Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 1-16725 (Commission file number) PRINCIPAL FINANCIAL GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 42-1520346 (State or other jurisdiction of incorporat ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-16725 PRINCIPAL FINANCIAL GROUP, INC. (Exact name of Registrant as specified in its charter) Delaware (State or other jurisdicti ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 1-16725 (Commission file number) PRINCIPAL FINANCIAL GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 42-1520346 (State or other jurisdiction of incorp ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Delaware 42-1520346 (Exact name of registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number) 711 High Street, Des Moines, Iowa 50392 For the quarterly period ended June 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF T ...

[Part I - FINANCIAL INFORMATION](index=3&type=section&id=Part%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Principal Financial Group, Inc. as of March 31, 2019, including statements of financial position, operations, comprehensive income, stockholders' equity, and cash flows, with detailed notes on accounting policies and data breakdowns [Consolidated Statements of Financial Position](index=3&type=section&id=Consolidated%20Statements%20of%20Financial%20Position) Total assets grew to **$259.4 billion** from **$243.0 billion**, driven by separate account assets and investments, with stockholders' equity rising to **$12.8 billion** Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total Assets** | **$259,419.9** | **$243,036.1** | | Total Investments | $88,543.9 | $84,766.6 | | Separate account assets | $157,942.8 | $144,987.9 | | **Total Liabilities** | **$246,120.0** | **$231,188.9** | | Separate account liabilities | $157,942.8 | $144,987.9 | | Long-term debt | $3,266.4 | $3,259.6 | | **Total Stockholders' Equity** | **$12,762.2** | **$11,456.0** | | Retained earnings | $10,571.9 | $10,290.2 | | Accumulated other comprehensive loss | $(418.9) | $(1,565.1) | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) Q1 2019 net income attributable to PFG rose to **$429.9 million** from **$397.1 million**, driven by **$3.74 billion** in revenues and a shift to capital gains Consolidated Statements of Operations (in millions, except per share data) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Total Revenues | $3,743.9 | $2,883.6 | | Premiums and other considerations | $1,724.9 | $995.2 | | Net realized capital gains (losses) | $84.5 | $(25.1) | | Total Expenses | $3,217.9 | $2,426.6 | | Income before income taxes | $526.0 | $457.0 | | Net Income | $452.1 | $402.5 | | **Net Income Attributable to PFG** | **$429.9** | **$397.1** | | **Diluted EPS** | **$1.53** | **$1.36** | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Q1 2019 comprehensive income attributable to PFG was **$1.58 billion**, a turnaround from a **$339.9 million** loss, driven by **$1.1 billion** in unrealized gains on AFS securities Consolidated Comprehensive Income (in millions) | Metric | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net Income | $452.1 | $402.5 | | Other comprehensive income (loss) | $1,146.7 | $(736.1) | | *Net unrealized gains (losses) on AFS securities* | *$1,104.3* | *$(805.5)* | | **Comprehensive income (loss) attributable to PFG** | **$1,576.1** | **$(339.9)** | [Consolidated Statements of Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity) Stockholders' equity grew from **$11.46 billion** to **$12.76 billion** in Q1 2019, driven by **$431.8 million** net income and **$1.15 billion** other comprehensive income - Key activities affecting stockholders' equity in Q1 2019 included net income of **$429.9 million**, other comprehensive income of **$1.15 billion**, common stock dividends of **$150.2 million**, and treasury stock acquisitions of **$153.6 million**[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2019 operating cash flow was **$1.18 billion**, with **$1.49 billion** used in investing and **$403.1 million** in financing, resulting in a **$717.8 million** cash decrease Consolidated Cash Flows (in millions) | Cash Flow Activity | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,176.4 | $746.5 | | Net cash used in investing activities | $(1,491.1) | $(979.9) | | Net cash provided by (used in) financing activities | $(403.1) | $98.3 | | **Net decrease in cash and cash equivalents** | **$(717.8)** | **$(135.1)** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section details accounting policies and methodologies, covering recent pronouncements, VIEs, investments, derivatives, insurance liabilities, income taxes, segment information, and subsequent events [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=91&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2019 financial condition and operations, covering key drivers, segment performance, investments, liquidity, and capital resources, highlighting net income growth from capital gains - On April 9, 2019, the company announced a definitive agreement to acquire Wells Fargo's Institutional Retirement & Trust business for **$1.2 billion** in cash plus a potential earn-out, expected to close in Q3 2019[419](index=419&type=chunk)[425](index=425&type=chunk) - Net income attributable to PFG increased to **$429.9 million** in Q1 2019 from **$397.1 million** in Q1 2018, primarily due to after-tax net realized capital gains, partially offset by a **$31.9 million** decrease in after-tax fees and other revenues[437](index=437&type=chunk) - Total revenues increased by **$860.3 million** year-over-year, driven by a **$729.7 million** increase in premiums and a **$109.6 million** positive swing in net realized capital gains (losses)[436](index=436&type=chunk) - Total expenses increased by **$791.3 million** year-over-year, mainly due to a **$784.0 million** rise in benefits, claims, and settlement expenses, corresponding with higher sales of single premium group annuities[436](index=436&type=chunk)[441](index=441&type=chunk) [Results of Operations by Segment](index=96&type=section&id=Results%20of%20Operations%20by%20Segment) Segment performance varied in Q1 2019, with Retirement and Income Solutions and Principal Global Investors seeing declines, while Principal International's earnings increased significantly Pre-tax Operating Earnings by Segment (in millions) | Segment | Q1 2019 | Q1 2018 | | :--- | :--- | :--- | | Retirement and Income Solutions | $240.6 | $243.9 | | Principal Global Investors | $100.7 | $113.7 | | Principal International | $111.1 | $91.5 | | U.S. Insurance Solutions | $110.7 | $115.0 | | Corporate | $(84.4) | $(67.6) | | **Total** | **$478.7** | **$496.5** | [Liquidity and Capital Resources](index=101&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity with **$1.7 billion** in cash and liquid assets, an improved debt-to-capitalization ratio of **21%**, and returned **$303.8 million** to shareholders in Q1 2019 - As of March 31, 2019, the holding companies and other subsidiaries held **$1.7 billion** of cash and liquid assets available for corporate purposes[482](index=482&type=chunk) Capitalization Summary (in millions) | Metric | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total debt | $3,310.3 | $3,302.5 | | Total stockholders' equity attributable to PFG | $12,694.4 | $11,390.0 | | **Total capitalization** | **$16,004.7** | **$14,692.5** | | Debt to capitalization | 21% | 22% | - In Q1 2019, the company returned **$303.8 million** to common stockholders, consisting of **$150.2 million** in dividends and **$153.6 million** in share repurchases[492](index=492&type=chunk) [Investments](index=106&type=section&id=Investments) Total invested assets grew to **$88.5 billion**, primarily in fixed maturities (**72%**) and commercial mortgage loans (**18%**), with **96%** of fixed income assets rated investment grade Composition of Invested Assets (in millions) | Asset Class | March 31, 2019 | % of Total | | :--- | :--- | :--- | | Fixed maturities | $63,791.9 | 72% | | Equity securities | $1,864.1 | 2% | | Mortgage loans | $15,597.5 | 18% | | Real estate | $1,736.7 | 2% | | Other investments & Policy loans | $5,553.7 | 6% | | **Total invested assets** | **$88,543.9** | **100%** | - The fixed maturities portfolio had a carrying amount of **$59.9 billion** as of March 31, 2019, with **96%** of the portfolio rated investment grade (NAIC designations 1 and 2)[549](index=549&type=chunk) - The commercial mortgage loan portfolio carrying amount was **$14.0 billion**, with a conservative weighted average loan-to-value ratio of **45%** and a debt service coverage ratio of **2.5x**[528](index=528&type=chunk)[579](index=579&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=122&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company manages market risks from interest rates, equity, and foreign currency, with a 100 bps interest rate drop impacting earnings by less than **1%** and a **10%** S&P 500 decline by **4-6%** - **Interest Rate Risk:** A hypothetical **100 basis point** immediate, parallel decrease in interest rates would reduce segment pre-tax operating earnings by less than **1%** over the next 12 months, excluding potential unlocking of DAC[610](index=610&type=chunk) - **Equity Risk:** An immediate **10%** decline in the S&P 500 index is estimated to reduce annual segment pre-tax operating earnings by approximately **4% to 6%**, excluding potential unlocking of DAC[639](index=639&type=chunk) - **Foreign Currency Risk:** A **10%** immediate unfavorable change in foreign currency exchange rates is estimated to reduce the total equity of international operations by **$326.8 million** as of March 31, 2019[630](index=630&type=chunk) [Controls and Procedures](index=128&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2019, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2019[643](index=643&type=chunk) - No material changes were made to the company's internal control over financial reporting during the first quarter of 2019[641](index=641&type=chunk) [Part II — OTHER INFORMATION](index=129&type=section&id=Part%20II%20%E2%80%94%20OTHER%20INFORMATION) [Legal Proceedings](index=129&type=section&id=Item%201.%20Legal%20Proceedings) The company is regularly involved in litigation, but as of March 31, 2019, there were no litigation or regulatory contingencies requiring disclosure - As of March 31, 2019, the company had no litigation or regulatory contingencies that required disclosure[220](index=220&type=chunk)[644](index=644&type=chunk) [Risk Factors](index=129&type=section&id=Item%201A.%20Risk%20Factors) New risk factors relate to the Wells Fargo acquisition, including potential deal failure, integration challenges, unanticipated liabilities, and new risks in trust and custody services - New risk factors have been added related to the acquisition of Wells Fargo's Institutional Retirement & Trust business[645](index=645&type=chunk) - Risks include potential failure to close the deal, complex and costly integration challenges, and the possibility of not realizing expected benefits and synergies[646](index=646&type=chunk)[647](index=647&type=chunk) - The company may assume unanticipated or unknown liabilities from the seller, with only limited indemnification rights[650](index=650&type=chunk) - Entering and expanding the trust and custody services business introduces new operational, competitive, and regulatory risks[651](index=651&type=chunk)[652](index=652&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=131&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In Q1 2019, the company repurchased approximately **2.7 million** shares, suspending its program with **$295.3 million** remaining under the November 2018 authorization Issuer Purchases of Equity Securities (Q1 2019) | Period | Total Shares Purchased | Average Price Paid | Shares Purchased Under Program | | :--- | :--- | :--- | :--- | | Jan 2019 | 1,468,212 | $47.10 | 1,467,368 | | Feb 2019 | 1,671,267 | $50.39 | 1,224,506 | | Mar 2019 | 4,050 | $52.99 | 0 | | **Total** | **3,143,529** | | **2,691,874** | - In Q1 2019, the company suspended its share repurchase program, with **$295.3 million** remaining under the November 2018 authorization[655](index=655&type=chunk) [Exhibits](index=132&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including the Wells Fargo acquisition Purchase Agreement, CEO/CFO certifications, and XBRL data files

[Part I](index=5&type=section&id=PART%20I) [Business](index=5&type=section&id=Item%201.%20Business) Principal Financial Group, Inc. (PFG) is a global investment management firm providing retirement, asset management, and insurance products, managing **$626.8 billion** in assets for approximately **24.2 million** customers worldwide as of December 31, 2018 - The company's operations are structured into four main reportable segments: Retirement and Income Solutions, Principal Global Investors, Principal International, and U.S. Insurance Solutions[19](index=19&type=chunk) - In the U.S., PFG primarily targets small and medium-sized businesses (fewer than 1,000 employees), a market segment considered to have attractive growth opportunities[16](index=16&type=chunk) - Internationally, the company focuses on select markets with a trend towards private sector defined contribution pension systems, driven by aging populations[17](index=17&type=chunk) [Retirement and Income Solutions Segment](index=5&type=section&id=Retirement%20and%20Income%20Solutions%20Segment) This segment offers a comprehensive portfolio of products for retirement savings and income, including defined contribution and defined benefit plans, annuities, and banking services, organized into Fee and Spread business groupings - The Retirement and Income Solutions segment is organized into two business groupings: Fee-based and Spread-based operations[21](index=21&type=chunk) Full Service Accumulation Statistics (as of Dec 31, 2018) | Plan Type | Number of Plans | Assets | Participants Covered | | :--- | :--- | :--- | :--- | | Defined Contribution | > 38,500 | $153.9 B | 5.2 million | | Defined Benefit | > 2,000 | $19.1 B | > 315,000 | - As of December 31, 2018, the segment's individual variable annuity account balances totaled **$9.0 billion**, with **$6.2 billion** of the separate account values having a guaranteed minimum withdrawal benefit (GMWB) rider[31](index=31&type=chunk)[32](index=32&type=chunk) - Principal Bank, a U.S. federal savings bank within this segment, had approximately **$3.1 billion** in assets and nearly **400,000** customers as of year-end 2018[48](index=48&type=chunk) [Principal Global Investors Segment](index=12&type=section&id=Principal%20Global%20Investors%20Segment) This segment manages assets for global investors through a multi-boutique strategy, offering capabilities in equity, fixed income, real estate, and other alternatives, managing **$393.5 billion** in assets as of December 31, 2018 Principal Global Investors AUM by Asset Class (as of Dec 31, 2018) | Asset Class | AUM (in billions) | | :--- | :--- | | Equity Investments | $147.7 | | Fixed Income Investments | $184.8 | | Alternative Investments | $56.0 | | **Total Managed by Boutiques** | **$393.5** | - The segment operates on a multi-boutique model, including specialized groups like Principal Global Equities, Principal Global Fixed Income, and Principal Real Estate Investors[52](index=52&type=chunk) - As of year-end 2018, Principal Global Investors and its boutiques served over **750** third-party institutional clients in **40** countries, with **$103.5 billion** of AUM from this channel[67](index=67&type=chunk) [Principal International Segment](index=14&type=section&id=Principal%20International%20Segment) The Principal International segment operates in Latin America and Asia, focusing on markets with growing middle classes and demand for long-term savings products through joint ventures, acquisitions, and start-ups Principal International AUM by Key Market (as of Dec 31, 2018) | Market | AUM (in billions) | Ownership Structure | | :--- | :--- | :--- | | Brazil (Brasilprev) | $67.7 | Joint Venture | | Chile | $43.9 | Wholly/Majority Owned | | Mexico | $12.9 | Wholly Owned | | Hong Kong SAR | $9.5 | Wholly Owned | | Southeast Asia (CPAM/CPIAM) | $19.1 | Joint Venture (60% owned) | | China (CCB PAM - not in reported AUM) | $149.3 | Joint Venture (25% owned) | - In February 2018, the company acquired MetLife's pension fund business in Mexico, increasing AUM by **$3.8 billion** and making it the fifth largest AFORE in the country[79](index=79&type=chunk) - In May 2018, Principal increased its ownership stake in its Southeast Asian joint ventures (CPAM and CPIAM) with CIMB Group to **60%**[89](index=89&type=chunk) [U.S. Insurance Solutions Segment](index=18&type=section&id=U.S.%20Insurance%20Solutions%20Segment) This segment provides insurance solutions to businesses and individuals in the U.S., organized into Specialty Benefits (group dental, vision, life, disability) and Individual Life divisions U.S. Insurance Solutions Key Metrics (as of Dec 31, 2018) | Product Line | Metric | Value | | :--- | :--- | :--- | | Group Dental & Vision | Policies in force | ~65,000 | | Group Life Insurance | Insurance in force | ~$152 billion | | Individual Life Insurance | Insurance in force | >$377 billion | - The company holds strong market positions, ranking **6th** in group dental, **3rd** in group life, and **5th** in individual disability insurance in the U.S. based on 2017 LIMRA data[92](index=92&type=chunk)[93](index=93&type=chunk)[98](index=98&type=chunk) - There is an enhanced focus on voluntary/worksite benefits, where funding shifts from the employer to the employee, which is seen as a growth opportunity[107](index=107&type=chunk) [Corporate Segment](index=21&type=section&id=Corporate%20Segment) The Corporate segment manages capital not allocated to other segments and includes financing activities, income on unallocated capital, inter-segment eliminations, and results from Principal Securities, Inc. and RobustWealth, Inc. - This segment's financial results primarily reflect financing costs, income on capital not allocated to business segments, and certain unallocated corporate expenses and adjustments[111](index=111&type=chunk) [Ratings](index=23&type=section&id=Ratings) The company's insurance subsidiaries, Principal Life and PNLIC, maintain strong financial strength ratings from major agencies, which are crucial for marketing products and reflect their ability to meet policyholder obligations Insurer Financial Strength Ratings | Rating Agency | Rating | Outlook | | :--- | :--- | :--- | | A.M. Best | A+ (Superior) | Stable | | Fitch Ratings | AA- (Very Strong) | Stable | | Moody's | A1 (Good) | Stable | | S&P Global | A+ (Strong) | Stable | [Regulation](index=23&type=section&id=Regulation) The company's businesses are subject to extensive regulation in the U.S. and internationally by various bodies, covering solvency, market conduct, securities, and employee benefits - The primary insurance regulatory authority for Principal Life and PNLIC is the Insurance Division of the Department of Commerce of the State of Iowa[121](index=121&type=chunk) - The company is subject to National Association of Insurance Commissioners (NAIC) risk-based capital (RBC) standards, and as of year-end 2018, all U.S. life insurance companies exceeded the minimum RBC requirements[124](index=124&type=chunk) - International businesses are supervised by local regulatory authorities, and global regulations like the EU's GDPR have an impact on operations[132](index=132&type=chunk) [Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company faces a variety of risks that could impact future performance, categorized into economic and market conditions, estimates and valuations, legal and regulatory changes, and business operations - Adverse capital and credit market conditions could significantly affect liquidity, access to capital, and cost of capital, potentially impacting the ability to meet obligations and fund growth[143](index=143&type=chunk) - Changes in interest rates or a sustained low-rate environment can adversely affect results by compressing investment spreads, increasing reserves, and altering policyholder behavior[152](index=152&type=chunk) - The company's profitability depends significantly on actual experience (mortality, morbidity, lapses) aligning with the assumptions used for pricing products and establishing reserves[180](index=180&type=chunk) - Changes in laws or regulations, including those related to insurance, securities (e.g., fiduciary standards), and taxes, could increase compliance costs and reduce profitability[184](index=184&type=chunk) - A downgrade in financial strength or credit ratings could increase policy surrenders, reduce new sales, and increase the cost of capital[221](index=221&type=chunk) [Part II](index=52&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=52&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Global Select Market under the symbol 'PFG', with details on dividends declared for 2018 and 2017, and a monthly breakdown of 2018 share repurchase activity Dividends Declared Per Common Share | Quarter | 2018 | 2017 | | :--- | :--- | :--- | | First | $0.51 | $0.45 | | Second | $0.52 | $0.46 | | Third | $0.53 | $0.47 | | Fourth | $0.54 | $0.49 | - In 2018, the company completed three separate share repurchase programs and authorized a new program of up to **$500.0 million** in November 2018, which has no expiration[267](index=267&type=chunk) 2018 Share Repurchase Summary | Metric | Value | | :--- | :--- | | Total Shares Purchased | 12,114,409 | | Total Shares Purchased (Public Program) | 11,773,365 | [Selected Financial Data](index=54&type=section&id=Item%206.%20Selected%20Financial%20Data) This section presents a five-year summary of key consolidated financial data from 2014 to 2018, including income statement items, balance sheet data, and Assets Under Management (AUM) Selected Financial Data (2016-2018) | Metric | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | | Total Revenues | $14,237.2 M | $14,093.2 M | $12,394.1 M | | Net Income | $1,553.7 M | $2,324.5 M | $1,361.8 M | | Diluted EPS | $5.36 | $7.88 | $4.50 | | Total Assets | $243,036.1 M | $253,941.2 M | $228,014.3 M | | Total Stockholders' Equity | $11,456.0 M | $12,921.9 M | $10,293.8 M | | AUM | $626.8 B | $668.6 B | $591.6 B | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=55&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) The MD&A provides management's perspective on the company's financial condition and results of operations, detailing the impact of economic factors, critical accounting policies, recent transactions, and a review of the investment portfolio, liquidity, and capital resources - In 2018, negative market performance more than offset positive net customer cash flow, leading to a decrease in AUM in the Retirement and Income Solutions and Principal Global Investors segments[276](index=276&type=chunk) - The company's profitability is driven by AUM levels, investment spreads, fee generation, insurance product pricing, investment portfolio management, and operating expense control[279](index=279&type=chunk) - Key transactions affecting comparability in 2018 include the acquisitions of RobustWealth, INTERNOS, and MetLife Afore, as well as a significant performance fee recognition from a real estate team realignment[328](index=328&type=chunk)[330](index=330&type=chunk)[331](index=331&type=chunk)[336](index=336&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=108&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the company's exposure to primary market risks: interest rate, foreign currency, and equity risk, outlining the risk management framework and providing sensitivity analyses for hypothetical market shifts - A hypothetical **100 basis point** immediate, parallel decrease in interest rates is estimated to reduce segment pre-tax operating earnings by less than **1%** over the next **12 months**, excluding certain unlocking impacts[565](index=565&type=chunk) - A hypothetical **100 basis point** immediate, parallel increase in interest rates would reduce the net reported fair value of financial assets and derivatives by an estimated **$3.9 billion** as of December 31, 2018[573](index=573&type=chunk) - An immediate **10%** decline in the S&P 500 index, followed by a gradual recovery, is estimated to reduce annual segment pre-tax operating earnings by approximately **4% to 6%**[590](index=590&type=chunk) - The company uses derivative instruments, including interest rate swaps, currency forwards, and equity options, to economically hedge exposures to market risks[578](index=578&type=chunk)[585](index=585&type=chunk)[593](index=593&type=chunk) [Financial Statements and Supplementary Data](index=117&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section contains the company's audited consolidated financial statements for the three years ended December 31, 2018, including the Statements of Financial Position, Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows, along with the Report of Independent Registered Public Accounting Firm and detailed Notes Consolidated Financial Highlights (Year Ended Dec 31, 2018) | Metric | Value (in millions) | | :--- | :--- | | **Total Assets** | **$243,036.1** | | Total Investments | $84,766.6 | | Separate Account Assets | $144,987.9 | | **Total Liabilities** | **$231,188.9** | | Contractholder Funds | $39,699.7 | | Separate Account Liabilities | $144,987.9 | | **Total Stockholders' Equity** | **$11,456.0** | | **Total Revenues** | **$14,237.2** | | **Net Income** | **$1,553.7** | [Notes to Consolidated Financial Statements](index=126&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide detailed disclosures that supplement the consolidated financial statements, covering the nature of operations, significant accounting policies, goodwill, investments, derivatives, insurance liabilities, debt, income taxes, employee benefits, contingencies, stockholders' equity, fair value measurements, and segment information - Note 1 outlines the basis of presentation and significant accounting policies, including the adoption of new standards for revenue recognition and financial instruments in 2018[631](index=631&type=chunk)[643](index=643&type=chunk)[645](index=645&type=chunk) - Note 4 provides a detailed breakdown of the investment portfolio, including **$60.1 billion** in available-for-sale fixed maturities and **$15.3 billion** in mortgage loans as of December 31, 2018[770](index=770&type=chunk)[800](index=800&type=chunk) - Note 14 details the fair value hierarchy of assets and liabilities, with the majority of financial instruments classified as Level 1 or Level 2, indicating reliance on observable market inputs[1077](index=1077&type=chunk)[1112](index=1112&type=chunk) - Note 16 provides a detailed financial breakdown by business segment, reconciling segment operating earnings to the consolidated income before taxes[1170](index=1170&type=chunk)[1181](index=1181&type=chunk) [Part III](index=274&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=274&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) This section incorporates by reference information from the company's 2019 proxy statement regarding its directors, corporate governance practices, and compliance with Section 16(a) reporting, with a code of ethics applicable to principal executive and financial officers available on its website - Information regarding directors, corporate governance, and Section 16(a) compliance is incorporated by reference from the company's definitive proxy statement for the 2019 annual meeting[1326](index=1326&type=chunk) - A code of ethics for principal executive and financial officers is available on the company's website, and any amendments or waivers will be disclosed there[1326](index=1326&type=chunk)[1327](index=1327&type=chunk) [Executive Compensation](index=276&type=section&id=Item%2011.%20Executive%20Compensation) This section incorporates by reference the detailed information on executive compensation from the company's 2019 proxy statement - Detailed information on executive compensation is incorporated by reference from the Proxy Statement under the heading 'Executive Compensation'[1328](index=1328&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=276&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) This section incorporates by reference information from the 2019 proxy statement regarding security ownership by certain beneficial owners and management, and provides a table summarizing equity compensation plans Equity Compensation Plan Information (as of Dec 31, 2018) | Plan Category | Securities to be Issued Upon Exercise | Weighted-Average Exercise Price | Securities Remaining for Future Issuance | | :--- | :--- | :--- | :--- | | Approved by Stockholders | 8,201,832 | $46.77 | 10,963,662 | [Certain Relationships and Related Transactions, and Director Independence](index=276&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) This section incorporates by reference information from the 2019 proxy statement concerning related party transactions and the independence of the company's directors - Information on director independence and related party transactions is incorporated by reference from the Proxy Statement[1331](index=1331&type=chunk) [Principal Accounting Fees and Services](index=276&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) This section incorporates by reference information from the 2019 proxy statement regarding the fees paid to and services provided by the company's independent registered public accounting firm - Information regarding fees for professional services rendered by the principal accountant is incorporated by reference from the Proxy Statement[1332](index=1332&type=chunk) [Part IV](index=277&type=section&id=PART%20IV) [Exhibits and Financial Statement Schedules](index=277&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the documents filed as part of the Form 10-K, including financial statements, four specific financial statement schedules, and an index of all exhibits - The report includes four financial statement schedules: Summary of Investments, Condensed Financial Information of Registrant (Parent Only), Supplementary Insurance Information, and Reinsurance[1333](index=1333&type=chunk) - An index of exhibits lists all documents filed with the report, including the company's certificate of incorporation, bylaws, debt indentures, and executive compensation plans[1336](index=1336&type=chunk)