From the Board of Directors

As your Board of Directors, we take our oversight responsibilities very seriously. We’re committed to representing your interests and believe that Principal’s strong governance is key to creating sustainable, long-term value for shareholders. On behalf of the Board, I’m pleased to provide an update on our top areas of focus and share some thoughts on company performance.

Strategic oversight

The Board not only evaluates company strategy but also shares perspectives, provides advice, and oversees and assesses management’s implementation. Each quarter, and at our annual strategy retreat with management, we discuss and debate topics critical to the company’s long-term success. At our 2019 retreat, we focused on global growth strategies and capital planning. This involved an in-depth look at: Principal’s target markets by customer and solution type; current and future sources of differentiation and risk for the enterprise and by business; and investments in innovation to improve the customer experience. Management continues to evolve and refine company strategy, invest in growth, and take appropriate actions to further strengthen its long-term competitive positioning. Principal’s acquisition of the Wells Fargo Institutional Retirement and Trust business, which closed on July 1, 2019, was clearly strategic, enabling the company to further capitalize on the U.S. retirement savings and retirement income markets.

Risk oversight

We have a coordinated, comprehensive approach to overseeing the company’s enterprise risk management. The Board regularly reviews strategic threats, opportunities, and key risks, including financial, product, cybersecurity, privacy, regulatory, and reputational risk, as well as risks that could potentially emerge in the future. Both your Board and management are fully engaged in risk management and have made it a fundamental aspect of company strategy, operations, and culture.

Social responsibility

Principal has long understood the importance of making a positive impact on the global communities in which it operates and has long been committed to environmental, social, and governance (ESG) initiatives. Management reports to the Board of Directors regularly on ESG focus areas. In 2019, Principal’s ESG management committee began developing a 2025 vision for ESG, including public commitments and key performance indicators.

Principal’s social responsibility efforts continue to be recognized by the financial press, human rights campaigns, and representatives of military and gender-equality associations and advocates. This includes being named one of the World’s Most Ethical Companies by the Ethisphere Institute for the fifth consecutive year (and ninth overall) in 2019, ranking Number 55 on Forbes 2019 list of America’s Best Employers for Diversity, and Number 5 on Forbes 2019 list of America’s Best Employers for Women.

Talent and succession planning

Our role in talent and succession planning applies to both company leadership and the Board. As part of a planned succession, Renee Schaaf assumed the role of president of Retirement and Income Solutions after having served as chief operating officer for Principal International. Schaaf replaced Nora Everett, who retired in March 2019 after 27 years with the company.

We remain committed to regular Board refreshment, striving for balance between introducing new perspectives and maintaining continuity. In September 2019, we added Jonathan Auerbach, executive vice president, chief strategy, growth, and data officer of PayPal Inc., to the Principal Board of Directors. Jonathan brings expertise in strategic planning, business development, data science, mergers and acquisitions, and payment platforms. Our Board is now composed of 12 directors, 11 of whom are independent, with broad expertise, skills, and viewpoints to help the company advance and execute its strategy. The Board values diversity in all aspects, including gender, race, age, and experience. Women and minorities comprise 55% of the independent members of our Board.

Ms. Tallett was lead director from 2007 through 2019. Mr. Mills has been lead director since January 2020.In November 2019, the Board appointed Scott Mills as our next lead director, which was effective January 1, 2020. As President of BET Networks, Scott leads overall strategy, creative, and business operations. He joined the Principal Board of Directors in July 2016. Membership and leadership of our Board committees continues to evolve as new directors join the Board, and directors like Scott take on new roles.

Company performance

The Board remains focused on sustainable performance. While volatile macroeconomic conditions impacted company performance in 2019, long-term growth remains strong. Since 2014, the company has increased assets under management by more than $216 billion, or 42%. This has helped drive a 5% compound annual growth in non-GAAP operating earnings per diluted share over the past five years. Again, through strategic investment, the company continues to make important strides in meeting customers’ needs, positioning Principal for long-term success.

Let me close by thanking you again for your continued support. It’s been a privilege to serve as your lead director, and I have great confidence in Scott as my successor. Please contact us with your questions, thoughts, and opinions at principal.com/contactscott.

Sincerely,

Elizabeth Tallett

Lead director, Principal Financial Group