Principal Financial Group A deep dive into our Principal - - PowerPoint PPT Presentation

Principal Financial Group

John Egan

Vice President of Investor Relations

A deep dive into our Principal International and Principal Global Investors Asian operations

A non-GAAP financial measure is a numerical measure of performance, financial position, or cash flows that includes adjustments from a comparable financial measure presented in accordance with U.S. GAAP. The company uses a number of non-GAAP financial measures that management believes are useful to investors because they illustrate the performance of the company’s normal, ongoing

• perations which is important in understanding and evaluating the company’s financial

condition and results of operations. While such measures are also consistent with measures utilized by investors to evaluate performance, they are not, however, a substitute for U.S. GAAP financial measures. Therefore, at the end of the presentation, the company has provided reconciliations of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure. The company adjusts U.S. GAAP financial measures for items not directly related to ongoing operations. However, it is possible these adjusting items have occurred in the past and could recur in future reporting periods. Management also uses non-GAAP financial measures for goal setting, as a basis for determining employee and senior management awards and compensation, and evaluating performance on a basis comparable to that used by investors and securities analysts. The company also uses a variety of other operational measures that do not have U.S. GAAP counterparts, and therefore do not fit the definition of non-GAAP financial measures. Assets under management is an example of an operational measure that is not considered a non-GAAP financial measure.

Use of Non-GAAP Financial Measures

2

Certain statements made by the company which are not historical facts may be considered forward-looking statements, including, without limitation, statements as to operating earnings, net income available to common stockholders, net cash flows, realized and unrealized gains and losses, capital and liquidity positions, sales and earnings trends, and management’s beliefs, expectations, goals and opinions. The company does not undertake to update these statements, which are based on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Future events and their effects on the company may not be those anticipated, and actual results may differ materially from the results anticipated in these forward-looking statements. The risks, uncertainties and factors that could cause or contribute to such material differences are discussed in the company’s annual report on Form 10-K for the year ended Dec. 31, 2015 , and in the company’s quarterly report on Form 10-Q for the quarter ended June 30, 2016, filed by the company with the U.S. Securities and Exchange Commission, as updated or supplemented from time to time in subsequent filings. These risks and uncertainties include, without limitation: adverse capital and credit market conditions may significantly affect the company’s ability to meet liquidity needs, access to capital and cost of capital; conditions in the global capital markets and the economy generally; volatility or declines in the equity, bond or real estate markets; changes in interest rates

• r credit spreads or a sustained low interest rate environment; the company’s investment portfolio is subject to several risks that

may diminish the value of its invested assets and the investment returns credited to customers; the company’s valuation of investments and the determination of the amount of allowances and impairments taken on such investments may include methodologies, estimations and assumptions that are subject to differing interpretations; any impairments of or valuation allowances against the company’s deferred tax assets; the company’s actual experience could differ significantly from its pricing and reserving assumptions; the pattern of amortizing the company’s DAC and other actuarial balances on its universal life-type insurance contracts, participating life insurance policies and certain investment contracts may change; the company may not be able to protect its intellectual property and may be subject to infringement claims; the company’s ability to pay stockholder dividends and meet its obligations may be constrained by the limitations on dividends or distributions Iowa insurance laws impose on Principal Life; changes in laws, regulations or accounting standards; results of litigation and regulatory investigations; from time to time the company may become subject to tax audits, tax litigation or similar proceedings, and as a result it may owe additional taxes, interest and penalties in amounts that may be material; applicable laws and the company’s certificate of incorporation and by-laws may discourage takeovers and business combinations that some stockholders might consider in their best interests; competition from companies that may have greater financial resources, broader arrays of products, higher ratings and stronger financial performance; a downgrade in the company’s financial strength or credit ratings; changes in investor preferences; inability to attract and retain qualified employees and sales representatives and develop new distribution sources; international business risks; fluctuations in foreign currency exchange rates; the company may need to fund deficiencies in its “Closed Block” assets that support participating

• rdinary life insurance policies that had a dividend scale in force at the time of Principal Life’s 1998 conversion into a stock life

insurance company; the company’s reinsurers could default on their obligations or increase their rates; risks arising from acquisitions

• f businesses; and a computer system failure or security breach could disrupt the company’s business and damage its reputation.

Forward Looking Statements

3

Time Presentation Presenter 11:00 a.m. Total Company Overview John Egan 11:10 a.m. Principal International – Asian Operations Renee Schaaf & Thomas Cheong 12:00 p.m. Working Lunch 12:20 p.m. Principal Global Investors – Asian Operations Kirk West & Hitoshi Itagaki 1:10 p.m. Panel Discussion: PGI-PI Synergies in Asia All presenters

PGI & PI Asian deep dive

Agenda

4

Fortune 500 company; 137 year history

1 Trailing Twelve Months. Before-tax. Results exclude Corporate. 2 Assets under management by asset manager.

5

Company overview

A leading financial services company

Operating Earnings1

$1,790.8 million as of Jun. 30, 2016

67% 24% 9%

Principal Global Investors Principal International & Other PFG Entities

Assets Under Management2

$572.7 billion as of Jun. 30, 2016

Fee Spread Risk

25% 22% 14% 14% 13% 12% RIS - Fee Principal Global Investors Principal International RIS - Spread Specialty Benefits Individual Life

Principal Financial Group

Dan Houston, CEO - 32/32 Terry Lillis, CFO – 34/34

Retirement & Income Solutions (RIS)

Nora Everett President – 25/25

Principal Global Investors (PGI)

Jim McCaughan President – 42/14

U.S. Insurance Solutions (USIS)

Deanna Strable President – 27/22

Corporate

Management team averages 30 years of industry experience

Principal International (PI)

Luis Valdes President – 28/25

RIS – Fee RIS – Spread Specialty Benefits Life

6

Company overview

Segment reporting structure

(Year) = Principal entered country

AUM as of 06/30/2016

Principal Financial Group

Mexico (1993)

• Annuities, Mutual

Funds, Pensions, Asset Management

• AUM of $10.3B
• Wholly owned

Chile (1995)

• Annuities, Mutual Funds, Asset

Management, Mandatory Pensions, Voluntary Pensions

• AUM of $41.5B
• Wholly owned
• Cuprum – a 98% majority owned

company AUM of $35.5B

Brazil (1999)

• Annuities, Pensions,

Mutual Funds, Asset Management

• Brasilprev – a 25%
• wned joint venture

with Banco do Brasil AUM of $54.9B

• Claritas – 100% owned

mutual fund company AUM of $1.1B

India (2000)

• Asset Management,

Mutual Funds, Advisory Services

• AUM of $0.7B
• 79% majority owned

company with Punjab National Bank

Malaysia (2003)

• Conventional & Islamic

Asset Management, Mutual Funds, Pensions

• AUM of $12.3B
• CIMB-Principal – 40%
• wned joint venture with

CIMB Group; 50% owned Islamic company with CIMB

China (2005)

• Asset Management,

Mutual Funds

• AUM of $101.0B
• CCB-Principal – a 25%
• wned joint venture with

China Construction Bank

Hong Kong (1996)

• Asset Management,

Mutual Funds, Pensions

• AUM of $7.4B
• AXA – Transaction closed

9/1/2015 adding AUM

• f $3.1B
• Wholly owned

Thailand (2010)

• Asset Management, Mutual Funds
• AUM of $2.3B
• Wholly owned subsidiary of Malaysian JV

Indonesia (2007)

• Asset Management,

Mutual Funds

• AUM of $0.4B
• Wholly owned

subsidiary of Malaysian JV

Singapore (2006)

• Asset Management
• AUM of $5.9M
• Wholly owned

subsidiary of Malaysian JV

7

Principal International

Our locations

We operate in emerging markets with a fast growing middle class

Principal Portfolio Strategies Principal Global Equities Principal Global Fixed Income Principal Real Estate Investors

Principal Global Investors

Post Advisory Group Columbus Circle Investors Edge Asset Management Macro Currency Group Origin Asset Management Morley Financial Services, Inc. Spectrum Finisterre Capital LLP

• Unique hybrid boutique

approach

• Distinct investment

processes

• Leverage distribution;

global institutional and funds

• Integrated business

processes; drive scale and share best practices

8

Principal Global Investors

Specialized investment boutiques

Morningstar rankings

Percentage of funds in the top two quartiles

87% 87% 91% 73% 91% 94% 72% 95% 93%

1-Year 3-Year 5-Year

06/30/2015 03/31/2016 06/30/2016

Principal “I” shares; if no “I” share class then “A” share class; separate accounts use “R6” rate level; Includes Principal mutual funds, separate accounts and collective investment trusts (CITs); Excludes money market, stable value and U.S. Property separate account.

4 OR 5 STARS = 39 FUNDS

3 STARS 18 FUNDS 2 STARS 1 FUNDS 1 STAR 1 FUND

• f rated funds have

4 or 5 star rating

9

Principal Global Investors

Top tier investment performance

Principal International

Asia Investor Day

Tokyo, Japan September 2016

Principal International

Overview

Principal International

Help millions of middle class citizens in our chosen emerging markets plan and invest for their financial security through our retirement and long-term saving franchise.

12

Brazil Chile Mexico China Hong Kong India Malaysia Thailand Indonesia Singapore

Our mission

Principal International

13

Latin America Pension LT Savings / Asset Management Brazil

• Chile
• Mexico
• North Asia

Pension LT Savings / Asset Management China

• Hong Kong
• South Asia

Pension LT Savings / Asset Management Southeast Asia

• Malaysia
• Thailand
• Indonesia
• Singapore
• India
• Latin America

Complete retirement franchise

Asia

Long-term savings and asset management franchise

Expand retirement franchise in Asia as markets develop Principal International

Future opportunity

14

• Primary focus
• Ability to leverage asset

management and retirement expertise across Principal

• Strong reputation with

regulators for global pension expertise

+ +

• We’re in the right

markets

• Strong foothold in key

markets

• Marquee joint venture

partners

• Broad distribution

reach

Principal International

Competitive differentials

Retirement & long-term savings expert

Strong market growth Strong partners

15

5% 95%

2013

11% 89%

2015

2 year CAGR*

PI Total Asia Latin America 18% 47% 15%

Pre-tax Operating Earnings Contribution Principal International

Diversified growth

V

Asia

V

Latin America

* Results normalized for encaje vs. expectation, the 3Q impairment of intangible assets in China and reflects 2015 FX rates

Asia

Overview

Principal International

SE Asia 12% India 1% Hong Kong 6% China 81% 17

India

• 79% majority owned joint venture with

Punjab National Bank

• Products: mutual funds, asset

management, advisory services

• Small but growing asset management

industry

• Long-term strategic importance

Southeast Asia

• Malaysia, Thailand, Indonesia, & Singapore
• 40% owned joint venture with CIMB Group
• 50% owned Islamic company with CIMB

Group

• Products: Pension, mutual funds,

conventional & Islamic asset management

• Ranked #2 in Private Retirement Scheme

(PRS) and unit trust in Malaysia

Hong Kong

• Wholly owned company
• Products: Pension, mutual funds, asset

management

• Complete retirement franchise
• 5th largest Mandatory Provident Fund

(MPF) provider

China

• 25% owned joint venture with China

Construction Bank

• Products: Mutual funds, asset

management

• Pursuing complete retirement franchise
• 9th largest retail mutual fund provider

$124 B

Long-term savings and asset management franchise Principal International

Asia overview

Asia Combined AUM

as of 6/30/2016

10 20 30 40

2012 2013 2014 2015

Pre-tax Operating Earnings

(USD $Mn) Constant currency CAGR adjust historical periods to 2015 FX rates

18

Principal’s Asia

• perations are

becoming an increasingly larger part of Principal and we expect the strong growth to continue

50 100 150 200

2012 2013 2014 2015

Combined Net Revenue (at PFG Share)

(USD $Mn) 5 10 15 20 25

2012 2013 2014 2015

Reported AUM

(USD $Bn) 10% 15% 20% 25%

2012 2013 2014 2015

Pre-tax Return on Net Revenue (at PFG share)

Principal International

Principal Asia growth

China

Overview

Principal International

500 1,000 1,500 2,000 2,500 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

China Mutual Fund Assets3

in USD billions 20

• China has a significant middle

class population

• China is aging rapidly – by 2050, 1

in 5 retirees above the age of 65 years old will be in China1

• China’s mutual fund industry

topped US$1.2 trillion as of June 2016 (50% CAGR between 2014- 2016)2

• Mutual fund industry is expected

to continue growing at 14% CAGR between 2015 to 20203

• Enterprise annuity has

experienced strong growth in last 8 years with a 26% CAGR4

1. CIA Worldfactbook, United Nations 2. Z-ben Advisors 3. Cerulli 4. MOHRSS

4

AUM

Enterprise Annuity Employee and AUM Growth

AUM (RMB millions)

• No. of Employees

Principal International

China mutual fund and pension market

21

+ =

Retirement and asset management expert

• No. 2 bank in China with

local expertise and distribution strength

Successful joint venture Principal International

Principal in China

22

• 25% joint venture partnership with China Construction Bank

since 2005

• CCBPAM is the 9th largest retail mutual fund provider among the

108 in the industry as of June 2016

• Generated USD$34 million of pre-tax earnings over the TTM

period ended 2Q16

• Pre-tax RONR of 49% during the TTM period ended 2Q16
• AUM of USD$101 billion as of 2Q16

Principal International

CCB-Principal Asset Management (CCBPAM)

23

China’s Three-Pillar System

PILLAR 1 State Pension PILLAR 2 Occupational Pension / Enterprise Annuity PILLAR 3 Personal Savings (Mutual funds, bank savings, etc.) ~ US$ 0.7 trillion1 ~US$ 1.1 trillion2 ~US$ 28.5 trillion3 PAYG & Funded Individual Account Defined Contribution Voluntary Contribution

Manage global mandates and

• ffshore investments

Propose pension joint venture with CCB Grow asset management and mutual fund business in CCBPAM

BWMP, trust, FMC SA, brokerage AM, insurance, property and PFM.

Principal’s Opportunity

Principal International

China pension system

24

• In exchange, CCB will

advocate on Principal’s behalf to become partner in CCB’s pension company

• Significant long-term

growth opportunity

• Signed Strategic Cooperation Agreement with CCB in March 2016

to develop a new asset management and pension partnership

• Principal is sharing pension expertise with CCB in following areas:
• Operations
• Product design
• Investing

Principal CEO Dan Houston with Vice Governor Yu

• f CCB, who is also chairman of CCB Pension

Principal International

Spotlight on pension in China

Hong Kong

Overview

Principal International

26

• Mandatory Provident Fund (MPF) is a

tax incentivized mandatory saving plan

• Approximately 2.5 million participants;

276,000 employers

• Hong Kong’s MPF industry reached

US$78 billion as of June 20161

• Low contribution and cap has led

to low average account balance of approximately US$30k

• Significant growth of voluntary

contributions in the last 10 years – approximately 13% and 49% CAGRs in voluntary and special voluntary contributions, respectively

1. Gadbury MPF Market Share Report 2. Cerulli

46 57 66 73 76 78

2011 2012 2013 2014 2015 2016 (Jun)

MPF AUM

(USD bn)

69 93 108 121 116 122 137 154 171 184 40 80 120 160 200 2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E 2020E

Hong Kong Mutual Fund Assets2

in USD billions

Principal International

Hong Kong pension and mutual fund market

27

• Entered market in 1996
• 5th largest MPF provider following the acquisition of AXA’s

MPF with AUM of USD$7.4 billion as of 2Q16

• AXA acquisition included an exclusive 15-year distribution

agreement which complemented existing distribution

• AXA integration progressing as planned and distribution is

already contributing strong net customer cash flows

• Administration of AXA’s block of business has shifted from

BestServe to Principal which will result in expense synergies

Principal International

Principal Hong Kong

28

• Aging population:
• MPF contributions are insufficient to generate an adequate

replacement rate

• MPF industry changes and reforms are likely:

2015 2041 Population age 65 and older

15% 32%

Dependency ratio

5 working adults to 1 senior above age 65 2 working adults to 1 senior above age 65

Default investment strategy Offsetting mechanism Full portability Increase mandatory contributions Principal International

Future of Hong Kong pension system

29

Strengthen distribution Growth in voluntary MPF savings Long-term savings through robust mutual fund platform Principal International

Opportunities for Principal Hong Kong

30

• Leverage China & Hong Kong footprints and partnership with CCB to access
• pportunities
• Examples:
• China-Hong Kong Mutual Recognition Fund
• Internationalizing CCB-Principal product lines
• Distribution of mutual funds and MPF via CCB(Asia)
• Tapping Chinese high net worth demand for overseas investment exposure via

CCB(Asia) etc. Drivers for potential inflow into China Drivers for potential outflows from China

• RMB internationalization
• Access to China interbank bond market
• Higher China weightage in major global

indices

• China’s "new economy" offers interesting
• pportunities
• Estimated market size: US$ 1.8 trillion by

20211

• RMB internationalization
• China’s foreign direct investment
• Chinese investors seeking risk diversification
• Estimated market size: US$ 1.3 trillion by 20211

1 Z-ben Advisors

Principal International

Spotlight on cross-border flows

31

+ +

Principal International

Positioned for success

Retirement & long-term savings expert Strong market growth Strong partners

Principal International Q&A

Please grab your lunch and join us at 12:20 p.m.

Principal Global Investors

Asia Investor Day

Tokyo, Japan September 2016

What investors are seeking Close-up on Japan

Today’s topics

35

PGI in the Asia-Pacific region How we drive growth in the region Q&A for PGI

To meet current and future needs of all investors we serve globally by providing investment management solutions and expertise across a broad range of capabilities and investment vehicles.

36

Our mission

Principal Global Investors

Principal Global Investors A diversified investment manager

Well positioned to serve organizations and individuals, offering institutional and retirement expertise, guidance, and outcome- based strategies for real life challenges A broad group of specialized investment boutiques, diverse set

• f asset classes, and comprehensive financial solutions

Principal Global Investors is the 30th largest U.S. money manager

• ut of 300 managers profiled1 and the 36th largest manager of

worldwide assets out of 600 managers profiled2 Alternatives $8.0 B Real Estate $70.7 B Fixed Income $186.7 B Equity $137.1 B

Principal Global Investors $402.7 B

37

Pri Princi cipal In Internation

• nal ma

marke kets ts Pri Princi cipal Glob lobal Inv Inves esto tors s po portfol

• lio ma

manageme ement nt, resea esearc rch and nd trading ng Pri Princi cipal Glob lobal Inv Inves esto tors sa s sales a es and nd se servic ice represe esent ntatives es

PGI has clients in 75 countries

We invest and work with clients globally

38

United States $324,793 Canada $998 Latin America $2,538 Europe $16,841 Japan $23,477 Middle East $823 Asia ex Japan $10,364 Australia / New Zealand $3,764

As of 6/30/2016. Based on client country of domicile

Client assets by region ($ millions)

39

Greater China

• Pensions
• Official Sector
• Insurance
• High Net Worth

Korea

• Pensions
• Official Sector
• Insurance
• Sub-advisory

Japan

• Pensions
• Financial Institutions
• Sub-advisory

Australia / New Zealand

• Superfunds
• Institutions
• Sub-advisory

SE Asia

• Official Sector
• Institutions
• High Net Worth

Asia-Pacific target clients

40

What investors are seeking

• Income: monthly income payout is often

preferred

• Diversification: away from US HY, and into

assets like Preferred Securities

• Overseas investments: to capture yield,

avoiding local low/negative yields

• Multi-asset solutions
• High Conviction Equity strategies
• Alternatives and Absolute Return: Real

Estate and Private Equity

• Low Volatility solutions
• Niche strategies: diversification
• pportunities
• In Greater China, strong interest in US$-

denominated strategies

• In Australia, gradual move toward Global

Equities across all market segments

41

Capitalize on our broad range of capabilities

• Strong investment performance across boutiques

and platforms

• Specialist investment capabilities – in demand

despite pressure on traditional core managers

• Multi-asset, multi-manager capabilities
• Well-positioned in strategies forecast to see

significant growth

• Income and yield-oriented
• Alternatives
• Multi-asset, multi-manager solutions
• Early entrant in Active and Smart Beta ETFs
• Capabilities offered in various legal vehicles

based on client need

• Disciplined, market-driven product development

Our growth drivers

42

Take advantage of global leadership in funds

* As of 6/30/2016. Includes Principal Funds, PGI Trust CITs, PGI Dublin Funds, PGI Australia Funds, and various boutique-level funds.

Our growth drivers

• PGI/Funds integration makes Principal a “global

destination for funds”

• $168B in AUM across U.S. and International

platforms, as well as various private funds*

• Strong performance across boutiques and

strategies

• Key functions aligned globally
• Distribution
• Governance
• Operations
• Centralized team coordinates product strategy,

development, and management globally

• Work closely with PI in markets where they are

present

43

The Principal Global Investors Funds (the Unit Trust) established in 1992 Specialist boutiques Innovative products relevant to the new economic environment Over $4.7 B in assets under management1

Offshore UCITS and Alternative Investment Funds Platform

The funds referenced on this page are not available to U.S. investors and nothing in this document constitutes an invitation to invest in these funds.

A leading offshore funds provider

15 of our offshore funds/share classes are rated 4 or 5 stars by Morningstar

44

Leverage strong institutional and wealth advisory distribution

Our growth drivers

• Institutional opportunities across client segments
• Private & Public Pension Plans
• Endowment & Foundations
• Insurance Companies
• Family Offices
• Official Sector Institutions
• Wealth Advisory activates and manages global

firm-level relationships

Key Global Distributors Credit Suisse Standard Chartered Bank Banco Santander Deutsche Bank Merrill Lynch HSBC Morgan Stanley Barclays Julius Baer BNP Paribus UBS Credit Agricole Citibank RBC

45

• Daiwa SB Investments Ltd.
• Nippon Life Insurance Company
• Nissay Asset Management
• Local Government Officials
• Private School Mutual Aid
• Mitsubishi UFJ Kokusai AM
• Greater China Government-related pension schemes
• Multiple Confidential Official Sector Clients
• Simone Investment Managers
• Public Officials Benefit Association (POBA)
• Equip Super
• Citi

Representative clients in the region

Japan APAC

46

Close-up on Japan

• Asset management industry overview
• Historical growth of our business
• Opportunities going forward

47

0.5 10.0 45.7

20 40 60 80 100 120 140 160 180 Other Investment Securities (Fund Investment) Equities Corporate Bonds Short-term Bonds Municipal Bonds Government Bonds

• Japan Post Bank eyes

more aggressive Investments and shifts to riskier assets to boost profitability as negative interest rates shrink income from government bonds.

• As of June 30, 2016,

Fund investment assets totaled JPY 46trn.

Japan Post Bank - Total Assets of Investment Securities (JPY trillion)

Source : Japan Post Bank

Asset management overview

Financial institutions –Japan Post Bank

48

34.4 13.8 52.4 3.9 6.3 1.6 8.8 10.8 5.4 17.1 34.9 9.0 33.4 31.5 29.9 2.3 2.8 1.8 20 40 60 80 100

Euro area U.S. Japan Currency and Deposite Debt Securities Investment Funds (including MMF) Equities Life Insurance Reserves, Pension Entitlements Others

• Investment trust fund’s

share within household financial assets in Japan is smaller than the U.S. and Euro area.

• As of March 31, 2016,
• nly 5.4% individuals
• wned investment

trusts in Japan.

(%)

Net Assets as of March 31, 2016. Source : The Investment Trusts Association Japan

Asset management overview

Retail business in Japan

49

Net Assets as of March 31, 2016. Source : The Investment Trusts Association Japan

17,875 3,609 2,084 1,916 1,897 1,584 1,561 1,386 1,167 949

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 U.S. Lux Ireland Germany France Australia U.K. Japan China Canada Total Net Assets (USD billion)

Asset management overview

Investment Trusts – net assets top10 countries

50

1.6 3.0 4.4 5.2 6.4 7.8 25.0 7.3 8.3 8.8 9.2 9.1 10.1 15.0 2 4 6 8 10 12 14 16 5 10 15 20 25 30 2014/06 2014/12 2015/03 2015/06 2015/12 2016/03 E 2020 Total amount of purchase (JPY trillion) Number of accounts

Source : Based on the Financial Services Agency’s survey on NISA

• In 2014, Japanese

government established a new wealth- building incentive program ‘NISA’.

• Growth in investment

trust business will be expected by NISAs plan.

• Individual money flows

into retail funds with NISA.

Japanese Government targets JPY 25trn in 2020 ‘NISA’ started in 2014 ‘Junior NISA’ started in 2016 Annual contribution limit changed up to JPY1.2mn in 2016

Asset management overview

NISA – Nippon Individual Saving Account

51

200 200 170 179 171 167 176 184 201 100 90 74 93 92 93 101 109 117 50 100 150 200 250 300 350 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 Public Pension Corporate Pension

Source : Bank of Japan

AUM (JPY trillion)

• Major growth in both

GPIF and Corporate pension assets.

• Japanese pension

assets totaled JPY 318trn, JPY 25trn increase from a year earlier.

Asset management overview

Pension business in Japan

52

Source : Trust companies association of Japan, Ministry of Health Labor and Welfare, PFA, SEREMA – The Smaller Enterprise Retirement Allowance Mutual Aid

20 40 60 80 100 120

2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3

SERAMA plans Corporate DC pension plans Tax-Qualified pension plans Employees' pension funds DB Corporate pension plans

• Dissolution of EPF and

transfer into another type of corporate pension plan.

• Corporate DC pension

assets will grow continuously.

AUM (JPY trillion)

Asset management overview

Corporate pension business in Japan

53

115 120 118 123 116 114 120 127 137 135 3.7 (4.6) (7.6) 7.9 (0.3) 2.3 10.2 8.6 12.3 (3.8)

• 20.0
• 15.0
• 10.0
• 5.0

0.0 5.0 10.0 15.0 20 40 60 80 100 120 140 160 180 200 2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 AUM (JPY trillion) Return (Annualized, %)

Source : GPIF

• Public pensions are

exhibiting a growing preference for distinctive investment products.

• GPIF, which is the

world’s largest pension fund, manages $ 1.3trn.

• Over 90% of total

public pension assets is managed by the GPIF.

Asset management overview

GPIF

54

25% 25% 15% 35% 21.8% 22.1% 5.1% 13.5% 37.6%

Japanese Equity International Equity Short-term Assets International Bond Japanese Bond

As of Mar 31, 2016

Source : GPIF

As of Sep 30, 2014

JPY 135trillion

• New Policy Asset Mix

On October 31, 2014, GPIF moved massive amounts of money from Japanese bonds into domestic and foreign stocks.

• Smart beta

GPIF started factor investing, or smart beta as a third way of implementing equity mandates.

Inside : Target portfolio allocation Outside : Actual portfolio allocation

JPY 131trillion 12% 12% 5% 11% 60% 18.2% 17.4% 2.6% 12.1% 49.6%

Asset management overview

GPIF – Policy Asset Mix Change

55

AUM

(JPY trillion ) GPIF 135 CalPE RS 33 CPPIB 24 GPF-G 96

AUM as of March 31, 2016. 1US$=JPY 112.40, 1CAD$=JPY 86.90, 1NOK＝JPY 13.59 Source : GPIF

• 35%
• 25%
• 15%
• 5%

5% 15% 25% 35%

2005/32006/32007/32008/32009/32010/32011/32012/32013/32014/32015/32016/3

GPIF CalPERS CPPIB GPF-G On Sep 16th 2015, GPIF became a signatory to the United Nation’s for Responsible Investment (UN-PRI) to express their attitudes to ESG issues. Annualized return (%)

Asset management overview

GPIF vs Global Public Pensions comparison

56

Business outlook in Japan

• Japan’s asset management market does not have high growth potential. On the
• ther hand the size of the market is still dominant in Asia Pacific region.
• At institutional market, the move from traditional asset class to non-traditional

asset class is irreversible.

• Pension market is maturing and the money is now moving to individual market.

Asset management business for retail investors have growth potential. Challenges

• Japanese retail market is still dominated by large distributors and the affiliated

asset managers. So far we could not leverage our experience of fund business in US.

• Due to the historical low interest rate at developed countries, pressures to the

margin is continuous.

Asset management overview

Summary

57

0.11 0.25 0.23 0.25 0.41 0.97 1.66 2.43 2.41

0.00 0.50 1.00 1.50 2.00 2.50 2008 2009 2010 2011 2012 2013 2014 2015 2016Q2 AUM (JPY trillion) Established in 2006 First agreement with corporate pension client in 2008 First agreement with public pension client in 2009 Adopted the Japan Stewardship Code in 2014 AUM exceeded JPY 2trn in 2015

Historical growth of our business

Japan sourced AUM - proven track record

58

6.4% 93.3% 0.2%

Pension Financial Institutions Other

By Client Type

Broad and deep distribution channels and sectors

• Public pension
• Private pension (Autos,

Electronics, Utilities, Housing, Food, etc)

• Financials
• Foundation

75.5% 24.5%

Institutional Retail

JPY 2.4trillion

AUM as of June 30, 2016

By Client Channel

JPY 2.4trillion

Historical growth of our business

Japan sourced AUM

59

PGIJ seeks multi-asset class distribution with unique hybrid boutique approach.

Equity 9.0% Fixed Income 85.3% Real Estate 5.3% Hedge Fund 0.5%

AUM as of June 30, 2016

By Asset Class

JPY 2.4trillion

Edge 0.2% Finisterre 0.5% Origin 0.8% PGI Equity 8.1% PGI Fixed Income 54.2% Post Advisory Group 18.1% PrinREI 4.5% Spectrum 13.8%

By Boutique

JPY 2.4trillion

Historical growth of our business

Japan sourced AUM

60

• Principal’s multi boutiques are well matched to the institutional market
• demand. We will continue to attract clients with unique product line up such

as credit products, real estate and alternative investments.

• In retail market, we accumulated good relationships with some of major

investment trust managers who are subsidiaries of large distributors. We will keep leveraging these relationships with Principal’s multiple solutions.

Japan summary

Opportunities going forward

61

Principal Global Investors Q&A

PGI-PI Synergies in Asia

All Presenters

Panel Discussion

64

Activate & Support Distribution Leverage Global & Local Market Expertise Optimize Relationships

Focus areas for capturing synergies

65

Non-GAAP financial measure reconciliations

Operating earnings (losses) Trailing twelve months, 30-Jun-16 Pre-Tax Operating Earnings, Excluding Corporate $1,790.8 Pre-Tax Operating Earnings - Corporate (216.6) Pre-Tax Operating Earnings - PFG 1,574.2 Pre-Tax Net Realized Capital Gains, As Adjusted 4.6 Pre-Tax Other Adjustments (3.1)* Certain Other Adjustments Related to Equity Method Investments and Noncontrolling Interest (57.8) Income Before Income Taxes $1,521.0 * Exited group medical insurance business Principal Asia Combined Net Revenue (at PFG share) 31-Dec-12 31-Dec-13 31-Dec-14 31-Dec-15 Principal Asia Combined Net Revenue (at PFG Share) $104.4 $117.6 $133.0 $181.2 Less: Principal Asia Combined Operating Expenses (at PFG Share) 88.2 100.1 109.7 144.6 Principal Asia Pre-Tax Operating Earnings $16.2 $17.5 $23.3 $36.6 Twelve months ended,