finalreg111708.htm -- Converted by SEC Publisher, created by BCL Technologies Inc., for SEC Filing


Washington, D.C. 20549



Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report: November 18, 2008
(Date of earliest event reported)


(Exact name of registrant as specified in its charter)

Delaware    1-16725    42-1520346 
(State or other jurisdiction    (Commission file number)    (I.R.S. Employer 
of incorporation)        Identification Number) 

711 High Street, Des Moines, Iowa 50392
(Address of principal executive offices)

(515) 247-5111
(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ]    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) 
[ ]    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 
[ ]    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 
[ ]    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 

Page 2         
Item 7.01    Regulation FD Disclosure 
    Since Principal Financial Group's November 4, 2008 call discussing third quarter 2008 
financial results, a number of industry analysts and media outlets have commented on potential 
issues for the life insurance sector, including annuities with living benefits, rating agency 
downgrades and commercial real estate holdings. The company believes some of the commentary 
has resulted in misinterpretation and potentially misleading information concerning The Principal’s 
financial condition. Included in the discussion below is information on: the company’s minimal 
exposure to annuities with living benefits; recent affirmations of Principal Life’s insurer financial 
strength ratings; and the quality and performance of the company’s commercial real estate 
holdings, and investment portfolio overall. 
Investors who wish to be accurately informed of The Principal's financial condition should visit our 
website at and review the documents that can be found at the Investor 
Relations portion of the website. 
·     Discussion by various commentators of annuities with living benefits, variously referred to 
     as guaranteed minimum income benefits or guaranteed minimum withdrawal benefits 
     (“GMWB”), has created the impression that The Principal's exposure to this risk is similar 
     to that of other insurers. As CEO Larry Zimpleman explained at The Principal’s third 
     quarter earnings call, a significant point that distinguishes The Principal from other 
     insurers is the small part GMWB plays in The Principal's business. With only $1 billion in 
     this block, equity market volatility has minimal impact on the capital necessary to support 
     The Principal's individual annuities business. Annuities with GMWB represented 
     approximately 1/2 of 1% of The Principal's third quarter 2008 earnings. 
·     Commentators have speculated about the possibility of agency downgrades as a reason to 
     sell shares of U.S. life insurance companies. On November 7, 2008, Moody's Investors 
     Service affirmed The Principal's financial strength and debt ratings, all with stable 
     outlooks. In addition, Fitch affirmed The Principal's financial strength and debt ratings in 
     September 2008, all with stable outlooks. 
     In our third quarter earnings call, we acknowledged the possibility of downgrades in the 
     insurance sector and explained that, while strong relative ratings remain important to The 
     Principal, our key growth engines – U.S. Asset Accumulation, Principal Global Investors 
     and Principal International – could continue to operate successfully at a lower rating, 
     particularly if downgrades were industry wide. 
·     Some reports have contained broad, negative comments about The Principal's commercial 
     real estate loan portfolio. As Chief Financial Officer Terry Lillis pointed out at our third 
     quarter earnings call, every single commercial mortgage loan in our $11 billion portfolio is 
     performing on schedule. In releasing third quarter 2008 results, we clearly communicated 
     that we anticipate defaults and losses on commercial mortgages will increase in the future. 
     However, we believe the increase will occur over a period of several years, and that we 
     will have the ability to accommodate these losses going forward through the use of a 
     number of capital management techniques. We would like to remind investors that our 

Page 3     
    three key growth businesses require very little capital to support organic growth, which 
    enables us to generate substantial free cash flows on an ongoing basis. Because of strong 
    liquidity in our general account, we have the flexibility to selectively scale back on certain 
    capital intensive businesses to free up additional capital. In addition, we manage our 
    investment portfolio to match our liabilities, which, like others in the life insurance 
    industry (and different from other financial services industries), are longer-term in nature. 
         ·    We continue to believe the fundamentals of our fixed maturity portfolio remain sound and 
    that gross unrealized losses are a highly inaccurate representation of future investment 
    losses. Given our strong general account liquidity position, the longer-term nature of our 
    liabilities and our disciplined asset-liability matching, we have the ability and intent to 
    hold assets until maturity. 
         ·    As we stated at our November 4 earnings call, the company has continued to enhance 
    liquidity, increasing cash and cash equivalent holdings by more than 50% from June 30 to 
    $2.3 billion at the end of the third quarter. During the third quarter, we also made 
    adjustments in our general account investment strategies, investing new cash flows 
    primarily into government and agency backed securities, and other liquid investments. In 
    addition, we closed out our very modest general account securities lending program. 

                   Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly 
caused this report to be signed on its behalf by the undersigned thereunto duly authorized. 
                                                                                         PRINCIPAL FINANCIAL GROUP, INC. 
                                                                                         By:  /s/ Terrance J. Lillis
                                                                                         Name: Terrance J. Lillis 
                                                                                         Title: Senior Vice President and Chief Financial 
Date:  November 18, 2008