Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2013

Fair Value (Table)

As of March 31, 2013

Assets/

(liabilities)

measured at

Fair value hierarchy level

fair value

Level 1

Level 2

Level 3

(in millions)

Assets

Fixed maturities, available-for-sale:

U.S. government and agencies

953.3

297.5

655.8

—

Non-U.S. governments

1,179.7

—

1,139.3

40.4

States and political subdivisions

3,491.8

—

3,489.9

1.9

Corporate

34,102.8

74.2

33,861.0

167.6

Residential mortgage-backed securities

3,123.2

—

3,123.2

—

Commercial mortgage-backed securities

3,990.7

—

3,990.7

—

Collateralized debt obligations

394.0

—

318.8

75.2

Other debt obligations

3,848.6

—

3,832.7

15.9

Total fixed maturities, available-for-sale

51,084.1

371.7

50,411.4

301.0

Fixed maturities, trading

628.9

—

459.4

169.5

Equity securities, available-for-sale

147.0

62.1

68.8

16.1

Equity securities, trading

732.2

107.5

624.7

—

Derivative assets (1)

840.9

—

773.7

67.2

Other investments (2)

288.9

41.8

136.2

110.9

Cash equivalents (3)

757.4

2.4

755.0

—

Sub-total excluding separate account assets

54,479.4

585.5

53,229.2

664.7

Separate account assets

120,906.1

58,020.6

58,226.3

4,659.2

Total assets

175,385.5

58,606.1

111,455.5

5,323.9

Liabilities

Investments-type insurance contracts (4)

(117.8

)

—

(117.8

)

Derivative liabilities (1)

(1,198.1

)

—

(1,122.5

)

(75.6

)

Other liabilities (4)

(271.8

)

—

(217.6

)

(54.2

)

Total liabilities

(1,587.7

)

—

(1,340.1

)

(247.6

)

Net assets (liabilities)

173,797.8

58,606.1

110,115.4

5,076.3

	As of December 31, 2012
	Assets/
	(liabilities)
	measured at			Fair value hierarchy level
	fair value			Level 1		Level 2			Level 3
	(in millions)
Assets
Fixed maturities, available-for-sale:
U.S. government and agencies	$	944.3		$	203.5	$	740.8		$	—
Non-U.S. governments	1,208.3			—		1,164.0			44.3
States and political subdivisions	3,178.8			—		3,176.9			1.9
Corporate	34,325.4			85.9		34,065.0			174.5
Residential mortgage-backed securities	3,226.7			—		3,226.7			—
Commercial mortgage-backed securities	3,897.4			—		3,897.4			—
Collateralized debt obligations	379.2			—		301.6			77.6
Other debt obligations	3,779.2			—		3,764.5			14.7
Total fixed maturities, available-for-sale	50,939.3			289.4		50,336.9			313.0
Fixed maturities, trading	626.7			9.4		450.5			166.8
Equity securities, available-for-sale	136.5			54.4		66.8			15.3
Equity securities, trading	252.8			99.8		153.0			—
Derivative assets (1)	1,016.7			—		941.6			75.1
Other investments (2)	272.1			64.1		94.1			113.9
Cash equivalents (3)	1,772.6			561.4		1,211.2			—
Sub-total excluding separate account assets	55,016.7			1,078.5		53,254.1			684.1

Separate account assets	81,653.8			54,010.1		23,027.7			4,616.0
Total assets	$	136,670.5		$	55,088.6	$	76,281.8		$	5,300.1

Liabilities
Investments-type insurance contracts (4)	$	(170.5	)	$	—	$	—		$	(170.5	)
Derivative liabilities (1)	(1,205.1		)	—		(1,102.5		)	(102.6		)
Other liabilities (4)	(237.4		)	—		(197.8		)	(39.6		)
Total liabilities	$	(1,613.0	)	$	—	$	(1,300.3	)	$	(312.7	)

Net assets (liabilities)	$	135,057.5		$	55,088.6	$	74,981.5		$	4,987.4

(1) Within the consolidated statements of financial position, derivative assets are reported with other investments and derivative liabilities are reported with other liabilities. Refer to Note 5, Derivative Financial Instruments, for further information on fair value by class of derivative instruments. Our derivatives are primarily Level 2, with the exception of certain credit default swaps and other swaps that are Level 3.

(2) Primarily includes seed money investments, commercial mortgage loans of consolidated VIEs and an equity method investment reported at fair value.

(3) Includes money market instruments and short-term investments with a maturity date of three months or less when purchased.

(4) Includes bifurcated embedded derivatives that are reported at fair value within the same line item in the consolidated statements of financial position in which the host contract is reported. Other liabilities also include obligations of consolidated VIEs reported at fair value.

Reconciliation for All Assets and Liabilities Measured at Fair Value on a Recurring Basis Using Significant Unobservable Inputs (Table)

For the three months ended March 31, 2013

Changes in

Beginning

Net

Ending

unrealized

asset/

Total realized/unrealized

purchases,

asset/

gains (losses)

(liability)

gains (losses)

sales,

(liability)

included in

balance

Included in

issuances

balance

net income

as of

Included in

other

and

Transfers

as of

relating to

December 31,

net income

comprehensive

settlements

into

out of

March 31,

positions still

2012

(1)

income

(4)

Level 3

2013

held (1)

(in millions)

Assets

Fixed maturities, available-for-sale:

Non-U.S. governments

44.3

—

0.3

(4.2

)

—

40.4

—

State and political subdivisions

1.9

—

1.9

—

Corporate

174.5

(3.1

)

(10.1

)

(17.6

)

47.5

(23.6

)

167.6

(3.1

)

Collateralized debt obligations

77.6

2.1

7.1

(33.0

)

21.4

—

75.2

—

Other debt obligations

14.7

—

1.7

(0.5

)

—

15.9

—

Total fixed maturities, available-for-sale

313.0

(1.0

)

(1.0

)

(55.3

)

68.9

(23.6

)

301.0

(3.1

)

Fixed maturities, trading

166.8

2.7

—

169.5

2.8

Equity securities, available-for-sale

15.3

—

0.8

—

16.1

—

Derivative assets

75.1

(11.5

)

—

3.6

—

67.2

(11.0

)

Other investments

113.9

(0.6

)

—

(2.4

)

—

110.9

(0.6

)

Separate account assets (2)

4,616.0

119.0

(0.2

)

(77.0

)

1.4

—

4,659.2

117.2

Liabilities

Investments-type insurance contracts

(170.5

)

51.7

—

1.0

—

(117.8

)

50.9

Derivative liabilities

(102.6

)

25.8

0.3

0.9

—

(75.6

)

25.7

Other liabilities (3)

(39.6

)

(14.6

)

—

(54.2

)

(14.6

)

	For the three months ended March 31, 2012																				Changes in
	Beginning									Net								Ending			unrealized
	asset/			Total realized/unrealized						purchases,								asset/			gains (losses)
	(liability)			gains (losses)						sales,								(liability)			included in
	balance			Included in			Included in			issuances								balance			net income
	as of			net			other			and			Transfers		Transfers			as of			relating to
	December 31,			income			comprehensive			settlements			into		out of			March 31,			positions still
	2011			(1)			income			(4)			Level 3		Level 3			2012			held (1)
	(in millions)
Assets
Fixed maturities, available-for-sale:
Non-U.S. governments	$	22.9		$	—		$	(0.3	)	$	(0.3	)	$	14.5	$	—		$	36.8		$	—
Corporate	297.0			(2.6		)	2.0			(16.6		)	3.4		(80.5		)	202.7			(2.7		)
Collateralized debt obligations	102.5			(0.1		)	3.1			0.5			—		(27.0		)	79.0			(0.1		)
Other debt obligations	27.3			(0.7		)	(1.3		)	(25.2		)	6.0		—			6.1			—
Total fixed maturities, available-for-sale	449.7			(3.4		)	3.5			(41.6		)	23.9		(107.5		)	324.6			(2.8		)
Fixed maturities, trading	220.8			3.6			—			(18.2		)	—		—			206.2			(2.4		)
Equity securities, available-for-sale	18.0			—			(0.5		)	—			—		—			17.5			—
Derivative assets	60.2			(14.6		)	—			1.7			—		—			47.3			(13.6		)
Other investments	97.5			(0.9		)	—			(6.8		)	—		—			89.8			(0.8		)
Separate account assets (2)	4,198.2			86.1			0.1			(2.7		)	0.3		(1.7		)	4,280.3			76.9

Liabilities
Investment-type insurance contracts	(195.8		)	68.8			—			(2.0		)	—		—			(129.0		)	68.1
Derivative liabilities	(177.1		)	25.4			1.3			8.1			—		—			(142.3		)	26.4
Other liabilities (3)	(24.2		)	(16.5		)	—			—			—		—			(40.7		)	(16.5		)

(1) Both realized gains (losses) and mark-to-market unrealized gains (losses) are generally reported in net realized capital gains (losses) within the consolidated statements of operations. Realized and unrealized gains (losses) on certain fixed maturities, trading and certain derivatives used in relation to certain trading portfolios are reported in net investment income within the consolidated statements of operation.

(2) Gains and losses for separate account assets do not impact net income as the change in value of separate account assets is offset by a change in value of separate account liabilities. Foreign currency translation adjustments related to the Principal International segment separate account assets are recorded in AOCI and are offset by foreign currency translation adjustments of the corresponding separate account liabilities.

(3) Certain embedded derivatives reported in other liabilities are part of a cash flow hedge, with the effective portion of the unrealized gains (losses) recorded in AOCI.

(4) Gross purchases, sales, issuances and settlements were:

For the three months ended March 31, 2013

Net purchases,

sales, issuances

Purchases

Sales

Issuances

Settlements

and settlements

(in millions)

Assets

Fixed maturities, available-for-sale:

Non-U.S. governments

—

(3.9

)

—

(0.3

)

(4.2

)

Corporate

4.2

(9.4

)

—

(12.4

)

(17.6

)

Collateralized debt obligations

—

(32.4

)

—

(0.6

)

(33.0

)

Other debt obligations

—

(0.5

)

(0.5

)

Total fixed maturities, available-for-sale

4.2

(45.7

)

—

(13.8

)

(55.3

)

Derivative assets

6.7

(3.1

)

—

3.6

Other investments

0.2

—

(2.6

)

(2.4

)

Separate account assets (5)

66.5

(136.8

)

(4.5

)

(2.2

)

(77.0

)

Liabilities

Investment-type insurance contracts

—

(0.3

)

1.3

1.0

Derivative liabilities

(1.6

)

2.5

—

0.9

	For the three months ended March 31, 2012
													Net purchases,
													sales, issuances
	Purchases			Sales			Issuances			Settlements			and settlements
	(in millions)
Assets
Fixed maturities, available-for-sale:
Non-U.S. governments	$	3.9		$	(3.9	)	$	—		$	(0.3	)	$	(0.3	)
Corporate	12.3			(26.6		)	—			(2.3		)	(16.6		)
Collateralized debt obligations	—			—			—			0.5			0.5
Other debt obligations	—			—			—			(25.2		)	(25.2		)
Total fixed maturities, available-for-sale	16.2			(30.5		)	—			(27.3		)	(41.6		)
Fixed maturities, trading	—			(0.9		)	—			(17.3		)	(18.2		)
Derivative assets	2.5			(0.8		)	—			—			1.7
Other investments	—			—			—			(6.8		)	(6.8		)
Separate account assets (5)	127.5			(90.3		)	(134.9		)	95.0			(2.7		)

Liabilities
Investment-type insurance contracts	—			—			(3.3		)	1.3			(2.0		)
Derivative liabilities	(0.7		)	8.8			—			—			8.1

(5) Issuances and settlements include amounts related to mortgage encumbrances associated with real estate in our separate accounts.

Transfers (Table)

For the three months ended March 31, 2013

Transfers out

of Level 1 into

of Level 2 into

of Level 3 into

Level 2

Level 3

Level 1

Level 3

Level 1

Level 2

(in millions)

Assets

Fixed maturities, available-for-sale:

Corporate

—

47.5

—

23.6

Collateralized debt obligations

—

21.4

—

Total fixed maturities, available-for-sale

—

68.9

—

23.6

Separate account assets

243.4

—

4.6

1.4

—

	For the three months ended March 31, 2012
	Transfers out		Transfers out		Transfers out		Transfers out		Transfers out		Transfers out
	of Level 1 into		of Level 1 into		of Level 2 into		of Level 2 into		of Level 3 into		of Level 3 into
	Level 2		Level 3		Level 1		Level 3		Level 1		Level 2
	(in millions)
Assets
Fixed maturities, available-for-sale:
Non-U.S. governments	$	—	$	—	$	—	$	14.5	$	—	$	—
Corporate	—		—		—		3.4		—		80.5
Collateralized debt obligations	—		—		—		—		—		27.0
Other debt obligations	—		—		—		6.0		—		—
Total fixed maturities, available-for-sale	—		—		—		23.9		—		107.5
Separate account assets	—		0.3		—		—		—		1.7

Quantitative Information about Level 3 Fair Value Measurements (Table)

As of March 31, 2013

Assets /

(liabilities)

measured at

Valuation

Unobservable

Input/range of

Weighted

fair value

technique(s)

input description

inputs

average

(in millions)

Assets

Fixed maturities, available-for-sale:

Non-U.S. governments

13.0

Discounted cash flow

Discount rate (1)

1.8%

Illiquidity premium

50 basis points (“bps”)

50bps

Corporate

31.4

Discounted cash flow

Discount rate (1)

1.7%-22.0%

11.4%

Earnings before interest, taxes, depreciation and amortization multiple

0x-4.8x

3.1x

Probability of default

0%-100%

65.1%

Potential loss severity

0%-30%

14.4%

Collateralized debt obligations

35.6

Discounted cash flow

Discount rate (1)

1.2%-2.7%

2.1%

Illiquidity premium

0bps-400bps

150bps

Other debt obligations

15.9

Discounted cash flow

Discount rate (1)

6.5%-15.0%

10.4%

Illiquidity premium

0bps-50bps

27bps

Fixed maturities, trading

37.9

Discounted cash flow

Discount rate (1)

1.3%-62.1%

4.0%

Illiquidity premium

0bps-1,400bps

390bps

110.4

See note (2)

	As of March 31, 2013
	Assets /
	(liabilities)
	measured at	Valuation	Unobservable	Input/range of	Weighted
	fair value	technique(s)	input description	inputs	average
	(in millions)
Other investments	77.2	Discounted cash flow - commercial mortgage loans of consolidated VIEs	Discount rate (1)	3.7%	3.7%
			Illiquidity premium	272bps	272bps
	33.7	Discounted cash flow - equity method real estate investment	Discount rate (1)	9.0%	9.0%
			Terminal capitalization rate	5.5%	5.5%
			Average market rent growth rate	3.6%	3.6%
		Discounted cash flow - equity method real estate investment debt	Loan to value	48.4%	48.4%
			Credit spread rate	3.3%	3.3%
Separate account assets	4,510.9	Discounted cash flow - mortgage loans	Discount rate (1)	0.8%-9.4%	3.3%
			Illiquidity premium	0bps-50bps	20bps
			Credit spread rate	47bps-880bps	240bps
		Discounted cash flow - real estate	Discount rate (1)	6.5%-16.0%	7.9%
			Terminal capitalization rate	4.8%-9.0%	6.8%
			Average market rent growth rate	1.9%-5.6%	3.5%
		Discounted cash flow - real estate debt	Loan to value	16.1%-85.8%	54.2%
			Credit spread rate	1.4%-5.1%	3.3%

	As of March 31, 2013
	Assets /
	(liabilities)
	measured at		Valuation	Unobservable	Input/range of	Weighted
	fair value		technique(s)	input description	inputs	average
	(in millions)

Liabilities
Investment-type insurance contracts	(117.8	)	Discounted cash flow	Long duration interest rate	2.8%-3.0% (3)
				Long-term equity market volatility	16.1%-37.8%
				Non-performance risk	0.2%-1.5%
				Utilization rate	See note (4)
				Lapse rate	0.5%-14.6%
				Mortality rate	See note (5)
Derivative liabilities	(46.2	)	See note (2)
Other liabilities	(54.2	)	See note (2)

As of December 31, 2012

Assets /

(liabilities)

measured at

Valuation

Unobservable

Input/range of

Weighted

fair value

technique(s)

input description

inputs

average

(in millions)

Assets

Fixed maturities, available-for-sale:

Non-U.S. governments

12.9

Discounted cash flow

Discount rate (1)

1.6%

Illiquidity premium

50 basis points (“bps”)

50bps

Corporate

66.6

Discounted cash flow

Discount rate (1)

1.7%-29.0%

8.4%

Illiquidity premium

0bps-100bps

39bps

Earnings before interest, taxes, depreciation and amortization multiple

0x-3.5x

0.2x

Probability of default

0%-100%

6.4%

Potential loss severity

0%-30%

1.9%

Collateralized debt obligations

38.2

Discounted cash flow

Discount rate (1)

1.0%-19.8%

13.3%

Illiquidity premium

400bps-1,000bps

791bps

	As of December 31, 2012
	Assets /
	(liabilities)
	measured at	Valuation	Unobservable	Input/range of		Weighted
	fair value	technique(s)	input description	inputs		average
	(in millions)

Other debt obligations	14.7	Discounted cash flow	Discount rate (1)	6.5%-20.0%		11.8%
			Illiquidity premium	0bps-50bps		30bps
Fixed maturities, trading	35.9	Discounted cash flow	Discount rate (1)	1.2%-60.5%		4.1%
			Illiquidity premium	0bps-1,400bps		390bps
	110.4	See note (2)
Other investments	80.3	Discounted cash flow - commercial mortgage loans of consolidated VIEs	Discount rate (1)	3.5	%	3.5%
			Illiquidity premium	287bps		287bps
	33.6	Discounted cash flow - equity method real estate investment	Discount rate (1)	9.3	%	9.3%
			Terminal capitalization rate	5.5	%	5.5%
			Average market rent growth rate	3.6	%	3.6%
		Discounted cash flow - equity method real estate investment debt	Loan to value	49.4	%	49.4%
			Credit spread rate	3.3	%	3.3%

	As of December 31, 2012
	Assets /
	(liabilities)
	measured at		Valuation	Unobservable	Input/range of	Weighted
	fair value		technique(s)	input description	inputs	average
	(in millions)
Separate account assets	4,449.0		Discounted cash flow - mortgage loans	Discount rate (1)	0.8%-10.4%	3.3%
				Illiquidity premium	0bps-50bps	20bps
				Credit spread rate	44bps-975bps	286bps
			Discounted cash flow - real estate	Discount rate (1)	6.5%-16.0%	8.3%
				Terminal capitalization rate	4.8%-9.0%	7.2%
				Average market rent growth rate	2.3%-5.5%	3.3%
			Discounted cash flow - real estate debt	Loan to value	17.0%-86.0%	54.8%
				Credit spread rate	1.6%-5.3%	3.5%

Liabilities
Investment-type insurance contracts	(170.5	)	Discounted cash flow	Long duration interest rate	2.6%-2.8% (3)
				Long-term equity market volatility	16.1%-38.3%
				Non-performance risk	0.3%-1.6%
				Utilization rate	See note (4)
				Lapse rate	0.5%-14.6%
				Mortality rate	See note (5)
Derivative liabilities	(65.1	)	See note (2)
Other liabilities	(39.6	)	See note (2)

(1) Represents market comparable interest rate or an index adjusted rate used as the base rate in the discounted cash flow analysis prior to any credit spread, illiquidity or other adjustments, where applicable.

(2) Relates to a consolidated collateralized private investment vehicle that is a VIE. Fixed maturities, trading represents the underlying collateral of the investment structure and consists of high-grade fixed maturity investments, which are over-collateralized based on outstanding notes priced at par. The derivative liability represents credit default swaps that are valued using a correlation model to the credit default swap (“CDS”) Index (“CDX”) and inputs to the valuation are based on observable market data such as the end of period swap curve, CDS constituents of the index and spread levels of the index, as well as CDX tranche spreads. The other liabilities represent obligations to third party note holders due at maturity or termination of the trust. The value of the obligations reflect the third parties’ interest in the investment structure.

(3) Represents the range of rate curves used in the valuation analysis that we have determined market participants would use when pricing the instrument. Derived from interpolation between observable 20 and 30-year swap rates.

(4) This input factor is the number of contractholders taking withdrawals as well as the amount and timing of the withdrawals and a range does not provide a meaningful presentation.

(5) This input is based on an appropriate industry mortality table and a range does not provide a meaningful presentation.

Financial Instruments Not Reported at Fair Value (Table)

March 31, 2013

Fair value hierarchy level

Carrying amount

Fair value

Level 1

Level 2

Level 3

(in millions)

Assets (liabilities)

Mortgage loans

11,577.9

12,350.1

—

12,350.1

Policy loans

866.5

1,051.9

—

1,051.9

Other investments

231.7

233.2

—

146.0

87.2

Cash and cash equivalents

903.8

—

Investments-type insurance contracts

(30,791.6

)

(31,405.9

)

—

(6,822.7

)

(24,583.2

)

Short-term debt

(46.5

)

(46.5

)

—

(46.5

)

—

Long-term debt

(2,790.5

)

(3,090.4

)

—

(3,057.3

)

(33.1

)

Separate account liabilities

(111,716.3

)

(110,268.8

)

—

(110,268.8

)

Bank deposits

(2,181.6

)

(2,225.5

)

(1,433.4

)

(792.1

)

—

Cash collateral payable

(75.0

)

(75.0

)

(75.0

)

—

	December 31, 2012
							Fair value hierarchy level
	Carrying amount			Fair value			Level 1			Level 2			Level 3
	(in millions)
Assets (liabilities)
Mortgage loans	$	11,519.7		$	12,163.7		$	—		$	—		$	12,163.7
Policy loans	864.9			1,056.8			—			—			1,056.8
Other investments	280.1			280.5			—			195.3			85.2
Cash and cash equivalents	2,404.6			2,404.6			2,364.6			40.0			—
Investments-type insurance contracts	(31,953.1		)	(32,531.6		)	—			(7,367.4		)	(25,164.2		)
Short-term debt	(40.8		)	(40.8		)	—			(40.8		)	—
Long-term debt	(2,671.3		)	(2,951.4		)	—			(2,921.7		)	(29.7		)
Separate account liabilities	(73,096.0		)	(72,173.8		)	—			—			(72,173.8		)
Bank deposits	(2,174.7		)	(2,177.7		)	(1,404.4		)	(773.3		)	—
Cash collateral payable	(205.6		)	(205.6		)	(205.6		)	—			—