term Incentive Target & Grant (as % of base salary)
                         
 
  Named Executive Officer
   
  Target %
   
  Award Granted
   
    Zimpleman       500%       500%    
    Lillis       275%       275%    
    McCaughan       350%       325%    
    Houston       350%       375%    
    Valdés       225%       200%    

              The long term incentive targets were established by the Committee to be market competitive with award opportunities for comparable positions in Peer Group companies. Mr. Zimpleman's award opportunity is greater than those of the other Named Executive Officers because he has overall responsibility for the Company.

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              Executives' long term compensation is awarded in the form of non-qualified stock options and performance based restricted stock units ("PSUs"), which each represent 50% of the total long-term incentive award. PSUs entitle the executive to earn shares of Principal Financial Group Common Stock if certain levels of performance are achieved. The Committee uses stock options as part of the long-term incentive program because options are an effective way to link an Executive's compensation to changes in shareholder value. The weighting is not based on a specific formula or algorithm, but rather is intended to create a balance between the achievement of specific operating objectives and changes in shareholder value based on the Committee's judgment, which may change from time to time.

              Stock options have a ten-year term and an exercise price equal to the closing price on the date of grant. Stock options vest in three equal annual installments starting on the first anniversary of the grant date.

              PSUs vest based on continued service and achieving financial objectives over a three-year period (with each three-year period treated as a "Performance Cycle"). Executives may defer the receipt of PSUs.

              For the 2012 PSUs, the performance threshold is met if either of the following goals is met:

              If either the ROE or OI objectives is met or exceeded, the number of units earned is determined using two performance measures, each weighted at 50%, to determine the funding level.

              In combination, the two measures selected provide an appropriate balance to maintain a sufficient level of equity over the long term while also making sure that capital is being used effectively.

2012-2014 PSU Performance Scale
                                 
 
  Performance Level
   
  Threshold
Award

   
  Target
Award

   
  Maximum Award
(150% of Target)

   
    Payout (% of Target) (1)       50%       100%       150%    
    Average ROE       7.5%       15%       19.5%    
    Average BV/Share       $24.65       $29.00       $37.70    




If neither the ROE nor the OI
objective is met, 
no PSUs will
be earned or paid out.



(1)
Straight line interpolation is used to determine awards for performance between threshold and target and between target and maximum.


Timing of Stock Option Awards and Other Equity Incentives


              Annual grants of stock options and PSUs for the Company's Executives are determined by the Committee at its February meeting, which occurs following the release of prior year firm results and during an open-window period. The Committee formalized its long-standing practices by adopting a policy regarding granting stock options and other equity awards. Under this policy, the grant date for all stock options and other stock-based awards shall never be the earlier than the date of approval, and shall be:

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Authority of the Chairman, President & CEO to Grant Equity Awards:

              Under the 2010 Stock Incentive Plan, the Committee has delegated authority to the Chairman, President & CEO to make certain equity awards to sales agents and non-Executive employees for new hires, promotions, retention and recognizing superior performance. The Committee receives a report on these grants at the next regular Committee meeting. The total awards granted by the Chairman, President & CEO may not exceed 250,000 shares per year.


Benefits


              The Named Executive Officers participate in Principal Life's broad-based employee benefits program, including:

              Principal Life also offers all Named Executive Officers (except Mr. McCaughan) defined benefit and defined contribution non-qualified retirement plans (the "NQDB" and the "Excess Plan"). These benefits are offered to attract and retain talent and provide long term financial security to employees. The NQDB helps the Company attract mid-career Executives and retain Executives by providing competitive retirement benefits. The NQDB is coordinated with the qualified pension plan and is designed to restore benefits that otherwise would accrue to Executives in the absence of Tax Code limitations on the qualified pension plan. The narrative to the Pension Benefits Table on pages 47-49 provides additional information about the NQDB and the qualified pension plan. Principal Life maintains the Excess Plan to help attract and retain Executives by allowing Executives to save for retirement and to provide matching contributions on those savings, without regard to the limitations imposed by the Tax Code on 401(k) plans. The narrative to the Non-Qualified Deferred Compensation Table on pages 50-51 provides additional information about the Excess Plan.

              The value of the retirement and savings plans is targeted to be, in the aggregate, slightly above the median of diversified financial services companies because a large portion of the Company's business centers on the sale of retirement products. The traditional pension plan benefit for Grandfathered Choice Participants (see page 47) has a market value above the median and the 401(k) plan match for Grandfathered Choice Participants is below market median. These benefits were also designed to be slightly above market median to attract and retain employees. As retirement plans evolved in the marketplace, their value has changed, leading to the realignment with market in 2006.

              All other benefits are targeted at market median in the aggregate, which supports the Company's benefit strategy and aids in attracting and retaining talent.


Change of Control and Separation Pay


              The Committee believes it is in the best interests of the Company and its shareholders to:

   


3 Effective January 1, 2010, Mr. McCaughan no longer participates in the qualified pension plan, NQDB Plan or Excess Plan. This change was the result of a compensation and benefit review of asset management companies that showed that these are not common benefits for executives in the asset management industry. This change also applied to other investment professionals who work with Principal Global Investors.

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              For these reasons, the Company has entered into "Change of Control" employment agreements with each of the Executives. These agreements would help the Executives more fairly evaluate a potential acquisition of the Company, particularly when the acquisition would result in termination of the Executive's employment. These Change of Control employment agreements are based on market practice and do not affect other components of the Named Executive Officers' compensation. When entering into these agreements, the Committee reviewed survey data and practices of other public insurance and financial services companies. The Committee continues to review market practices in this area for potential changes in these agreements.

              All benefits provided to the Executives upon a Change of Control are paid after both a Change of Control and qualifying termination of employment have occurred (sometimes referred to as a "double-trigger"), except that the then current value of the Executive's Excess Plan and NQDB will be paid upon a Change of Control to ensure that the value of those plans is not reduced if the Company is sold. The Company entered into new Change of Control Employment Agreements with Executives in 2010 that generally reduced severance amounts as multiples of cash compensation and eliminated excise tax gross-ups. See pages 52-55 for details.

              The Company has a severance plan to provide benefits to employees whose employment is terminated by the Company due to a reorganization or reduction in the workforce. Additional payments may be permitted in some circumstances as a result of negotiations with Executives, particularly when the Company requests additional covenants from the Executives. The Company has an employment agreement with Mr. Zimpleman for his services as the Company's CEO. See page 52 for details.


Perquisites


              The only perquisite for Executives that is not offered to all employees is one physical examination per year. We provide this perquisite to protect the health of our Executives and the Company's investment in its leadership.


Stock Ownership Guidelines


              Executives are required to own stock in the Company to ensure their interests are aligned with the shareholders' interests and with the long term performance of the Company. Once the Executive achieves the required stock ownership level based on market value, the ownership requirement remains at the number of shares owned at that time, regardless of subsequent changes in stock price or salary. Upon promotion, the Executive is required to meet the next level of stock ownership.

              Until the ownership guideline is met, Executives are required to retain a portion of the "net profit shares" resulting from equity based long term incentive plan grants. Net profit shares are the shares remaining after payment of the option exercise price and taxes owed at time of exercise, vesting of restricted stock units or earn out of performance shares. The percentage of net profit shares that must be retained until the multiple of salary guidelines are met are shown below:

                         
 
  Executive Level
   
  Retention Ratio
   
  Multiple of Base Salary
   
    CEO (Zimpleman)       75%       5 times    
    Division Presidents & Executive Vice Presidents (Houston, McCaughan & Valdés)       50%       3 times    
    Senior Vice Presidents (Lillis)       50%       2 times    

              All Named Executive Officers comply with these guidelines.

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Claw Back Policy


              The Committee has also adopted a compensation recovery policy that applies to Executive Officers. The Company can recover incentive compensation if the amount of the compensation was based on achievement of financial results that were subsequently restated if the Committee decides that the Executive Officer engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and that the amount of the Executive Officer's incentive compensation or equity award would have been lower had the financial results been properly reported.


Trading Policy


              The Company prohibits Directors and employees, including Executive Officers, from purchasing any Company securities on margin (except to the extent incident to the exercise of stock options), engaging in short sales or trading in any put or call options.


Succession Planning


              The Human Resources Committee, the CEO and the Senior Vice President — Human Resources maintain an ongoing focus on executive development and succession planning to prepare the Company for future success. In addition to preparing for CEO succession, the succession planning process has included all key executive positions. A comprehensive review of executive talent, including assessments by an independent consulting firm, has determined participants' readiness to take on additional leadership roles and identified the developmental and coaching opportunities needed to prepare them for greater responsibilities. The CEO makes a formal succession planning presentation to the Board of Directors annually. Succession planning is a responsibility of the entire Board and all members participate. In addition, the Company has an emergency succession plan for the CEO that is reviewed by the Board annually.


Human Resources Committee Report


              The Human Resources Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Michael T. Dan, Chair
Betsy J. Bernard
Richard L. Keyser
Elizabeth E. Tallett

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Risk Assessment


              Members of the Human Resources Department reviewed all of the Company's incentive compensation plans for employees to determine whether any compensation policies or practices are reasonably likely to have a materially adverse effect on the Company, and reviewed its processes and conclusions with the Chief Risk Officer. The following factors, among others, were reviewed:

              Other factors that mitigate risks of the Company's incentive plans are the Company's stock ownership guidelines for Executives and the compensation recovery policy. The Company also prohibits all employees from purchasing any Company securities on margin (except for the exercise of stock options), engaging in short sales or trading in any put or call options. A summary of this information was reviewed with the Human Resources Committee. Based on this analysis, the Company has determined that the Company's compensation plans are designed to encourage behaviors that create and maintain shareholder value, do not encourage excessive risk, and are not reasonably likely to have a material adverse effect on the Company.


Summary Compensation Table


              The following table sets forth the compensation paid to the Named Executive Officers for services provided to the Company and its subsidiaries during 2010, 2011 and 2012.

                                                                                 
 
  Name
   
  Year
   
  Salary
(1)

   
  Bonus
   
  Stock
Awards
(2)(3)

   
  Option
Awards
(2)

   
  Non Equity
Incentive
Compensation
(4)

   
  Change in
Pension Value
and
Non-qualified
Deferred
Compensation
Earnings (5)

   
  All Other
Compensation
(6)

   
  Total
(7)

   
    Zimpleman       2012       $900,000       $0       $2,249,990       $2,491,679       $1,282,500       $3,605,227       $80,329       $10,609,725    
    Chairman,       2011       $876,923       $0       $1,799,986       $1,993,320       $1,302,000       $3,160,566       $72,732       $9,205,527    
    President & CEO       2010       $781,538       $0       $1,999,988       $1,661,156       $1,547,446       $2,200,038       $56,816       $8,246,982    
    Lillis       2012       $466,000       $0       $653,136       $723,308       $443,000       $1,412,152       $24,571       $3,722,167    
    Senior Vice       2011       $427,692       $0       $435,993       $482,827       $276,000       $974,268       $22,927       $2,619,707    
    President & CFO       2010       $373,946       $0       $415,016       $387,622       $336,552       $599,034       $17,428       $2,129,598    
    Houston       2012       $544,231       $0       $1,031,260       $1,142,017       $612,000       $846,704       $88,603       $4,264,815    
    Pres. Retirement,       2011       $519,231       $0       $853,108       $944,764       $526,000       $507,677       $74,386       $3,425,166    
    Ins. & Financial Svs       2010       $480,362       $0       $750,009       $830,578       $720,542       $307,042       $54,460       $3,142,993    
    McCaughan       2012       $593,192       $0       $974,995       $1,079,730       $1,602,000       $76,897       $13,673       $4,340,487    
    Pres. Global       2011       $565,423       $0       $855,746       $947,681       $1,272,000       $73,235       $6,329       $3,720,414    
    Asset Management       2010       $539,269       $0       $1,076,741       $911,110       $1,617,807       $69,748       $5,867       $4,220,542    
    Valdés                                                                            
    Pres. - Int'l Asset       2012       $519,231       $0       $525,008       $581,366       $370,000       $35,446       $67,530       $2,098,581    
    Mgmt & Accum                                                                            

(1)
Includes 2012 salary deferred into the qualified 401(k) plan and the Excess Plan, as shown below (information detailing deferrals for 2011 was included in last year's proxy statement):

                                 
 
  Named Executive
Officer

   
  401(k) Employee
Contribution

   
  Excess Plan Employee
Contributions

   
  Total Employee
Contributions

   
    Zimpleman       $19,346       $72,692       $92,038    
    Lillis       $13,885       $22,929       $36,814    
    Houston       $20,644       $35,462       $56,106    
    McCaughan       $17,000       $0       $17,000    
    Valdés       $8,791       $24,561       $33,352    

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(2)
Amounts represent the aggregate grant date fair value amounts for awards and options granted in the year noted. The assumptions for the valuation of stock and option awards under the ASC Topic 718 for awards are included in the Summary Compensation Table as follows:

                                                 
 
  Grant Date
   
  Exercise
Price

   
  Volatility
   
  Expected
Term

   
  Dividend
Yield

   
  Risk-Free
Interest Rate

   
    February 23, 2010       $22.21       66.60%       6 years       2.251%       2.75%    
    February 28, 2011       $34.26       67.88%       6 years       1.605%       2.48%    
    February 27, 2012       $27.46       70.03%       6 years       2.550%       1.10%    
 
The grant date fair value per share of each RSU or PSU granted on the same date as an option listed in the above table was equal to the exercise price reported for options granted on such date.

PSUs will be earned and paid in shares of Common Stock only if performance requirements are met or exceeded. The PSUs are eligible for dividend equivalents, and the dividend equivalents are subject to the same performance requirements as the corresponding PSUs and are only earned if the performance measures are met or exceeded. The maximum payout for the 2010, 2011, and 2012 PSUs is 150% of the target number of PSUs. If the PSUs granted in 2012 are earned at the maximum payout, the grant date value of such PSUs would be as shown in the following table, and the amounts reported in the Stock Awards column, above, would be increased by the amount shown in the column to the far right of the following table.

                         
 
  Named Executive
Officer

   
  Grant Date Value
of 2012 PSUs
at Maximum Payout

   
  Amount by Which
Aggregate Grant Date
Values Reported
Would be Increased

   
    Zimpleman       $3,374,985       $1,124,995    
    Lillis       $979,704       $326,568    
    Houston       $1,546,890       $515,630    
    McCaughan       $1,462,492       $487,497    
    Valdés       $787,512       $262,504    
(4)
The amounts shown represent annual incentive compensation awards earned in 2012 and paid in 2013 and include the following amounts deferred into the qualified 401(k) Plan and Excess Plan:

                 
 
  Named Executive Officer
   
  Employee Contributions
on Incentive Pay

   
    Zimpleman       $127,552    
    Lillis       $30,226    
    Houston       $53,678    
    McCaughan       $0    
    Valdés       $24,771    
(5)
Assumptions underlying the determination of the amount of increase in actuarial value for both the qualified and non-qualified pension plans are illustrated on page 50. Changes in these assumptions and compensation changes will impact this value annually. There are no above market earnings on deferred compensation.

(6)
All Other Compensation for the Named Executive Officers consists of the following:

                                 
 
  Named Executive
Officer

   
  Perquisites and Other
Personal Benefits
(a)

   
  Principal Life Contributions to
Defined Contribution Plans
(b)

   
  Total
   
    Zimpleman       $14,269       $66,060       $80,329    
    Lillis       $2,311       $22,260       $24,571    
    Houston       $24,389       $64,214       $88,603    
    McCaughan       $923       $12,750       $13,673    
    Valdés       $36,359       $31,171       $67,530    

                                 
 
  Named Executive Officer
   
  401(k) Matching
Contribution Made by
Principal Life

   
  Excess Plan Matching
Contribution Made by
Principal Life

   
  Total
   
    Zimpleman       $6,375       $59,685       $66,060    
    Lillis       $5,100       $17,160       $22,260    
    Houston       $6,800       $57,414       $64,214    
    McCaughan       $12,750       $0       $12,750    
    Valdés       $12,750       $18,421       $31,171    
(7)
Sum of the total dollar value of the other columns in this table.

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Grants of Plan Based Awards for Fiscal Year End December 31, 2012


                                                                                                 
                    Estimated Future Payouts
Under Non Equity
Incentive Plan Awards
      Estimated Future Payouts
Under Equity
Incentive Plan Awards
(2)
      All Other
Stock
Awards:
Number
of
Shares
      All Other
Option
Awards:
Number of
Securities
      Exercise
or Base
Price of
      Grant
Date Fair
Value of
Stock and
   
                                                   
   

Name
     
Grant
Date
     
Threshold
 
     
Target
 
     
Maximum
(1)
     
Threshold
 
     
Target
 
     
Maximum
 
      of Stock
or Units
(3)
      Underlying
Options
(4)
      Option
Awards
(5)
      Option
Awards
(6)
   
    Zimpleman               N/A       $1,282,500       $5,600,000                                                            
            2/27/2012                               40,969       81,937       122,906                               $2,249,990    
            2/27/2012                                                               178,615       $27.46       $2,491,679    
    Lillis               N/A       $442,700       $1,600,000                                                            
            2/27/2012                               11,893       23,785       35,678                               $653,136    
            2/27/2012                                                               51,850       $27.46       $723,308    
    Houston               N/A       $646,274       $2,400,000                                                            
            2/27/2012                               18,778       37,555       56,333                               $1,031,260    
            2/27/2012                                                               81,865       $27.46       $1,142,017    
    McCaughan               N/A       $1,690,598       $4,800,000                                                            
            2/27/2012                               17,753       35,506       53,259                               $974,995    
            2/27/2012                                                               77,400       $27.46       $1,079,730    
    Valdés               N/A       $369,952       $1,600,000                                                            
            2/27/2012                               9,560       19,119       28,679                               $525,008    
            2/27/2012                                                               41,675       $27.46       $581,366    

(1)
The maximum award shown is the maximum aggregate award payable under the Annual Incentive Pay Plan for the Named Executive Officers, based on the Bonus Pool. In determining the actual annual incentive award payable, the Human Resources Committee exercises negative discretion to reduce the amount payable from the maximum award determined under the Annual Incentive Pay Plan as described on pages 34-37.
(2)
These columns reflect PSUs granted on February 27, 2012. These PSUs will vest, if at all, according to the 2012 – 2014 PSU performance scale outlined on page 38. The maximum payout for the 2012 PSUs is 150% of the target number of PSUs.
(3)
There were no other stock awards granted in 2012.
(4)
The options vest in three equal annual installments beginning on the first anniversary of the grant date. The options are not eligible for dividend equivalents. The number of stock options awarded to each Named Executive Officer in a given year is calculated by dividing the grant date fair value of one option into the portion of the Adjusted Target Award Opportunity (50%) to be delivered in options, using the Black-Scholes model (but adjusting for the possibility that some options may be forfeited because Executives may terminate their employment prior to the options vesting).
(5)
The per-share option exercise price is the closing price of the Common Stock on the date of grant.
(6)
Represents the grant date fair value of the award at target.

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Outstanding Equity Awards at Fiscal Year End December 31, 2012


                                                                         
            Option Awards       Stock Awards    
           
    Name       Number of
Securities
Underlying
Unexercised
Options
Exercisable
(1)
      Number of
Securities
Underlying
Unexercised
Options
Unexercisable
      Option
Exercise
Price
      Option
Expiration
Date
      Number of
Shares or
Units of
Stock that
Have Not
Vested
(2)
      Market
Value of
Shares or
Units of
Stock
that Have
Not
Vested
      Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights that
Have Not Vested
(3)
      Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested (4)
   
    Zimpleman (5)       48,353       0       $27.57       02/25/2013                                    
            77,790       0       $36.30       02/24/2014                                    
            108,185       0       $39.02       02/28/2015                                    
            82,885       0       $49.25       02/27/2016                                    
            1,120       0       $54.45       06/01/2016                                    
            74,935       0       $62.63       02/26/2017                                    
            142,985       0       $60.10       02/26/2018                                    
            368,615       0       $11.07       02/24/2019                                    
            96,466       48,234       $22.21       02/23/2020       24,263       $691,976       80,068       $2,283,553    
            35,305       70,610       $34.26       02/28/2021                       55,595       $1,585,566    
            0       178,615       $27.46       02/27/2022                       84,275       $2,403,526    
    Lillis (6)       7,380       0       $60.10       02/26/2018                                    
            13,505       0       $56.42       05/19/2018                                    
            22,510       11,255       $22.21       02/23/2020       3,155       $89,970       18,683       $532,841    
            8,551       17,104       $34.26       02/28/2021                       13,466       $384,056    
            0       51,850       $27.46       02/27/2022                       24,464       $697,705    
    Houston       37,080       0       $60.10       02/26/2018                                    
            129,810       0       $11.07       02/24/2019                                    
            48,233       24,117       $22.21       02/23/2020                       40,035       $1,141,794    
            16,733       33,467       $34.26       02/28/2021                       26,349       $751,483    
            0       81,865       $27.46       02/27/2022                       38,627       $1,101,632    
    McCaughan       40,475       0       $27.57       02/25/2013                                    
            74,960       0       $36.30       02/24/2014                                    
            91,955       0       $39.02       02/28/2015                                    
            63,760       0       $49.25       02/27/2016                                    
            48,990       0       $62.63       02/26/2017                                    
            60,590       0       $60.10       02/26/2018                                    
            173,555       0       $11.07       02/24/2019                                    
            52,910       26,455       $22.21       02/23/2020       12,325       $351,521       43,918       $1,252,527    
            16,785       33,570       $34.26       02/28/2021                       26,431       $753,807    
            0       77,400       $27.46       02/27/2022                       36,519       $1,041,527    
    Valdés       0       41,675       $27.46       02/27/2022                       19,665       $560,833    

(1)
All options vest in three equal installments on the first, second and third anniversaries of the grant date. Each of these options is also subject to accelerated vesting in certain events, such as the Executive's death, disability or retirement, or upon the occurrence of a Change of Control.
(2)
All RSUs vest on the third anniversary of the grant date.
(3)
The PSUs granted in 2010 vested on December 31, 2012 are disclosed at 110% in accordance with ASC Topic 718. The PSUs granted in 2011 will vest on December 31, 2013 and will pay out if either the ROE or operating income threshold performance measure is met as approved by the Human Resources Committee. PSUs granted in 2012 will vest on December 31, 2014 and will pay out if either the ROE or operating income threshold is met as approved by the Human Resources Committee.
(4)
Assumes a stock price of $28.52 per share, the closing price of a share of Common Stock on the last trading day of the year, December 31, 2012, reported for the New York Stock Exchange-Composite Transactions.
(5)
Mr. Zimpleman received additional options on June 1, 2006, when he was promoted to President and Chief Operating Officer.
(6)
Mr. Lillis received additional options on May 19, 2008, in connection with his promotion to CFO.

              Executives may defer PSUs that are earned and would otherwise be paid shortly after the performance period. Annual cash incentive awards, as shown in the Non-Equity Incentive Compensation column of the Summary Compensation Table, may also be deferred into the Excess Plan.

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Option Exercises and Stock Vesting


              The following table provides information concerning the exercise of stock options and the vesting of RSUs and PSUs during calendar year 2012 for each Named Executive Officer on an aggregated basis.

                                         
 
   
   
  OPTION AWARDS
   
  STOCK AWARDS
   
    Named
Executive
Officer
 
      Number of Shares
Acquired on
Exercise
      Value Realized
on Exercise
(1)
      Number of Shares
Acquired on
Vesting
      Value Realized
on Vesting
(2)
   
    Zimpleman       41,095       $100,683       79,340       $2,435,745    
    Lillis (3)       44,895       $693,268       18,513       $568,326    
    Houston (4)       13,515       $5,811       84,214       $2,458,419    
    McCaughan (4)       66,817       $20,186       98,111       $2,856,409    
    Valdés       0       $0       10,049       $308,509    

(1)
Represents the difference between the market price of the underlying shares of Common Stock on the date of exercise and the exercise price of the exercised option.
(2)
Represents the market value of PSUs granted in 2010 that settled on February 25, 2013 at $30.70 upon Committee approval of the final performance modifier of 109%. The actual payout was determined applying negative discretion, which took into account various factors including changes in accounting guidance and extraordinary items. As described in the 10k, these extraordinary items include a 3Q12 actuarial assumption review and Principal Financial Group Foundation contributions arising from Catalyst Health Solutions gains.
(3)
Although vested, Mr. Lillis elected to defer settlement of his PSUs to the earlier of January 3, 2017 or termination of his employment.
(4)
In addition to the PSUs, Mr. Houston and Mr. McCaughan had RSUs granted in 2009 that settled on February 24, 2012 at $27.85.

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Pension Plan Information


                                                     
  
  Participant Group
   
  Pension Benefit Formula
   
   
    GRANDFATHERED CHOICE
 
Grandfathered Choice Employees are employees who were age 47 or older with at least ten years of service on December 31, 2005, and elected to retain the prior benefit provisions under the DB Plan and the NQDB Plan and to forego receipt of the additional matching contributions offered under the 401(k) and Excess Plans.
      Defined Benefit Plan (Traditional Formula)
39.2% of Average Compensation (The highest five consecutive years' total Pay out of the past ten years of Pay. "Pay" is the Named Executive Officer's base salary and annual incentive bonus up to the Tax Code limits) below the Integration Level (1) plus 61.25% of Average Compensation above the Integration Level.
 
Cash Balance Plan - The Annual Pay Credits are calculated using the table below
   
                                                     
                               
                        Age + Service       Annual Pay Credit            
                                       
                        Years
(Points)
      Contribution on
all Pay
      Contribution on Pay above
Taxable Wage Base(2)
           
                               
                        < 40       4.00%       2.00%            
                               
                        40 – 49       5.50%       2.75%            
                               
                        50 – 59       7.00%       3.50%            
                               
                        60 – 69       9.00%       4.50%            
                               
                        70 – 79       11.50%       5.75%            
                               
                        80 or more       14.00%       7.00%            
                               
                                                        
    Messrs. Zimpleman and Lillis are Grandfathered Choice participants and their benefit at retirement will be the greater of the benefit provided under the Traditional or Cash Balance Formulas.       NQ Defined Benefit
The NQDB benefit formula for employees hired before January 1, 2002, who are also Grandfathered Choice Participants is the greater of:
• 65% of the employee's Average Compensation, offset by Social Security and DB Plan benefits; or
• The traditional or cash balance DB Plan benefit for Grandfathered Choice Participants (whichever is greater) without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan.
   
                    
            Reduction if payments start earlier than Normal Retirement Age (Traditional Benefit Formula only):    
            • The Company subsidizes early retirement if the Executive remains employed until Early Retirement Age (age 57 with 10 years of service), which is the earliest date an employee may begin receiving retirement benefits.
• If the Executive retires after Early Retirement Age but before Normal Retirement Age (age 65), those benefits received by the Executive prior to age 62 are reduced to reflect payments are beginning at an earlier age. The early retirement benefits range from 75% at age 57 to 95% at age 61.
• If the Executive terminates employment before reaching Early Retirement Age, Principal Life does not subsidize early retirement. The early retirement benefits range from 58.6% at age 57 to 92.8% at age 64.
• Benefits receive a Cost of Living(3) adjustment after retirement benefits commence.
   
           



(1)    The Covered Compensation Table in the Tax Code.
(2)    The Social Security Taxable Wage Base.
(3)    Seventy-five percent of increase in the Consumer Price Index. An average is taken for October through September and applied to the following year.
   
                                                     

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  Participant Group
   
  Pension Benefit Formula
   
   
    NON-GRANDFATHERED CHOICE
 
Non-Grandfathered Choice Employees are employees who were eligible for the plan prior to January 1, 2006 and will receive the greater of the benefit provided under the Traditional Benefit Formula or the Cash Balance Formula. Any employees hired or that reenter the plan after December 31, 2001 are only eligible for the Cash balance Formula.
      Defined Benefit Plan (Traditional Formula)
35% of Average Compensation below the Integration Level plus 55% of Average Compensation above the Integration Level.
 
Cash Balance Plan - The Annual Pay Credits are calculated using the table below
   
                                                     
                               
                        Age + Service       Annual Pay Credit            
                                       
                        Years
(Points)
      Contribution on
all Pay
      Contribution on Pay above
Taxable Wage Base
           
                               
                        < 40       3.00%       1.50%            
                               
                        40 – 59       4.00%       2.00%            
                               
                        60 – 79       5.50%       2.75%            
                               
                        80 or more       7.00%       3.5%            
                               
                                                     
    • Mr. Houston's retirement benefit will be the greater of the Traditional or Cash Balance Formulas.
• 
Mr. Valdés's retirement benefit will be - the Cash Balance Formula. Mr. Valdés will also have a small benefit under the Traditional Formula due to service prior to January 1, 2006.
• 
Mr. McCaughan's retirement befit will be determined under the - Cash Balance Formula. As of January 1, 2010, he no longer accrues benefits under this plan.
      NQ Defined Benefit
The NQDB benefit formula for employees hired before January 1, 2002, who are Non-Grandfathered Choice Participants is:
 
• The traditional or cash balance pension plan benefit for Non-Grandfathered Choice Participants (whichever is greater) without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan.
 
A different benefit formula was in effect until January 1, 2006, for the DB Plan and NQDB. For employees that were active participants of the plan on December 31, 2005, their accrued benefit on any date will not be less than their accrued benefit determined as of December 31, 2005.
 
Reduction if payments start earlier than Normal Retirement Age (Traditional Benefit Formula only):
• The Company subsidizes early retirement if the Executive remains employed until Early Retirement Age (age 57 with 10 years of service), which is the earliest date an employee may begin receiving retirement benefits.
• The subsidy is less for benefits accrued after December 31, 2005. If the Executive retires after Early Retirement Age but before Normal Retirement Age (age 65), those benefits received by the Executive prior to age 62 are reduced to reflect payments are beginning at an earlier age. The early retirement benefits range from 75% at age 57 to 95% at age 61 (and 97% at age 64 for benefits earned after December 31, 2005).
• If the Executive terminates employment before reaching Early Retirement Age, Principal Life does not subsidize early retirement. The early retirement benefits range from 58.6% at age 57 to 92.8% at age 64.
• Benefits accrued as of December 31, 2005 receive a Cost of Living adjustment after retirement benefits commence.
   
                                                     

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Pension Distributions


              Participants receive an annuity under the traditional benefit formula in the DB Plan. The earliest this benefit may be received is at age 57 with ten years of service. The qualified cash balance benefit formula in the DB Plan allows for benefits in the form of an annuity or as a lump sum (payable immediately upon termination/retirement or deferred to a later date).

              NQDB benefits may be paid as a lump sum at termination/retirement, or as an annuity at the later of age 57 or termination/retirement. All benefit payments for specified employees, including the Named Executive Officers, will be made no earlier than six months after termination, as required by Section 409A of the Tax Code. Distributions may also be allowed at death or a change of control. For participants in the plan prior to January 1, 2010, a mandatory payment occurs at age 65, and these participants could elect for benefits to be paid to them on a date they specified between age 60 and 65.


Pension Benefits


                                         
 
  Named Executive
Officer

   
  Plan Name
   
  Number of
Years Credited
Service
(1)

   
  Present Value of
Accumulated Benefit at
Normal Retirement Age
(2)

   
  Payments
During Last
Fiscal Year

   
    Zimpleman       Qualified Pension
NQDB
      39       $1,963,080
$14,519,969
      $0
$0
   
    Lillis       Qualified Pension
NQDB
      30       $1,748,751
$2,783,060
      $0
$0
   
    Houston       Qualified Pension
NQDB
      28       $635,589
$1,901,586
      $0
$0
   
    McCaughan       Qualified pension
NQDB
      7       $174,338
$1,440,493
      $0
$0
   
    Valdés       Qualified pension
NQDB
      2       $49,683
$28,174
      $0
$0
   

(1)
As of December 31, 2012.
(2)
Benefit calculations have been made using the following assumptions:
Discount Rate: 5.15% for December 31, 2011 and 4% for December 31, 2012 benefits;
Mortality: 2011 IRS Prescribed Mortality — Static Annuitant, Male & Female for December 31, 2011 benefits and 2012 IRS Prescribed Mortality – Static Annuitant, Male & Female for December 31, 2012 benefits;
Cost of living increase: 1.875% for December 31, 2011 benefits and 1.6875% for December 31, 2012 benefits;
No disability;
Retirement age of 62 for Messrs. Zimpleman and Lillis, who could retire at that age and receive unreduced benefits under the terms of the plans. Retirement age of 65 for Houston, as he will not have unreduced benefits prior to that point. Retirement age of 65 for Valdes frozen traditional benefit plus current cash balance account. Current cash balance account for Mr. McCaughan;
A spouse 3 years younger; and
Cash balance interest crediting rate of 5.5% for December 31, 2011 and for December 31, 2012.

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Non-Qualified Deferred Compensation


                                                 
 
  Named Executive
Officer

   
  Executive
Contributions in
Last Fiscal year
(1)

   
  Principal Life
Contributions in
Last Fiscal Year
(2)

   
  Aggregate
Earnings in Last
Fiscal Year

   
  Aggregate
Withdrawals /
Distributions

   
  Aggregate Balance
at Last
Fiscal Year End
(3)

   
    Zimpleman       $198,950       $59,685       $296,295       $0       $2,386,118    
    Lillis       $34,320       $17,160       $49,977       $0       $365,845    
    Houston       $76,552       $57,414       $156,985       $0       $1,193,513    
    McCaughan       $0       $0       $330,299       $0       $2,106,907    
    Valdés       $24,561       $18,421       1,955       $0       $44,937    

(1)
The amounts shown as "Executive Contributions" have either been included in the Salary column of the Summary Compensation Table on page 42 or represent annual incentive payment deferrals earned in 2011 and credited to the Executives' accounts during 2012.
(2)
The amounts shown as "Principal Life Contributions" are included in the "All Other Compensation Column" of the Summary Compensation table on page 42.
(3)
The end of year 2012 aggregate balances includes the following deferrals and matching contributions from years prior to 2012:

                                 
 
  Named Executive Officer
   
  Employee Deferral
Prior to 1/1/2012

   
  Principal Life Match
Prior to 1/1/2012

   
  Total
   
    Zimpleman       $1,417,002       $351,349       $1,768,351    
    Lillis       $147,066       $68,899       $215,965    
    Houston       $477,030       $276,603       $753,633    
    McCaughan       $998,343       $581,568       $1,579,911    
    Valdés       $0       $0       $0    


Qualified 401(k) Plan and Excess Plan


              The qualified 401(k) plan allows employees to defer one to 15% of base salary (one to 100% if not contributing to the Excess Plan) and one to 100% of awards under the Annual Incentive Plan or PrinPay Plan up to the limits imposed by the Tax Code. Principal Life provides matching cash contributions of (i) 50% of deferrals, up to a maximum deferral of six percent of the employee's pay (base salary and annual bonus) for Grandfathered Choice Participants and (ii) 75% of deferrals, up to a maximum of eight percent of the employee's pay (base salary and annual bonus) for all other participants.

              The qualified 401(k) plan offers 20 investment options (including the Company's Common Stock) and investment return is based on the participant's investment direction. Distributions from the plan are allowed at various times including at termination of employment, death and disability. Vesting in the qualified plan is a three-year cliff schedule.

              The Excess Plan allows for deferral of one to 15% of base salary and deferral of one to 100% of awards under the Annual Incentive Plan or PrinPay Plan. Principal Life provides matching cash contributions identical to those in the 401(k) Plan, without regard to the limitations on such contributions imposed under the Tax Code. Plan participants can direct their investments and the participants' investment returns are based on their investment selections. Deferrals and matching contributions in the Excess Plan are immediately vested. Distributions from the Excess Plan are allowed at various times, including termination of employment, death, specified date, change of control, mandatory distribution at age 65 and in the event of an unforeseeable emergency.

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              The following funds are the investment options available to all participants in the Excess Plan:

                 
 
  Investment Option
   
  1 Year Rate Of Return
(12/31/2012)

   
    Principal Equity Income Institutional Fund       12.95%    
    Principal LargeCap Value Institutional Fund       18.82%    
    Principal LargeCap S&P 500 Index Institutional Fund       15.73%    
    Principal LargeCap Growth Institutional Fund       16.48%    
    Principal LargeCap Growth I Institutional Fund       16.52%    
    Principal MidCap Blend Institutional Fund       19.15%    
    Principal MidCap Growth III Institutional Fund       9.40%    
    Principal SmallCap Value II Institutional Fund       17.70%    
    Principal SmallCap S&P 600 Index Institutional Fund       16.10%    
    Principal Small Cap Growth I Institutional Fund       14.63%    
    Principal Real Estate Securities Institutional Fund       17.15%    
    Principal International Emerging Markets Institutional Fund       20.80%    
    Principal Diversified International Institutional Fund       18.19%    
    Principal LifeTime Strategic Income Institutional Fund       9.46%    
    Principal LifeTime 2010 Institutional Fund       12.04%    
    Principal LifeTime 2020 Institutional Fund       14.71%    
    Principal LifeTime 2030 Institutional Fund       15.66%    
    Principal LifeTime 2040 Institutional Fund       16.66%    
    Principal LifeTime 2050 Institutional Fund       17.42%    
    Principal Money Market Institutional Fund       0%    
    Principal Bond & Mortgage Securities Institutional Fund       7.35%    
    Principal Inflation Protection Institutional Fund       7.07%    
    Principal Government & High Quality Bond Institutional Fund       4.37%    
    Principal Financial Group, Inc. Employer Stock Fund       19.11%    

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PAYMENTS UPON TERMINATION



Employment Agreement


              The Company has an employment agreement dated May 1, 2008, with Mr. Zimpleman for his service as the Company's CEO. The employment agreement had an initial term through May 1, 2011, and the term of the agreement automatically extends to create a new one-year term unless either Mr. Zimpleman or the Company notifies the other of the intention not to extend the agreement. Mr. Zimpleman is entitled to benefits if his employment involuntarily terminates under certain circumstances other than upon a Change of Control. The severance provisions were based on market practice, and did not impact the decisions made regarding other components of his compensation.


Severance Plans


              Messrs. Houston Lillis and Valdés are eligible for severance under the Company's severance plan if they are terminated as a result of lay-offs, position elimination or similar reasons. Executives do not receive severance benefits if they take a comparable job with Principal Life, fail to sign a release of claims against Principal Life, and/or other specified reasons. The benefit payable under the severance plan is the greater of one week of base salary for each year of service with Principal Life or two weeks of base salary for each $10,000 of annual base salary (rounded to the nearest $10,000). The severance plan has a minimum benefit of six weeks and a maximum benefit of 52 weeks of base pay, and also provides for three months of reimbursement of premium for continuation of medical, dental and vision insurance under the Retiree plan if the Executive is eligible to retire or COBRA if the Executive is not eligible to retire. In circumstances in which the severance plan does not apply, the Human Resources Committee would determine whether any severance benefits would be paid to Messrs. Houston, Lillis and Valdés.

              An agreement made with Mr. McCaughan when he was hired provides that if he is terminated without "Cause", as that term is defined in the Change of Control Employment Agreements (see below), he will be paid (i) one year's base compensation and one year's annual bonus at target, and (ii) all other accrued entitlements, in accordance with the terms of the relevant plan.

              Pursuant to Mr. Zimpleman's employment agreement, the lump sum severance amount is two times the sum of his annual base salary and target annual bonus.

              The following table illustrates the severance or contractual benefits that the Named Executive Officers would have received had they qualified for such benefits on December 31, 2012.

                                         
 
  Named Executive
Officer

   
  Severance
   
  Outplacement
Services

   
  COBRA
Reimbursement

   
  Total
   
    Zimpleman       $4,500,000       $10,000       $3,038       $4,513,038    
    Lillis       $475,000       $10,500       $1,691       $487,191    
    Houston       $550,000       $10,500       $4,389       $564,889    
    McCaughan       $2,400,000       $10,500       $5,122       $2,415,622    
    Valdés       $525,000       $10,500       $4,240       $539,740    


Change of Control Employment Agreements


              The Company entered into Change of Control Employment Agreements in 2010 with each of the Named Executive Officers, which replaced prior agreements. These Agreements have a term of two years and will automatically renew for successive one-year periods unless the Company provides a notice electing not to extend the term. If during the term of these agreements a "Pre-Change of Control Event" or a "Change of Control"

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occurs, the term of the agreements will extend until the second anniversary of a Change of Control. These agreements provide that if payments upon termination of employment related to a Change of Control would be subjected to the excise tax imposed by Section 4999 of the Code, and if reducing the amount of the payments would result in greater benefits to the Executive (after taking into consideration the payment of all income and excise taxes that would be owed as a result of the Change of Control payments), the Company will reduce the Change in Control payments by the amount necessary to maximize the benefits received by the Executive Officer, determined on an after tax basis. In addition to the benefit of having to make fewer payments, if the benefits payable to any of the Named Executive Officers are reduced, all of the payments will be eligible to be deducted by the Company for federal income tax purposes.

              The severance and other benefits provided under these agreements will be available to covered Executives upon a Change of Control if their employment is terminated following or in connection with a Pre-Change of Control Event, or if any third party ends or adversely changes the terms and conditions of the Executive's employment. For an Executive termination prior to a Change of Control, such termination or change in employment is deemed to have occurred immediately following the date on which a Change of Control occurs, rather than at the time the termination or change in employment actually occurs.

              Under these Agreements, a "Pre-Change of Control Event" means:

              Under these Agreements, a Change of Control means:

              These Agreements also provide:

              The benefits the Executive receives upon a Change of Control without termination of employment include the current vested account balance in the Excess Plan and the current vested benefit in the NQDB, according to change of control distribution elections on file for these plans.

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              For purposes of the Agreements, "Good Reason" means negative changes in the terms and conditions of the Executive's employment, consisting of:

              "Cause" means any one or more of the following:

              The benefits to be paid or provided under the Agreements if termination occurs for Good Reason or without Cause consist of:

              In addition, until the third anniversary of the date of the Executive's termination (the second anniversary for Mr. Lillis), the Executive and his eligible family members will receive medical, prescription drug, dental, vision, group term life insurance, and accidental death and dismemberment coverages comparable to those received by Executives whose employment continues.

              Pursuant to these Agreements, Mr. Zimpleman has agreed that for 18 months, and the other Named Executive Officers for one year, following a termination of employment that results in the Executive receiving the severance benefits described above, the Executive will not work for a competing business, solicit employees or customers, or interfere with the relationships of the Company, its affiliates and subsidiaries with their employees or customers.

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Potential Payments Upon Termination Related to a Change of Control


              The following table describes the potential payments upon involuntary termination without Cause or voluntary termination for Good Reason following a Change of Control. The calculations provided in the table assume:

                                                         
 
  Named
Executive
Officer

   
  Cash
Severance
(1)

   
  Spread on
Previously
Unvested
Options

   
  Value of Previously
Unvested
Restricted Stock &
Performance
Shares (2)

   
  Benefits
Continuation
(3)

   
  Accelerated
Pension
Benefit
(4)

   
  Total
Termination
Benefits
(before
taxes)

   
    Zimpleman       $4,500,000       $493,688       $4,477,298       $41,446       $0       $9,512,432    
    Lillis       $1,900,000       $125,980       $1,124,772       $24,386       $0       $3,175,138    
    Houston       $2,475,000       $238,955       $1,781,245       $55,921       $0       $4,551,121    
    McCaughan       $4,800,000       $248,975       $2,051,158       $51,042       $0       $7,151,175    
    Valdés       $1,837,500       $102,000       $856,769       $55,921       $0       $2,852,190    

(1)
Cash severance equals two times the sum of base salary and target annual bonus. In addition, the Executives would be entitled to a pro-rata bonus for the year of termination.
(2)
Equals the full value of unvested restricted shares and unearned performance shares as of December 31, 2012, where vesting would be accelerated, at a stock price of $28.52. Performance shares granted in 2011 and 2012 are valued at target, based on our performance-to-date as of December 31, 2012.
(3)
Includes the estimated cost of continued medical, dental, vision, and life insurance coverage for three years after the Executive's termination and outplacement services, except for Mr. Lillis, who would receive these benefits for two years.
(4)
Represents the lump-sum present value of the accelerated vesting of unvested retirement benefits.

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PROPOSAL THREE – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION


              Say on pay votes will be held annually until the next vote on the frequency of this advisory vote is conducted in 2017, or until the Board determines that a different frequency would be in the best interests of the Company's shareholders.

              The Company's Executive compensation program is designed to reward Executives who contribute to the achievement of the Company's business objectives and to attract, retain and motivate talented Executives to perform at the highest level and contribute significantly to the Company's success. The program is designed to tie the delivery of Executive compensation to the achievement of the Company's long and short term financial and strategic goals and to align the interests of Executives and shareholders. The purposes and objectives of, and the rationale behind, the Company's compensation program are described in significant detail in the Compensation Discussion and Analysis, starting on page 26. Of particular note are the following policies and practices aligned with recognized corporate governance best practice:

              Shareholders are being asked to vote on the Company's compensation policies and procedures for the Named Executive Officers, as described in the Compensation Discussion and Analysis and the compensation tables and the accompanying narratives in this Proxy Statement.

              This vote is not intended to address any specific item of compensation, but the Company's overall compensation related to our Named Executive Officers. Because your vote is advisory, it will not be binding on the Board and will not overrule any decision by the Board or require the Board to take any action. However, the Human Resources Committee, which is responsible for designing and administering the Company's executive compensation program, values shareholder opinions and will consider the outcome of the vote when making future compensation decisions for the Named Executive Officers.

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              This proposal, commonly known as a "say on pay" proposal, gives shareholders the opportunity to vote on an advisory, non-binding basis to approve the compensation of our Named Executive Officers as disclosed in this proxy statement pursuant to SEC rules through the following resolution:

              RESOLVED, that the compensation paid to the Company's Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.

              The Board of Directors recommends that shareholders vote "For" this resolution.

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PROPOSAL FOUR – RATIFICATION OF APPOINTMENT OF INDEPENDENT
PUBLIC REGISTERED ACCOUNTANTS


              Subject to shareholder ratification, the Audit Committee has appointed the firm of Ernst & Young LLP to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2013 The Company or Principal Life has used Ernst & Young LLP as its independent registered public accountants for several years. Ratification of the appointment of the independent registered public accountants requires the affirmative vote of a majority of the shares represented at the meeting and voting on the matter. If the shareholders do not ratify this appointment, the Audit Committee will consider the matter of the appointment of the independent registered public accountants.

              RESOLVED, that the appointment of Ernst & Young, LLP to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2013 be ratified.

              The Board of Directors recommends that shareholders vote "For" this resolution.

              Representatives of Ernst & Young LLP will be present at the Annual Meeting, will be given an opportunity to make a statement if they so desire and will be available to respond to appropriate questions relating to the audit of the Company's 2012 consolidated financial statements.


Audit Fees


              The aggregate fees billed by the Company's independent registered public accounting firm in 2012 and 2011 for professional services rendered in connection with regulatory audits in accordance with US GAAP, statutory, or foreign accounting principles; consultation on matters addressed during these audits; review of documents filed with regulators including the SEC; other engagements required by statute; or engagements that generally only the Company's independent registered public accounting firm can reasonably provide, such as comfort letters or consents, were approximately $7,464,000 in 2012 and $7,362,000 in 2011.


Audit-Related Fees


              The aggregate fees billed by the Company's independent registered public accounting firm in 2012 and 2011 for professional services rendered in connection with audit-related services such as financial statement audits of employee benefit plans, financial statement audits not required by statute or regulation, accounting consultations in connection with proposed transactions or emerging accounting standards, and other attest and related advisory services not required by statute or regulation, were approximately $1,083,000 in 2012 and $1,185,000 in 2011.


Tax Fees


              The aggregate fees billed by the Company's independent registered public accounting firm for professional services rendered in connection with tax services consisting primarily of tax consultations related to the Foreign Account Tax Compliance Act and other compliance totaled approximately $1,911,000 in 2012 and $409,000 in 2011. Tax compliance generally involves preparation, assistance or attestation related to tax filings in various domestic and non-domestic jurisdictions. Tax consultation generally involves assistance in connection with tax audits, filing appeals, and compliance with new tax-related regulations.


All Other Fees


              The aggregate fees billed by the Company's independent registered public accounting firm for professional services rendered in connection other services primarily consisted of a construction cost evaluation,

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software licensing and an enterprise risk management evaluation (only in 2011), totaled approximately $27,500 in 2012 and $275,800 in 2011.

              The Audit Committee has adopted a policy on auditor independence that calls for the Committee to preapprove any service the Company's independent registered public accountant proposes to provide to the Company, its majority-owned subsidiaries, employee benefit plans or affiliates. The policy also calls for the Committee to preapprove any audit service any independent auditor proposes to provide to these entities. The purpose of the policy is to assure that the provision of such services does not impair any auditor's independence. The policy provides for the general preapproval of specific types of Audit and Audit-Related services and fees up to an established individual engagement and annual threshold. The policy requires specific preapproval of all other services. Pursuant to the policy, each quarter Company management presents to the Committee a detailed description of each particular service that meets the definition of services that have been generally approved and each service for which specific preapproval is sought, and an estimate of fees for each service. The policy accords the Audit Committee Chair authority to preapprove services and fees for those services that arise between regularly scheduled meetings of the Audit Committee. In considering whether to preapprove the provision of non-audit services by the independent registered public accountant, the Audit Committee will consider whether the services are compatible with the maintenance of the independent registered public accountant's independence. The Audit Committee does not delegate its responsibilities to preapprove services performed by an independent auditor to management.

              The Audit Committee did not approve the services described above under the captions "Audit-Related Fees," "Tax Fees" and "All Other Fees" by utilizing the de minimis exception of SEC Rule 2-01(c)(7)(i)(C).

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


              Except as otherwise indicated below, the following table shows, as of March 18, 2013, beneficial ownership of shares of Common Stock by (i) the only shareholder known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each Director, (iii) each Named Executive Officer and (iv) all current Directors and executive officers as a group. Except as otherwise indicated below, each of the individuals named in the table has sole voting and investment power, or shares such powers with his or her spouse, for the shares set forth opposite his or her name.

                             
 
  Name
   
  Number of Shares
Beneficially Owned(1)

   
  Percent of
Common Stock
Outstanding

   
    The Bank of New York Mellon Corporation (2)
    One Wall Street, 31st Floor
    New York, New York 10286
        18,742,133         6.38    
                             
    Nippon Life Insurance Company(3)
    3-5-12 Imabashi
    Chuo-ku
    Osaka, 541-8501, Japan
        18,137,000         6.18    
                             
    Capital Research Global Investors (4)
    333 South Hope Street
    Los Angeles, California 90071
        17,405,962         5.93    
                             
    The Vanguard Group (5)
    100 Vanguard Boulevard
    Malvern, Pennsylvania 19355
        16,960,533         5.77    
    Betsy J. Bernard         22,638         *    
    Jocelyn Carter-Miller         22,974         *    
    Gary E. Costley         30,290         *    
    Michael T. Dan         26,827         *    
    Dennis H. Ferro         6,271              
    C. Daniel Gelatt (6)         326,891         *    
    Sandra L. Helton         30,237         *    
    Richard L. Keyser         25,959         *    
    Luca Maestri         1,050         *    
    Arjun K. Mathrani         1,885         *    
    Elizabeth E. Tallett         26,567         *    
    Daniel J. Houston (7)         421,754         *    
    Terrance J. Lillis (7)         166,830         *    
    James P. McCaughan         783,114         *    
    Luis Valdes         135,255              
    Larry D. Zimpleman         1,298,610         *    
    All Directors and Executive Officers as a group (23 persons)         4,912,208         1.67    

*
The number of shares represents less than one percent of the number of shares of Common Stock outstanding.

(1)
Includes beneficial ownership of shares which each person named in this table has the right to acquire on or before May 17, 2013 pursuant to previously awarded stock options, RSUs, and performance units that, although scheduled to be paid in shares in more than 60 days, would be paid immediately upon termination of service, as follows: Ms. Bernard, 20,983; Ms. Carter-Miller, 22,804; Dr. Costley, 20,983; Mr. Dan, 16,827; Mr. Ferro, 5,271; Dr. Gelatt, 25,384; Ms. Helton, 20,983; Mr. Keyser, 24,934; Mr. Maestri, 1,050; Mr. Mathrani, 1,885; Ms. Tallett, 24,934; Mr. Houston, 379,784; Mr. Lillis, 131,244; Mr. McCaughan, 652,545; Mr. Valdes, 100,067; Mr. Zimpleman, 1,160,534; and all other executive officers as a group, 1,219,315.
(2)
The information regarding beneficial ownership by The Bank of New York Mellon Corporation is based solely on a Schedule 13G filed by it with the SEC on February 4, 2013, which provided information as of December 31, 2012. According to the Schedule 13G,

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Bank of New York Mellon has sole voting power with respect to 14,711,297 shares; shared voting power with respect to 571,568 shares; sole investment power with respect to 18,636,013 shares; and shared investment power with respect to 2,245 shares.
(3)
The information regarding beneficial ownership by Nippon Life Insurance Company is based solely on a Schedule 13G filed by it with the SEC on February 28, 2008, which provided information as of February 21, 2008. According to the Schedule 13G, Nippon Life has sole voting power with respect to 18,137,000 shares; shared voting power with respect to 0 shares; sole investment power with respect to 18,137,000 shares; and shared investment power with respect to 0 shares.
(4)
The information regarding beneficial ownership by Capital Research Global Investors is based solely on a Schedule 13G filed by it with the SEC on February 13, 2013, which provided information as of December 31, 2012. According to the Schedule 13G, Capital Research Global Investors has sole voting power with respect to 17,405,962 shares; shared voting power with respect to 0 shares; sole investment power with respect to 17,405,962 shares; and shared investment power with respect to 0 shares.
(5)
The information regarding beneficial ownership by The Vanguard Group is based solely on a Schedule 13G filed by it with the SEC on February 13, 2013, which provided information as of December 31, 2012. According to the Schedule 13G, Vanguard has sole voting power with respect to 493,238 shares; shared voting power with respect to 0 shares; sole investment power with respect to 16,497,754 shares; and shared investment power with respect to 462,779 shares.
(6)
Includes 301,506 shares held by Gingko LLC of which Dr. Gelatt is a controlling shareholder, director and executive officer.
(7)
Includes the following shares held in the Demutualization separate account for the benefit of each person indicated, as to which none of such persons has voting power: Mr. Houston, 397; and Mr. Lillis, 39.

              In addition to beneficial ownership of Common Stock, the Company's Directors and executive officers also hold different forms of "stock units" that are not reported in the security ownership table but represent additional financial interests that are subject to the same market risk as Common Stock. These units include shares that may be acquired after May 17, 2013 pursuant to previously awarded stock options, RSUs, performance share units and non-transferable accounting-entry units such as phantom stock units issued pursuant to Company stock-based compensation and benefit plans. The value of such units is the same as the value of the corresponding number of shares of Common Stock.

              See "Directors' Compensation" on pages 23-25 for a discussion of the options and RSUs granted to Directors under the Principal Financial Group, Inc. 2005 Directors Stock Plan and the phantom stock units credited to Directors who participate in the Deferred Compensation Plan for Non-Employee Directors of Principal Financial Group, Inc. See "Compensation Discussion and Analysis" beginning on page 26 for a discussion of the performance units credited to officers who defer receipt of awards under a long term performance plan, the options and RSUs granted under the 2010 Stock Incentive Plan, and phantom stock units credited to officers that defer salary into an employer stock fund available under the Excess Plan.

              As of March 18, 2013, the Directors and Executive Officers named in the security ownership table hold a pecuniary interest in the following number of units: Ms. Bernard, 4,846; Ms. Carter-Miller, 4,846; Dr. Costley, 11,584; Mr. Dan, 11,323; Mr. Ferro, 16,221; Dr. Gelatt, 4,846; Ms. Helton, 4,846; Mr. Keyser, 4,846; Mr. Maestri, 4,846; Mr. Mathrani, 10,588; Ms. Tallett, 9,714; Mr. Houston, 162,292; Mr. Lillis, 106,025; Mr. McCaughan, 169,696; Mr. Valdes, 87,599; and Mr. Zimpleman, 377,545.


Section 16(a) Beneficial Ownership Reporting Compliance


              Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors, Executive Officers and persons who own more than ten percent of a registered class of the Company's equity securities to file with the SEC and the New York Stock Exchange reports of ownership of the Company's securities and changes in reported ownership. Directors, Executive Officers and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.

              Based solely on a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transactions were reported, the Company believes that during the fiscal year ended December 31, 2012, the Company's Directors, Executive Officers and greater than ten percent owners timely filed all reports they were required to file under Section 16(a), except for one report for each of two Directors. The Company discovered that a report for each of two Directors was inadvertently not timely filed to disclose fee deferrals into an account that tracks the performance of the Company's Common Stock in the Deferred Compensation Plan for Non-Employee Directors. The Directors involved were Dennis H. Ferro and Elizabeth E. Tallett.

              Mr. Ferro and Ms. Tallett regularly defer fees into the Deferred Compensation Plan for Non-Employee Directors. The Company undertakes to prepare Section 16(a) reports on behalf of its Directors and Executive Officers. A transition of duties and associated lack of communication within the Company caused the reports to be inadvertently filed two days after the two-day filing requirement for Section 16(a) reports.

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APPENDIX A



PROPOSED AMENDED ARTICLE V OF THE COMPANY'S AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION TO IMPLEMENT THE ANNUAL ELECTION OF
DIRECTORS, AS EXPLAINED IN PROPOSAL TWO


(new language is underlined; language to be deleted is stricken)


ARTICLE V

BOARD OF DIRECTORS;
MANAGEMENT OF THE CORPORATION

              Section 1.    Classified Board.    The Directors of the Corporation, subject to the rights of the holders of shares of any class or series of Preferred Stock, shall be classified with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the By-laws of the Corporation, one class ("Class I") whose initial term expires at the 2002 annual meeting of stockholders, another class ("Class II") whose initial term expires at the 2003 annual meeting of stockholders, and another class ("Class III") whose initial term expires at the 2004 annual meeting of stockholders, with each class to hold office until its successors are elected and qualified. At each annual meeting of stockholders of the Corporation, the date of which will be fixed pursuant to the By-Laws of the Corporation, and subject to the rights of the holders of shares of any class or series of Preferred Stock, the successors of the class of Directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third year following the year of their election. Directors elected to succeed those whose terms expired at the annual meetings of the Corporation's stockholders held in 2012 and 2013 shall hold office for a term expiring at the third annual meeting of stockholders following their respective elections. Directors elected at the annual meetings of the Corporation's stockholders in 2014 and 2015 shall each be elected at such meetings for one-year terms expiring at the respective next annual meeting of stockholders following their election.

              Section 2.    Elimination of Classified Board.    Commencing with the annual meeting of the Corporation's stockholders in 2016, the classification of the Board of Directors, as set forth in Article V, Section 1 of this Amended and Restated Certificate of Incorporation, shall cease. At the annual meeting of the Corporation's stockholders in 2016 and at each annual meeting of the Corporation's stockholders thereafter, each nominee for Director shall stand for election to a one-year term expiring at the next annual meeting of stockholders and until their respective successors shall have been duly elected and qualified, subject to prior death, resignation, retirement, disqualification or removal from office.

              Section 2 3.    Director Discretion.    In determining what he or she reasonably believes to be in the best interests of the Corporation in the performance of his or her duties as a director, a Director may consider, to the extent permitted by law, both in the consideration of tender and exchange offers, mergers, consolidations and sales of all or substantially all of the Corporation's assets and otherwise, such factors as the Board of Directors determines to be relevant, including without limitation:

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In connection with any such evaluation, the Board of Directors is authorized to conduct such investigations and to engage in such legal proceedings as the Board of Directors may determine.

              Section 3 4.    Management of Business.    The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its Directors and stockholders:

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APPENDIX B

Mclagan Investment Management Survey Participants

AllianceBernstein L.P.   Fidelity Investments   Neuberger Berman Group

Allianz Asset Management of America L.P.

 

Franklin Templeton Investments

 

Nuveen Investments

American Century Investments

 

GE Asset Management Inc.

 

Old Mutual Asset Management

Babson Capital Management LLC

 

Goldman Sachs Asset Management

 

Oppenheimer Funds, Inc.

BlackRock

 

Guggenheim Investments

 

Pacific Investment Management Company

BNY Mellon Cash Investment Strategies

 

Invesco

 

Principal Global Investors

Bridgewater Associates

 

Janus Capital Group

 

Putnam Investments

Capital Group Companies, Inc., The

 

Jennison Associates

 

Pyramis Global Advisors

Charles Schwab Investment Management, Inc.

 

JPMorgan Asset Management

 

Russell Investments

Columbia Management Investment Advisors

 

Legg Mason & Co.

 

State Street Global Advisors

Credit Suisse Asset Management

 

Loomis, Sayles & Company, L.P.

 

T. Rowe Price Associates, Inc.

Delaware Investments

 

Lord, Abbett & Co.

 

Trust Company of the West

Deutsche Asset Management

 

Mellon Capital Management

 

UBS Global Asset Management

Dimensional Fund Advisors Inc.

 

MFS Investment Management

 

Vanguard Group, Inc., The

Eaton Vance Investment Managers

 

Morgan Stanley Investment Management

 

Wellington Management Co.

Federated Investors, Inc.

 

Natixis Global Asset Management

 

Western Asset Management Company


Towers Watson Diversified Insurance Study of Executive Compensation Participants

AFLAC   John Hancock   Phoenix Companies

AIG

 

Lincoln Financial

 

Principal Financial

Allstate

 

Massachusetts Mutual

 

Prudential Financial

AXA Group

 

MetLife

 

Securian Financial

CIGNA

 

Nationwide

 

Sun Life Financial

CNO Financial

 

New York Life

 

Thrivent Financial

Genworth Financial

 

Northwestern Mutual

 

TIAA-CREF

Guardian Life

 

One America Financial

 

Transamerica

Hartford Financial

 

Pacific Life

 

Unum Group

ING

 

 

 

USAA

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Towers Watson Financial Services Executive Compensation Participants

1st Source   Farm Credit Bank of Texas   Northwestern Mutual

AAA Insurance Exchange Northern California, Utah & Nevada

 

Farm Credit Foundations

 

NRUCFC

AAA Northern California, Utah & Nevada

 

Farmers Group

 

Ohio National Financial Services

ACE Limited

 

Federal Home Loan Bank of Atlanta

 

Old Second National Bank

Acuity

 

Federal Home Loan Bank of San Francisco

 

One America Financial Partners

AEGIS Insurance Services

 

Federal Reserve Bank of Atlanta

 

OneBeacon Insurance

AFLAC

 

Federal Reserve Bank of Cleveland

 

Pacific Life

AIG

 

Federal Reserve Bank of Dallas

 

Penn Mutual Life

Allianz

 

Federal Reserve Bank of San Francisco

 

People's Bank

Allstate

 

Federal Reserve Bank of St. Louis

 

Phoenix Companies

Ally Financial

 

Fidelity Investments

 

PlainsCapital

American First Credit Union

 

Fifth Third Bancorp

 

Plymouth Rock Assurance

AMERIGROUP

 

FINRA

 

PMI Group

Ameriprise Financial

 

First Citizens Bank

 

Popular

Ameritas Life

 

First Commonwealth Financial

 

Portfolio Recovery Associates

Ameritrade

 

First Horizon National

 

Premera Blue Cross

Anchor Bank N.A.

 

First Midwest Bancorp

 

Presidential Life

Arthur J. Gallagher & Company

 

First National Bank in Sioux Falls

 

Principal Financial Group

Associated Banc-Corp

 

First National of Nebraska

 

PrivateBancorp

Auto Club Group

 

First Niagara Financial Group

 

Progressive

Aviva

 

Franklin Resources

 

Protective Life

AXA Group

 

Freddie Mac

 

Provident Bank

Bank of America

 

Fulton Financial

 

Prudential Financial

Bank of Blue Valley

 

Genworth Financial

 

QTI Human Resources

Bank of Montreal

 

Great-West Life Annuity

 

RaboBank

Bank of Tampa

 

Guardian Life

 

Regions Financial

Bank of the West

 

Hancock Holding

 

RLI

Bankers Bank

 

Hartford Financial Services

 

Rockland Trust Company

BB&T

 

Health Net

 

Royal Bank of Canada

BBVA

 

Highmark, Inc.

 

SBLI of Massachusetts

Blue Cross Blue Shield of Florida

 

Horizon BlueCross BlueShield of New Jersey

 

Securian Financial Group

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Blue Cross Blue Shield of Louisiana   Humana   Security National Bank

Blue Shield of California

 

Huntington Bancshares

 

SLM

Boeing Employees Credit Union

 

Iberia Bank

 

Springleaf Financial Services

BOK Financial

 

Independence Blue Cross

 

Star Financial Bank

Brandywine Trust Company

 

ING

 

State Farm Insurance

Bremer Financial

 

Inland Bancorp

 

State Street

Capital City Bank Group

 

INTRUST Bank NA

 

Sun Life Financial

Capital One Financial

 

Jackson National Life

 

SunTrust Banks

CapStar Bank

 

John Hancock

 

SVB Financial

Caterpillar Financial Services

 

KeyCorp

 

Synovus Financial Corporation

Centene

 

Liberty Mutual

 

TD Bank Financial Group

Chicago Mercantile Exchange

 

Loews

 

Thrivent Financial for Lutherans

Chubb

 

LPL Financial

 

TIAA-CREF

CIGNA

 

MAPFRE U.S.A.

 

Torus Insurance

Citi North American Operations & Technology

 

MARKEL

 

Towers Federal Credit Union

Citizens Property Insurance

 

Marsh & McLennan

 

Transamerica

Citizens Republic Bank

 

Massachusetts Mutual

 

Travelers

City National Bank

 

MasterCard

 

U.S. Bancorp

City National Bank of West Viginia

 

Mauch Chunk Trust Company

 

Union Bank N.A.

CLS

 

MB Financial

 

United Bankshares

CNA

 

Mechanics Bank

 

UnitedHealth

CNO Financial

 

Mercedes-Benz Financial Services

 

University FCU

Comerica

 

MetLife

 

Unum Group

Cullen Frost Bankers

 

MoneyGram International

 

USAA

CUNA Mutual

 

Moody's Corporation

 

Utica National Insurance

East West Bank

 

Munich re Group

 

Visa

Eastern Bank

 

Mutual of Omaha

 

W.J. Bradley Mortgage Capital

eBay

 

NASDAQ

 

Webster Bank

Edward Jones

 

Nationwide

 

Wellpoint

Employers Mutual Casualty Company

 

Navy Federal Credit Union

 

Wells Fargo

Equifax

 

NCCI Holdings

 

Western Union

Equity Office Properties

 

New York Life

 

Willis North America

Erie Insurance

 

Northern Trust

 

WSFS Bank

ESL Federal Credit Union

 

Northwest Bancorp Inc.

 

Zion's Bancorporation

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EE-9039-11


001CS40138 www.investorvote.com Step 1: Go to www.investorvote.com. Step 2: Follow the instructions on the screen to log in. Annual Meeting Notice 01LMOA + + . IMPORTANT ANNUAL MEETING INFORMATION Important Notice Regarding the Availability of Proxy Materials for the Principal Financial Group, Inc. Annual Meeting to be Held on Tuesday, May 21, 2013 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! If you want to receive a paper copy or an e-mail of these materials, you must request one. There is no charge to you for requesting a copy. Please make your request for a copy as instructed on the reverse side on or before May 10, 2013 to facilitate timely delivery. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report are available at: : Easy Online Access — A Convenient Way to View Proxy Materials and Vote Step 3: Click on the icon on the right to view the current meeting materials. Step 4: Return to the investorvote.com window and make your selection as instructed on each screen to select delivery preferences and vote. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. 1234 5678 9012 345 C 1234567890 P F G 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE SACKPACK

 


. Annual Meeting Notice Principal Financial Group, Inc.’s Annual Meeting will be held on May 21, 2013 at 711 High Street, Des Moines, Iowa, at 9:00 a.m. Central Daylight Time. The Board of Directors recommends a vote FOR proposals 1, 2, 3 and 4: 1. Election of 4 Directors 2. Annual election of directors 3. Advisory vote to approve executive compensation 4. Ratification of independent auditors PLEASE NOTE: YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go to www.investorvote.com, or you can request a set of proxy materials by following the instructions at the bottom of this page. If you wish to attend the Annual Meeting, please bring proof of share ownership and photo identification with you. 01LMOA Directions to the Principal Financial Group, Inc. 2013 Annual Meeting Here's how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below. E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet following the instructions below. If you request an e-mail copy of current materials you will receive an e-mail with a link to the materials. P LEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. Telephone – Call us free of charge at 1-866-641-4276 in the USA, US territories & Canada using a touch-tone phone. Internet – Go to www.investorvote.com. E-mail – Send an e-mail to investorvote@computershare.com with “Proxy Materials PFG” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the e-mail that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 10, 2013. 2013 Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 21, 2013, 9:00 a.m. Central Daylight Time Auditorium 711 High Street, Des Moines, Iowa Upon arrival, please present proof of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote.

 

 

+ 2013 Annual Meeting Proxy Card IMPORTANT ANNUAL MEETING INFORMATION Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your card, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 21, 2013. Vote by Internet • Log on to the Internet and go to www.investorvote.com • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card • Follow the instructions provided by the recorded message X IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. A Election of Directors 1. The Board of Directors recommends a vote FOR the listed nominees. For Against Abstain 01 - Michael T. Dan B Proposals The Board of Directors recommends a vote FOR Proposals 2, 3 and 4. For Against Abstain 2. Annual election of Directors 02 - C. Daniel Gelatt 03 - Sandra L. Helton 04 - Larry D. Zimpleman C Change of Address Change of Address — Please print new address below. 3. Advisory vote to approve executive compensation 4. Ratification of independent auditors D Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. +

 


2013 Annual Meeting 2013 Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 21, 2013, 9:00 a.m. Central Daylight Time Auditorium 711 High Street, Des Moines, Iowa Upon arrival, please show proof of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote. IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. Proxy — Principal Financial Group, Inc. This proxy is solicited on behalf of the Board of Directors of Principal Financial Group, Inc. for the annual meeting of shareholders to be held at 9:00 a.m. Central Daylight Time, May 21, 2013, in the auditorium at the corporate headquarters. The shareholder signator(s) on this form hereby appoints Joyce N. Hoffman, Terrance J. Lillis and Karen E. Shaff, and each of them, proxies with full power of substitution, to vote all shares of Principal Financial Group, Inc. common stock held in the name of the shareholder(s) at the 2013 annual meeting of shareholders and at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement, subject to any directions indicated on the reverse side. If no directions are given, the proxies will vote for the election of all listed nominees and in accordance with the Board of Directors recommendations on the other matters listed on the reverse side, and at their discretion, on any other matter that may properly come before the meeting. This proxy will be voted as directed, or if no direction is indicated, will be voted in accordance with the Board of Directors recommendations. SEE REVERSE SIDE FOR IMPORTANT INFORMATION ABOUT VOTING BY INTERNET OR TELEPHONE.