Registration No. 333-128079

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-4

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

Pre-Effective Amendment No.

Post-Effective Amendment No. 9

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940

Amendment No. 203

(Check appropriate box or boxes)

Principal Life Insurance Company Separate Account B

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(Exact Name of Registrant)

Principal Life Insurance Company

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(Name of Depositor)

The Principal Financial Group, Des Moines, Iowa 50392

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(Address of Depositor's Principal Executive Offices) (Zip Code)

(515) 362-2384

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Depositor's Telephone Number, including Area Code

Doug Hodgson

The Principal Financial Group Des Moines, Iowa 50392

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(Name and Address of Agent for Service)

Title of Securities Being Registered: Principal Freedom^SMVariable Annuity 2 Contract

It is proposed that this filing will become effective (check appropriate box)

_____ immediately upon filing pursuant to paragraph (b) of Rule 485

__X__ on May 1, 2015 pursuant to paragraph (b) of Rule 485

_____ 60 days after filing pursuant to paragraph (a)(1) of Rule 485

_____ on (date) pursuant to paragraph (a)(1) of Rule 485

_____ 75 days after filing pursuant to paragraph (a)(2) of Rule 485

_____ on (date) pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

_____ This post-effective amendment designates a new effective date for a previously filed post- effective amendment.

PRINCIPAL FREEDOM^SM VARIABLE ANNUITY 2

Issued by Principal Life Insurance Company (the “Company”)

Prospectus dated May 1, 2015

This prospectus provides information about the individual flexible premium deferred variable annuity (the “Contract”) and the Principal Life Insurance Company Separate Account B (“Separate Account”) that you, as owner, should know before investing. The prospectus should be read and retained for future reference. Additional information about the Contract is included in the Statement of Additional Information (“SAI”), dated May 1, 2015, which has been filed with the Securities and Exchange Commission (the “SEC”). The SAI is a part of this prospectus. The table of contents of the SAI is at the end of this prospectus. You may obtain a free copy of the SAI by writing or calling: Principal Freedom Variable Annuity 2, Principal Financial Group, P. O. Box 9382, Des Moines, Iowa 50306-9382, Telephone: 1-800-852-4450.

An investment in the Contract is not a deposit or obligation of any bank and is not insured or guaranteed by any bank, the Federal Deposit Insurance Corporation or any other government agency.

The Contract described in this prospectus is funded with the Separate Account. The assets of each Separate Account Division (“divisions”) are invested in a corresponding underlying mutual fund. The divisions available through the Contract are:

American Century Variable Portfolios, Inc.— Class I	Principal Variable Contracts Funds, Inc. — Class 1 (cont.)
• Income & Growth	• Principal LifeTime 2020 Account(1)
Fidelity Variable Insurance Products — Service Class	• Principal LifeTime 2030 Account(1)
• MidCap Portfolio	• Principal LifeTime 2040 Account(1)
Principal Variable Contracts Funds, Inc. — Class 1	• Principal LifeTime 2050 Account(1)
• Bond & Mortgage Securities Account	• Principal LifeTime Strategic Income Account(1)
• Diversified International Account	• Real Estate Securities Account
• Government & High Quality Bond Account	• Short-Term Income Account
• LargeCap Growth Account I	• SmallCap Blend Account
• LargeCap S&P 500 Index Account	• Strategic Asset Management Balanced(1)
• LargeCap Value Account	• Strategic Asset Management Conservative Balanced(1)
• MidCap Account(2)	• Strategic Asset Management Conservative Growth(1)
• Money Market Account	• Strategic Asset Management Flexible Income(1)
• Principal Capital Appreciation Account	• Strategic Asset Management Strategic Growth(1)
• Principal LifeTime 2010 Account(1)

⁽¹⁾  This underlying mutual fund is a fund of funds and expenses may be higher due to the tiered level of expenses.

⁽²⁾  Effective August 16, 2013, the MidCap Account is no longer available to customers with an application signature date on or after August 16, 2013.

These securities have not been approved or disapproved by the SEC or any statesecurities commission nor has the SEC or any state securities commission passed uponthe accuracy or adequacy of this prospectus. Any representation to the contrary is acriminal offense.

This prospectus is valid only when accompanied by the current prospectuses for the underlying mutual funds. These prospectuses should be kept for future reference.

The Contract offered by this prospectus may not be available in all states. This prospectus is not an offer to sell, or solicitation of an offer to buy, the Contract in states in which the offer or solicitation may not be lawfully made. No person is authorized to give any information or to make any representation in connection with this Contract other than those contained in this prospectus.

TABLE OF CONTENTS

GLOSSARY	4
SUMMARY OF EXPENSE INFORMATION	6
SUMMARY	7
Investment Limitations	8
Transfers	8
Surrenders	8
Charges and Deductions	8
Annuity Benefit Payments	8
Death Benefit	8
Examination Offer Period (free look)	9
THE PRINCIPAL FREEDOM VARIABLE ANNUITY 2	9
THE COMPANY	9
THE SEPARATE ACCOUNT	9
THE UNDERLYING MUTUAL FUNDS	10
THE CONTRACT	11
To Buy a Contract	11
Premium Payments	11
Right to Examine the Contract (free look)	11
THE ACCUMULATION PERIOD	12
The Value of Your Contract	12
Limitations on Unscheduled Transfers	14
Automatic Portfolio Rebalancing (APR)	15
Telephone and Internet Services	15
Surrenders	16
Death Benefit	17
The Annuitization Period	19
CHARGES AND DEDUCTIONS	21
Mortality and Expense Risks Charge	21
Transaction Fee	21
Transfer Fee	21
Premium Taxes	21
Surrender Charge	21
Free Surrender Privilege	22
Separate Account Administration Charge	23
Special Provisions for Group or Sponsored Arrangements	23
GENERAL PROVISIONS	24
The Contract	24
Delay of Payments	24
Misstatement of Age or Gender	24
Assignment	24
Change of Owner or Annuitant	25
Beneficiary	25
Contract Termination	25
Reinstatement	25
Reports	25
Important Information about Customer Identification Procedures	25

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RIGHTS RESERVED BY THE COMPANY	26
Frequent Trading and Market-Timing (Abusive Trading Practices)	26
DISTRIBUTION OF THE CONTRACT	27
PERFORMANCE CALCULATION	27
FEDERAL TAX MATTERS	28
Non-Qualified Contracts	28
Required Distributions for Non-Qualified Contracts	28
IRA, SEP, and SIMPLE-IRA	29
Rollover IRAs	30
Roth IRAs	30
Withholding	30
MUTUAL FUND DIVERSIFICATION	30
STATE REGULATION	31
GENERAL INFORMATION	31
FINANCIAL STATEMENTS	32
TABLE OF SEPARATE ACCOUNT DIVISIONS	33
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION	39
CONDENSED FINANCIAL INFORMATION	40

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GLOSSARY

accumulated value – an amount equal to the sum of your Contract’s value in the divisions.

accumulation period – the period of time from the contract date to the annuitization date.

anniversary – the same date and month of each year following the contract date.

annuitant – the person, including any joint annuitant, on whose life the annuity benefit payment is based. This person may or may not be the owner.

annuitization – application of a portion or all of the accumulated value to an annuity benefit payment option to make income payments.

annuitization date – the date all of the owner’s accumulated value is applied to an annuity benefit payment option.

contract date – the date that the Contract is issued and which is used to determine contract years.

contract year – the one-year period beginning on the contract date and ending one day before the contract anniversary and any subsequent one-year period beginning on a contract anniversary (for example, if the contract date is June 5, 2012, the first contract year ends on June 4, 2013, and the first contract anniversary is June 5, 2013).

data page – that portion of the Contract which contains the following: owner and annuitant data (names, gender, annuitant age); the contract date; maximum annuitization date; and contract charges and limits.

division – a part of the Separate Account which invests in shares of an underlying mutual fund (referred to in the marketing materials as “sub-account”).

joint annuitant – one of the annuitants on whose life the annuity benefit payment is based. Any reference to the death of the annuitant means the death of the first annuitant to die.

joint owner – an owner who has an undivided interest with the right of survivorship in this Contract with another owner. Any reference to the death of the owner means the death of the first owner to die.

non-qualified contract – a Contract which does not qualify for favorable tax treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA, Simple-IRA, or Tax Sheltered Annuity.

notice – any form of communication received by us, at the home office, either in writing or in another form approved by us in advance.

Your notices may be mailed to us at:

Principal Life Insurance Company

P O Box 9382

Des Moines, Iowa 50306-9382

owner – the person, including joint owner, who owns all the rights and privileges of this Contract.

partial annuitization – application of a portion of the accumulated value to an annuity benefit payment option.

premium payments – the gross amount contributed to the Contract.

qualified plans – retirement plans which receive favorable tax treatment under Section 401 or 403(a) of the Internal Revenue Code.

surrender charge – the charge deducted upon certain partial surrenders or upon a total surrender of the Contract within the first three contract years.

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surrender value – accumulated value less any applicable surrender charge, transaction fee, transfer fee and any premium or other taxes.

transfer – moving all or a portion of your accumulated value to or from one division or among several divisions. Simultaneous transfers are considered to be one transfer for purposes of calculating the transfer fee, if any.

underlying mutual fund – a registered open-end investment company, or a separate portfolio thereof, in which a division invests.

unit – the accounting measure used to calculate the value of a division.

unit value – a measure used to determine the value of an investment in a division.

valuation date – each day the New York Stock Exchange (“NYSE”) is open for trading and trading is not restricted.

valuation period – the period of time from one determination of the value of a unit of a division to the next. Each valuation period begins at the close of normal trading on the NYSE, generally 4:00 p.m. E.T., on each valuation date and ends at the close of normal trading of the NYSE on the next valuation date.

we, our, us - Principal Life Insurance Company. We are also referred to throughout this prospectus as the Company.

you, your – the owner of this Contract, including any joint owner.

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SUMMARY OF EXPENSE INFORMATION

The tables below describe the fees and expenses that you will pay when buying, owning and surrendering the Contract.

The following table describes the fees and expenses that you will pay at the time that you buy the Contract, surrender the Contract or transfer cash value between investment options.

Contract owner transaction expenses
Sales charge	•none
Maximum surrender charge(1)	•3%
Transaction Fees
•guaranteed maximum	•the lesser of $30 or 2% of each unscheduled partial surrender after the twelfth in a contract year
•current	•zero
Transfer Fee(2)
•guaranteed maximum	•the lesser of $25 or 2% of each unscheduled transfer after the first in a contract year
•current	•zero
State Premium Taxes (vary by state)
•maximum(3)	•3.5% of premium payments made
•current	•zero

⁽¹⁾ 

Table of Surrender Charges
Contract Year	Surrender Charge
1	3%
2	2%
3	1%
4 and later	0%

⁽²⁾ Please note that in addition to the fees shown, the Separate Account and/or sponsors of the underlying mutual funds may adopt requirements permitted or mandated under rules and/or regulations adopted by federal and/or state regulators which impose additional transfer fees and/or restrictions on transfers.

 ⁽³⁾ We reserve the right to deduct an amount to cover any premium taxes imposed by states or other jurisdictions. The highest current premium tax rate is 3.5%.

The following table describes the fees and expenses that are deducted periodically during the time that you own the Contract, not including underlying mutual fund fees and expenses.

Periodic Expenses
Separate Account Annual Expenses (as a percentage of accumulated value)
•guaranteed maximum    Mortality and Expense Risks Charge    Separate Account Administration Charge    Total Separate Account Annual Expenses	1.25% 0.15% 1.40%
•current    Mortality and Expense Risks Charge    Separate Account Administration Charge    Total Separate Account Annual Expenses	0.95% 0.00% 0.95%

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This table shows the minimum and maximum total operating expenses, charged by the underlying mutual funds, that you may pay periodically during the time that you own the contract. More detail concerning the fees and expenses of each underlying mutual fund is contained in its prospectus.

Minimum and Maximum Annual Underlying Mutual Fund Operating Expenses as of December 31, 2014
	Minimum	Maximum
Total annual underlying mutual fund operating expenses (expenses that are deducted from underlying mutual fund assets, including management fees, distribution and/or service (12b-1) fees and other expenses)	0.25%	0.95%

The annual fees and expenses charged by each underlying mutual fund are shown in each fund’s current prospectus.

Example

This example is intended to help you compare the cost of investing in the Contract with the cost of investing in other variable annuity contracts. These costs are imposed on any portion of the Contract that you have not annuitized and include contract owner transaction expenses, Separate Account annual expenses, and underlying mutual fund fees and expenses. Although your actual costs may be higher or lower, based on these assumptions, your costs would be as shown below.

The example reflects the current charges imposed if you were to purchase the Contract. This example also reflects the minimum and maximum annual underlying mutual fund operating expenses as of December 31, 2014 (without voluntary waivers of fees by the underlying funds, if any). This example assumes:

•a $10,000 investment in the Contract for the time periods indicated; and

•a 5% return each year.

	If you surrender your contract at the end of the applicable time period				If you do not surrender your contract				If you fully annuitize your contract at the end of the applicable time period
	1 Yr.	3 Yrs.	5 Yrs.	10 Yrs.	1 Yr.	3 Yrs.	5 Yrs.	10 Yrs.	1 Yr.	3 Yrs.	5 Yrs.	10 Yrs.
Maximum Total Underlying Mutual Fund Operating Expenses (0.95%)	$509	$809	$1,217	$2,603	$231	$711	$1,217	$2,603	$231	$711	$1,217	$2,603
Minimum Total Underlying Mutual Fund Operating Expenses (0.25%)	$443	$603	$867	$1,888	$163	$503	$867	$1,888	$163	$503	$867	$1,888

SUMMARY

This prospectus describes an individual flexible premium variable annuity offered by the Company. The Contract is designed to provide individuals with retirement benefits, including:

• non-qualified arrangements; and

• qualified arrangements (for example, Individual Retirement Annuities (“IRAs”), Simplified Employee Pension plans (“SEPs”) and Savings Incentive Match Plan for Employees (“SIMPLE”) IRAs adopted according to Section 408 of the Internal Revenue Code (see FEDERAL TAX MATTERS - IRA, SEP and SIMPLE-IRA and Rollover IRAs). The Contract does not provide anyadditional tax deferral if you purchase it to fund an IRA orother investment vehicle that already provides taxdeferral.

For information on how to purchase the Contract, please seeTHE CONTRACT – To Buy aContract.

This is a brief summary of the Contract’s features. More detailed information follows later in this prospectus.

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Investment Limitations

• The initial premium payment must be $10,000 or more.

• Each subsequent premium payment must be at least $500.

• If you are a member of a retirement plan covering three or more persons and premium payments are made through an automatic investment program, the initial and subsequent premium payments for the Contract must average at least $100 and not be less than $50.

You may allocate your net premium payments to the divisions, a complete list of which may be found in the Table of Divisions later in this prospectus. Each division invests in shares of an underlying mutual fund. More detailed information about the underlying mutual funds may be found in the current prospectus for each underlying mutual fund.

Transfers (See Division Transfers and Total and Partial Surrenders for additional restrictions.)

During the accumulation period,

•a dollar amount or percentage of transfer must be specified; and

•a transfer may occur on a scheduled or unscheduled basis.

After you fully annuitize the accumulated value, transfers are not permitted.

Surrenders (See Surrenders and Total and Partial Surrenders)

During the accumulation period:

• a dollar amount must be specified;

• surrendered amounts may be subject to a surrender charge;

• during a contract year, partial surrenders less than the earnings in the Contract or 10% of premium payments are not subject to a surrender charge; and

• surrenders before age 59½ may involve an income tax penalty (see FEDERAL TAX MATTERS).

After you fully annuitize the accumulated value, surrenders are not permitted.

Charges and Deductions (see CHARGES AND DEDUCTIONS)

• There is no sales charge on premium payments.

• A contingent deferred surrender charge is imposed on certain total or partial surrenders.

• An annual mortality and expense risks charge equal to an annual rate of 0.95% of the accumulated value is imposed daily. We guarantee that this charge will not exceed an annual rate of 1.25% of the accumulated value.

• The daily separate account administration charge currently is zero. We reserve the right to assess a charge not to exceed an annual rate of 0.15% of the accumulated value.

• Certain states and local governments impose a premium tax. The Company reserves the right to deduct the amount of the tax from premium payments or accumulated value.

Annuity Benefit Payments

• You may choose from several fixed annuity benefit payment options which are described in The AnnuitizationPeriod - Annuity Benefit Payment Options.

• You may choose to fully annuitize your Contract starting on your selected annuitization date.

• You may elect to partially annuitize your Contract prior to the annuitization date by sending us notice.

Annuity benefits payments are made to the owner or at the owner’s direction. You should carefully consider the tax implications of each annuity benefit payment option (see Annuity Benefit Payment Options and FEDERAL TAXMATTERS).

Death Benefit

• If the owner dies before the annuitization date, a death benefit is payable to the beneficiary of the Contract.

• The death benefit may be paid as either a single payment or under an annuity benefit payment option (see DeathBenefit).

If the annuitant dies on or after the annuitization date, payments to the beneficiary will continue only as provided by the annuity benefit payment option in effect.

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Examination Offer Period (free look) (see Right to Examine the Contract (free look)

• You may return the Contract during the examination offer period which is generally 10 days from the date you receive the Contract. The examination offer period may be longer in certain states.

• We return all premium payments if required by state law. Otherwise we return accumulated value.

THE PRINCIPAL FREEDOM VARIABLE ANNUITY 2

The Principal Freedom Variable Annuity 2 is significantly different from a fixed annuity. As the owner of a variable annuity, you assume the risk of investment gain or loss rather than the Company. The accumulated value under a variable annuity is not guaranteed and varies with the investment performance of the underlying mutual funds.

Based on your investment objectives, you direct the allocation of premium payments and accumulated values. There can be no assurance that your investment objectives will be achieved.

THE COMPANY

The Company is a stock life insurance company with authority to transact life and annuity business in all states of the United States and the District of Columbia. Our home office is located at: Principal Financial Group, Des Moines, Iowa 50392. We are a wholly owned subsidiary of Principal Financial Services, Inc., which in turn, is a wholly owned direct subsidiary of Principal Financial Group, Inc., a publicly-traded company.

On June 24, 1879, we were incorporated under Iowa law as a mutual assessment life insurance company named Bankers Life Association. We became a legal reserve life insurance company and changed our name to Bankers Life Company in 1911. In 1986, we changed our name to Principal Mutual Life Insurance Company. In 1998, we became Principal Life Insurance Company, a subsidiary stock life insurance company of Principal Mutual Holding Company, as part of a reorganization into a mutual insurance holding company structure. In 2001, Principal Mutual Holding Company converted to a stock company through a process called demutualization, resulting in our current organizational structure.

THE SEPARATE ACCOUNT

Principal Life Insurance Company Separate Account B was established under Iowa law on January 12, 1970 and was registered as a unit investment trust with the SEC on July 17, 1970. This registration does not involve SEC supervision of the investments or investment policies of the Separate Account. We do not guarantee the investment results of the Separate Account. There is no assurance that the value of your Contract will equal the total of the purchase payments you make to us.

The Separate Account is not affected by the rate of return of our General Account or by the investment performance of any of our other assets. Any income, gain, or loss (whether or not realized) from the assets of the Separate Account are credited to or charged against the Separate Account without regard to our other income, gains, or losses. Obligations arising from the Contract, including the promise to make annuity benefit payments, are general corporate obligations of the Company. Assets of the Separate Account attributed to the reserves and other liabilities under the Contract may not be charged with liabilities arising from any of our other businesses.

The Separate Account is divided into divisions. The assets of each division invest in a corresponding underlying mutual fund. New divisions may be added and made available. Divisions may also be eliminated from the Separate Account following SEC approval.

The Company does not guarantee the investment results of the Separate Account. There is no assurance that the value of your Contract will equal the total of your purchase payments.

In a low interest rate environment, yields for the Money Market division, after deduction of all applicable Contract and rider charges, may be negative even though the underlying money market fund’s yield, before deducting for such charges, is positive. If you allocate a portion of your Contract value to a Money Market division or participate in a scheduled automatic transfers program or Automatic Portfolio Rebalancing program where the Contract value is allocated to a Money Market division, that portion of your Contract value allocated to the Money Market division may decrease in value.

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THE UNDERLYING MUTUAL FUNDS

The underlying mutual funds are registered under the Investment Company Act of 1940 as open-end investment management companies. The underlying mutual funds provide the investment vehicles for the Separate Account. A full description of the underlying mutual funds, the investment objectives, policies and restrictions, charges and expenses and other operational information are contained in the accompanying prospectuses (which should be read carefully before investing) and the Statement of Additional Information (“SAI”). You may request additional copies of these documentswithout charge from your registered representative or by calling us at1-800-852-4450.

We purchase and sell shares of the underlying mutual fund for the Separate Account at their net asset value. Shares represent interests in the underlying mutual fund available for investment by the Separate Account. Each underlying mutual fund corresponds to one of the divisions. The assets of each division are separate from the others. A division’s performance has no effect on the investment performance of any other division.

The underlying mutual funds are NOT available to the general public directly. The underlying mutual funds are available only as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies and qualified plans. Some of the underlying mutual funds have been established by investment advisers that manage publicly traded mutual funds having similar names and investment objectives. While some of the underlying mutual funds may be similar to, and may in fact be modeled after publicly traded mutual funds, you should understand that the underlying mutual funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of any underlying mutual fund may differ substantially from the investment performance of a publicly traded mutual fund.

The Table of Separate Account Divisions later in this prospectus contains a brief summary of the investment objectives and a listing of the advisor and, if applicable, sub-advisor for each division.

Deletion or Substitution of Divisions

We reserve the right, within the law, to make additions, deletions and substitutions for the divisions. We will make no such substitution or deletion without first notifying you and obtaining approval of the appropriate insurance regulatory authorities and the SEC (to the extent required by 1940 Act).

If the shares of a division are no longer available for investment or if, in the judgment of our management, investment in a division becomes inappropriate for the purposes of our contract, we may eliminate the shares of a division and substitute shares of another division of the Trust or another open-end registered investment company. Substitution may be made with respect to both existing investments and the investment of future premium payments.

If we eliminate divisions, you may change allocation percentages and transfer any value in an affected division to another division(s) without charge. You may exercise this exchange privilege until the later of 60 days after a) the effective date of the additions, deletions and/or substitutions of the change, or b) the date you receive notice of the options available. You may only exercise this right if you have any value in the affected division(s).

We also reserve the right to establish additional divisions, each of which would invest in a separate underlying mutual fund with a specified investment objective.

Voting Rights

We vote shares of the underlying mutual funds owned by the Separate Account according to the instructions of owners.

We will notify you of shareholder meetings of the mutual funds underlying the divisions in which you hold units. We will send you proxy materials and instructions for you to provide voting instructions to us. We will arrange for the handling and tallying of proxies received from you and other owners. If you give no voting instructions, we will vote those shares in the same proportion as shares for which we received instructions.

We determine the number of fund shares that you may instruct us to vote by allocating one vote for each $100 of accumulated value in the division. Fractional votes are allocated for amounts less than $100. We determine the number of underlying fund shares you may instruct us to vote as of the record date established by the mutual fund for its shareholder meeting. In the event that applicable law changes or we are required by regulators to disregard voting instructions, we may decide to vote the shares of the underlying mutual funds in our own right.

NOTE: Because there is no required minimum number of votes, a small number of votes can have a disproportionate effect.

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THE CONTRACT

The following descriptions are based on provisions of the Contract offered by this prospectus. You should refer to the actual Contract and the terms and limitations of any qualified plan which is to be funded by the Contract. Qualified plans are subject to several requirements and limitations which may affect the terms of any particular Contract or the advisability of taking certain action permitted by the Contract.

Tax-qualified retirement arrangements, such as IRAs, SEPs, and SIMPLE-IRAs, are tax-deferred. You derive no additional benefit from the tax deferral feature of theannuity. Consequently, an annuity should be used to fund an IRA, or other taxqualified retirement arrangement to benefit from the annuity’s features other thantax deferral. These features may include guaranteed lifetime income, death benefits without surrender charges, guaranteed caps on fees, and the ability to transfer among investment options without sales or withdrawal charges.

To Buy a Contract

If you want to buy a Contract, you must submit an application and make an initial premium payment. If you are buying the Contract to fund a SIMPLE-IRA or SEP, an initial premium payment is not required at the time you send in the application. If the application is complete and the Contract applied for is suitable, the Contract is issued. If the completed application is received in proper order, the initial premium payment is credited within two valuation days after the later of receipt of the application or receipt of the initial premium payment at the home office. If the initial premium payment is not credited within five valuation days, it is refunded unless we have received your permission to retain the premium payment until we receive the information necessary to issue the Contract.

The date the Contract is issued is the contract date. The contract date is the date used to determine contract years, regardless of when the Contract is delivered.

Premium Payments

• The initial premium payment must be at least $10,000.

• If you are making premium payments through a payroll deduction plan or through a bank (or similar financial institution) account under an automated investment program, your initial and subsequent premium payments must be at least $100.

• Subsequent premium payments must be at least $500 and can be made until the annuitization date (we reserve the right to change the minimum subsequent premium payment amount but it will not be greater than $1,000).

• Premium payments are to be made via personal or financial institution check (for example, a bank or cashiers check). We reserve the right to refuse any premium payment that we feel presents a money laundering risk. Examples of the types of premium payments we will not accept are cash, money orders, starter checks, travelers checks, credit card checks, and foreign checks.

• No premium payments will be permitted after the annuitization date.

• If you are a member of a retirement plan covering three or more persons, the initial and subsequent premium payments for the Contract must average at least $100 and cannot be less than $50.

The total of all premium payments may not be greater than $2,000,000 without our prior approval.

Right to Examine the Contract (free look)

It is important to us that you are satisfied with the purchase of your Contract. Under state law, you have the right to return the Contract for any reason during the examination offer period (a “free look”). The examination offer period is the later of 10 days after the Contract is delivered to you, or such later date as specified by applicable state law.

Although we currently allocate your initial premium payments to the investment options you have selected, we reserve the right to allocate initial premium payments to the Money Market Division during the examination offer period. In California, for owners age 60 or older, we allocate initial premium payments to the Money Market Division unless you elect to immediately invest in the allocations you selected. If your premium payments were allocated to the Money Market Division, after the free look period ends, your accumulated value will be converted into units of the division(s) according to your allocation instructions. The units allocated will be based on the unit value next determined for each division.

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If you properly exercise your free look, we will rescind the Contract and we will pay you a refund of your current accumulated value plus any premium tax charge deducted, less any applicable federal and state income tax withholding and depending on the state in which the Contract was issued, any applicable fees and charges. The amount returned to you may be higher or lower than the premium payment(s) applied during the examination offer period.

Some states require us to return to you the amount of your premium payment(s); if so, we will return the greater of your premium payments or your current accumulated value plus any premium tax charge deducted, less any applicable federal and state income tax withholding and depending upon the state in which the Contract was issued, any applicable fees and charges.

If you are purchasing this Contract to fund an IRA, SIMPLE-IRA, or SEP-IRA and you return it on or before the seventh day of the examination offer period, we will return the greater of:

• the total premium payment(s) made; or

• your accumulated value plus any premium tax charge deducted, less any applicable federal and state income tax withholding and depending upon the state in which the Contract was issued, any applicable fees and charges.

If the purchase of this Contract is a replacement for another annuity contract or a life insurance policy, different examination offer periods may apply. We reserve the right to keep the initial premium payment in the Money Market Division longer than 10 days to correspond to the examination offer periods of a particular state’s replacement requirements.

To return a Contract, you must send notice to us or to the registered representative who sold it to you before the close of business on the last day of the examination offer period.

You may obtain more specific information regarding the free look from your registered representative or by calling us at 1-800-852-4450.

THE ACCUMULATION PERIOD

The Value of Your Contract

There is no guaranteed minimum accumulated value. As owner of the Contract, you bear the investment risk.

The accumulated value reflects the investment experience of the divisions that you choose. The value also reflects your premium payments, partial surrenders, surrender charges, partial annuitizations and Contract expenses.

The value of each division changes from day to day. At the end of any valuation period, your Contract’s value in a division is:

• the number of units you have in a division multiplied by

• the unit value of the division.

The number of units is the total of units purchased by allocations to the division from:

• your initial premium payments;

• subsequent premium payments; and

• transfers from another division.

minus units sold

• for partial surrenders and/or partial annuitizations from the division;

• as a part of a transfer to another division; and

• to pay contract charges and fees.

Unit values are calculated each valuation date at the close of normal trading of the NYSE. The unit value of a division is calculated by multiplying the unit value from the previous valuation date by the division’s net investment factor for the current valuation period. The number of units does not change due to a change in unit value.

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A division’s net investment factor measures the performance of that division. The net investment factor for a valuation period is [(a plus b) divided by (c)] minus d where:

• a =    the share price (net asset value) of the underlying mutual fund at the end of the valuation period;

• b =     the per share amount of any dividend* (or other distribution) made by the mutual fund during the valuation period;

• c =    the share price (net asset value) of the underlying mutual fund at the end of the previous valuation period; and

• d =    the total Separate Account annual expenses.

* When an investment owned by an underlying mutual fund pays a dividend, the dividend increases the net asset value of a share of the underlying mutual fund as of the date the dividend is recorded. As the net asset value of a share of an underlying mutual fund increases, the unit value of the corresponding division also reflects an increase. Payment of a dividend under these circumstances does not increase the number of units you own in the division.

The Separate Account annual expenses are calculated by dividing the annual amount of the charge by 365 and multiplying by the number of days in the valuation period.

Premium Payments

• On your application, you direct how your premium payments will be allocated to the divisions.

• Allocations may be in percentages which must be in whole numbers and total 100%.

• Subsequent premium payments are allocated according to your then current allocation instructions.

• Changes to the allocation instructions are made without charge.

•A change is effective on the next valuation period after we receive your new instructions.

•You can change the current allocations and future allocation instructions by:

•mailing your instructions to us;

•calling us at 1-800-852-4450 (if telephone privileges apply);

•faxing your instructions to us at 1-866-894-2087; or

•visiting www.principal.com.

• Changes to premium payment allocations do not result in the transfer of any existing division accumulated values. You must provide specific instructions to transfer existing division accumulated values.

• Premium payments are credited on the basis of unit value next determined after we receive a premium payment.

• If no premium payments are made during two consecutive calendar years and the accumulated value is less than $2,000, we reserve the right to terminate the Contract (see GENERALINFORMATION - Reservation of Rights).

Division Transfers

•You may request an unscheduled transfer or set up a scheduled transfer by:

•mailing your instructions to us;

•calling us at 1-800-852-4450 (if telephone privileges apply);

•faxing your instructions to us at 1-866-894-2087; or

•visiting www.principal.com.

•You must specify the dollar amount or percentage to transfer from each division.

•The minimum transfer amount is the lesser of $100 or the value of your division.

In states where allowed, we reserve the right to reject transfer instructions from someone providing them for multiple contracts for which he or she is not the owner.

Unscheduled Transfers

• You may make unscheduled division transfers from one division to another division.

• The transfer is made, and values determined, as of the end of the valuation period in which we receive your request.

• We reserve the right to impose a fee of the lesser of $25 or 2% of each unscheduled transfer after the first unscheduled transfer in a contract year.

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Limitations on Unscheduled Transfers

We reserve the right to reject excessive exchanges or purchases if the trade would disrupt the management of the Separate Account, any division of the Separate Account or any underlying mutual fund. In addition, we may suspend or modify transfer privileges in our sole discretion at any time to prevent market timing efforts that could disadvantage other owners. These modifications could include, but not be limited to:

• requiring a minimum time period between each transfer;

• imposing a transfer fee;

• limiting the dollar amount that an owner may transfer at any one time; or

• not accepting transfer requests from someone providing requests for multiple Contracts for which he or she is not the owner.

Scheduled Transfers (Dollar Cost Averaging)

• You may elect to have transfers made on a scheduled basis.

• There is no charge for scheduled transfers and no charge for participating in the scheduled transfer program.

• You must specify the dollar amount of the transfer.

• You select the transfer date (other than the 29th, 30th or 31st) and the transfer period (monthly, quarterly, semi-annually or annually).

• If the selected date is not a valuation date, the transfer is completed on the next valuation date.

• If you want to stop a scheduled transfer, you must provide us notice prior to the date of the scheduled transfer.

• Transfers continue until your value in the division is zero or we receive notice to stop the transfers.

• We reserve the right to limit the number of divisions from which simultaneous transfers are made. In no event will it ever be less than two.

Scheduled transfers are designed to reduce the risks that result from market fluctuations. They do this by spreading out the allocation of your premium payments to divisions over a longer period of time. This allows you to reduce the risk of investing most of your premium payments at a time when market prices are high. The results of this strategy depend on market trends and are not guaranteed.

Example:

Month	Amount Invested	Share Price	Shares Purchased
January	$100	$25.00	4
February	$100	$20.00	5
March	$100	$20.00	5
April	$100	$10.00	10
May	$100	$25.00	4
June	$100	$20.00	5
Total	$600	$120.00	33

In the example above, the average share price is $20.00 (total of share prices ($120.00) divided by number of purchases (6)). The average share cost is $18.18 (amount invested ($600.00) divided by number of shares purchased (33)).

Partial Annuitization

At any time prior to the annuitization date, you may annuitize a portion of your accumulated value by sending us written notice. The minimum partial annuitization amount is $2,000. Any partial annuitization request that would reduce the accumulated value to less than $5,000 is treated as a request for full annuitization. For more information regarding partial annuitization, see The Annuity Benefit PaymentPeriod—Annuity Benefit Payment Options.

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Automatic Portfolio Rebalancing (APR)

• APR allows you to maintain a specific percentage of your accumulated value in specified divisions over time.

• You may elect APR at any time after the examination offer period has expired.

• APR is not available if you have arranged scheduled transfers from the same division.

• There is no charge for APR transfers and no charge for participating in the APR program.

• APR may be done on the frequency you specify:

•quarterly (on a calendar year or contract year basis); or

•semiannually or annually (on a contract year basis).

• You may rebalance by:

•mailing your instructions to us,

•calling us at 1-800-852-4450 (if telephone privileges apply);

•faxing your instructions to us at 1-866-894-2087; or

•visiting www.principal.com.

Divisions are rebalanced at the end of the valuation period during which we receive your request.

Example: You elect APR to maintain your accumulated value with 50% in the LargeCap Value Division and 50% in the Bond & Mortgage Securities Division. At the end of the specified period, 60% of the accumulated value is in the LargeCap Value Division, with the remaining 40% in the Bond & Mortgage Securities Division. By rebalancing, units from the LargeCap Value Division are sold and invested in the Bond & Mortgage Securities Division so that 50% of the accumulated value is once again in each Division.

Telephone and Internet Services

If you elect telephone services or you elect internet services and satisfy our internet service requirements (which are designed to ensure compliance with federal UETA and E-SIGN laws), instructions for the following transactions may be given to us via the telephone or internet:

•make premium payment allocation changes;

•set up Dollar Cost Averaging (DCA) scheduled transfers;

•make transfers; and

•make changes to APR.

Neither the Company nor the Separate Account is responsible for the authenticity of telephone service or internet transaction requests. We reserve the right to refuse telephone service or internet transaction requests. You are liable for a loss resulting from a fraudulent telephone or internet order that we reasonably believe is genuine. We follow procedures in an attempt to assure genuine telephone service or internet transactions. If these procedures are not followed, we may be liable for loss caused by unauthorized or fraudulent transactions. The procedures may include recording telephone service transactions, requesting personal identification (name, address, security phrase, password, daytime telephone number, social security number and/or birth date) and sending written confirmation to your address of record.

Instructions received via our telephone services and/or the internet are binding on both owners if the Contract is jointly owned.

If the Contract is owned by a business entity or a trust, an authorized individual (with the proper password) may use telephone and/or internet services. Instructions provided by the authorized individual are binding on the owner.

We reserve the right to modify or terminate telephone service or internet transaction procedures at any time. Whenever reasonably feasible, we will provide you with prior notice if we modify or terminate telephone service or internet services. In some instances, it may not be reasonably feasible to provide prior notice if we modify or terminate telephone service or internet transaction procedures; however, any modification or termination will apply to all Contract owners in a non-discriminatory fashion.

Telephone Services

Telephone services are available to you. Telephone services may be declined on the application or at any later date by providing us with written notice. You may also elect telephone authorization for your registered representative by providing us written notice.

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If you elect telephone privileges, instructions

• may be given by calling us at 1-800-852-4450 while we are open for business (generally, between 8 a.m. and 5 p.m. Eastern Time on any day that the NYSE is open).

• are effective the day they are received if we receive the instructions in good order before the close of normal trading of the NYSE (generally 4:00 p.m. Eastern Time).

• are effective the next valuation day if we receive the instructions when we are not open for business and/or after the NYSE closes its normal trading.

Internet

Internet services are available to you if you register for a secure login on the Principal Financial Group web site, www.principal.com. You may also elect internet authorization for your registered representative by providing us written notice.

If you register for internet privileges, instructions

• are effective the day they are received if we receive the instructions in good order before the close of normal trading of the NYSE (generally 4:00 p.m. Eastern Time).

• are effective the next valuation day if we receive the instructions when we are not open for business and/or after the NYSE closes its normal trading.

Surrenders

Prior to the annuitization date, you may surrender your Contract by providing us notice. Surrender requests may be sent to us at:

Principal Life Insurance Company

P O Box 9382

Des Moines, Iowa 50306-9382

A surrender charge is generally imposed on surrenders in the first three contract years. However during the first three contract years, you may partially surrender a certain amount without a charge (see Free Surrender Privilege).

Surrenders result in the redemption of units. You receive the value of the redeemed units minus any applicable surrender charges. The unit values are determined as of the end of the valuation period in which we receive your request. Surrenders are generally paid within seven days of the effective date of the request for surrender (or earlier if required by law). However, certain delays in payment are permitted (see Delay of Payments). Surrenders before age 59½ may involve an income tax penalty (see FEDERAL TAX MATTERS).

You may specify surrender allocation percentages with each partial surrender request. If you do not provide us with specific percentages, we will use your premium payment allocation percentages for the partial surrender. Surrenders may be subject to a surrender charge (see Surrender Charge).

Total Surrender

• You may surrender the Contract at any time before the annuitization date.

• You receive the cash surrender value as of the end of the valuation period during which we receive your surrender request. The Contract is then terminated.

• The cash surrender value is your accumulated value minus any applicable surrender charges.

• The written consent of all collateral assignees and irrevocable beneficiaries must be obtained prior to surrender.

• We reserve the right to require you to return the Contract.

Unscheduled Partial Surrender

• Prior to the annuitization date, you may surrender a part of your accumulated value.

• You must specify the dollar amount of the unscheduled partial surrender (which must be at least $100).

• The unscheduled partial surrender is effective as of the end of the valuation period during which we receive your written request for the unscheduled partial surrender.

• The unscheduled partial surrender is deducted from your divisions according to your surrender allocation percentages.

• If surrender allocation percentages are not specified, we use your premium payment allocation percentages.

• We surrender units from your divisions to equal the dollar amount of the unscheduled partial surrender request plus any applicable surrender charge and transaction fee, if any.

• The accumulated value after the unscheduled partial surrender must be equal to or greater than $5,000 (we reserve the right to change the minimum remaining accumulated value but it will not be greater than $10,000).

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Scheduled Partial Surrender

• You may elect partial surrenders from any of the divisions on a scheduled basis.

• Your accumulated value must be at least $5,000 when the scheduled partial surrenders begin.

• You may specify monthly, quarterly, semi-annually or annually and choose a surrender date (other than the 29th, 30th or 31st).

• If the selected date is not a valuation date, the surrender is completed on the next valuation date.

• All scheduled partial surrenders occurring on the Contract anniversary are reflected in the values for the prior year.

• We surrender units from your divisions to equal the dollar amount of the scheduled partial surrender request plus any applicable surrender charge.

• The scheduled partial surrenders continue until your value in the division is zero or we receive notice to stop the scheduled partial surrenders.

Death Benefit

The following table illustrates the various situations and the resulting death benefit payment if you die before the annuitization date.

If you die and . . .	And . . .	Then . . .
You are the sole owner	Your spouse is not named as a primary beneficiary	The beneficiary(ies) receives the death benefit under the Contract. If a beneficiary dies before you, on your death we will make equal payments to the surviving beneficiaries unless you provided us with other written instructions. If no beneficiary(ies) survives you, the death benefit is paid to your estate in a single payment. Upon your death, only your beneficiary’s(ies’) right to the death benefit will continue; all other rights and benefits under the Contract will terminate.
You are the sole owner	Your spouse is named as a primary beneficiary	Your spouse may either a. elect to continue the Contract; or b. receive the death benefit under the Contract. All other beneficiaries receive the death benefit under the Contract. If a beneficiary dies before you, on your death we will make equal payments to the surviving beneficiaries unless you provided us with other written instructions. If no beneficiary(ies) survives you, the death benefit is paid to your estate in a single payment. Unless your spouse elects to continue the Contract, only your spouse’s and any other beneficiary’s(ies’) right to the death benefit will continue; all other rights and benefits under the Contract will terminate.
You are a joint owner	The surviving joint owner is not your spouse	The surviving owner receives the death benefit under the Contract. Upon your death, only the surviving owner’s right to the death benefit will continue; all other rights and benefits under the Contract will terminate.
You are a joint owner	The surviving joint owner is your spouse	Your spouse may either a. elect to continue the Contract; or b. receive the death benefit under the Contract. Unless the surviving spouse owner elects to continue the Contract, upon your death, only your spouse’s right to the death benefit will continue; all other rights and benefits under the rider and the Contract will terminate.

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If . . .	And . . .	Then . . .
The annuitant dies	The owner is not a natural person	The beneficiary(ies) receives the death benefit under the Contract. If a beneficiary dies before the annuitant, on the annuitant’s death we will make equal payments to the surviving beneficiaries unless the owner provided us with other written instructions. If no beneficiary(ies) survives the annuitant, the death benefit is paid to the owner. Upon the annuitant’s death, only the beneficiary’s(ies’) right to the death benefit will continue; all other rights and benefits under the Contract will terminate.

Before the annuitization date, you may give us written instructions for payment under a death benefit option. If we do not receive your instructions, the death benefit is paid according to instructions from the beneficiary(ies). The beneficiary(ies) may elect to apply the death benefit under an annuity benefit payment option or receive the death benefit as a single payment. Generally, unless the beneficiary(ies) elects otherwise, we pay the death benefit in a single payment, subject to proof of your death.

No surrender charge applies when a death benefit is paid.

Death Benefit

The amount of the death benefit is the greatest of a, b or c where:

• a =    the accumulated value on the date we receive proof of death and all required documents;

• b =    the total of premium payments minus an adjustment for each partial surrender (and any applicable fees and surrender charges) and each partial annuitization made prior to the date we receive proof of death and all required documents; and

• c =    is the highest accumulated value on any contract anniversary that is wholly divisible by seven (for example, contract anniversary 7, 14, 21, 28, etc.) plus any premium payments since that contract anniversary and minus an adjustment for each partial surrender (and any applicable fees and surrender charges) and each partial annuitization made after that contract anniversary.

The adjustment for each partial surrender (and any applicable fees and surrender charges) and for each partial annuitization made prior to the date we receive proof of death and all required documents is equal to (x divided by y) multiplied by z, where:

• x =    the amount of the partial surrender (and any applicable fees and surrender charges) or the partial annuitization;

• y =    the accumulated value immediately before the partial surrender or the partial annuitization; and

• z =    is the amounts determined in b or c above immediately prior to the partial surrender or partial annuitization

Example: Your accumulated value is $10,000 and you take a partial surrender of $2,000 (20% of the accumulated value). For purposes of calculating the death benefit, the adjustment included in the calculation for b & c above is 20%.

Payment of Death Benefit

The death benefit is usually paid within five business days of our receiving all documents (including proof of death) that we require to process the claim. Payment is made according to benefit instructions provided by you. Some states require this payment to be made in less than five business days. Under certain circumstances, this payment may be delayed (see Delay of Payments). We pay interest (as required by state law) on the death benefit from the date we receive all required documents until payment is made or until the death benefit is applied under an annuity benefit payment option.

NOTE: Proof of death includes: a certified copy of a death certificate; a certified copy of a court order; a written statement by a medical doctor; or other proof satisfactory to us.

The accumulated value remains invested in the divisions until the valuation period during which we receive the required documents. If more than one beneficiary is named, each beneficiary’s portion of the death benefit remains invested in the divisions until the valuation period during which we receive the required documents for that beneficiary. After payment of all of the death benefit, the Contract is terminated.

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The Annuitization Period

Annuitization Date

You may specify an annuitization date in your application. You may change the annuitization date with our prior approval. The request must be in writing. You may not select an annuitization date later than the maximum annuitization date found on the data page. If you do not specify an annuitization date, the annuitization date is the maximum annuitization date shown on the data page.

Full Annuitization

You may annuitize your Contract at any time by electing to receive payments under an annuity benefit payment option. If the accumulated value on the annuitization date is less than $2,000 or if the amount applied under an annuity benefit payment option is less than the minimum requirement, we may pay out the entire amount in a single payment. The contract would then be canceled. You may select when you want the payments to begin (within the period that begins the business day following our receipt of your instruction and ends one year after our receipt of your instruction).

Once payments begin under the annuity benefit payment option you choose, the option may not be changed. In addition, once payments begin, you may not surrender or otherwise liquidate or commute any of the portion of your accumulated value that has been annuitized.

Depending on the type of annuity benefit payment option selected, payments that are initiated either before or after the annuitization date may be subject to penalty taxes (see FEDERAL TAX MATTERS). You should consider this carefully when you select or change the annuity benefit payment commencement date.

Partial Annuitization

At any time prior to the annuitization date, you may annuitize a portion of your accumulated value by sending us a written notice and selecting an annuity benefit payment option. The minimum amount that may be applied to an annuity benefit payment option is $2,000. Any partial annuitization request that would reduce the accumulated value to less than $5,000 is treated as a request for full annuitization.

• We redeem units from your divisions to equal the dollar amount of the partial annuitization request.

• No surrender charge is imposed on the partial annuitization.

• The redemption is effective as of the end of the valuation period during which we receive your request.

• If you do not specify surrender allocation percentages, we use your premium payment allocation percentages.

You may select one of the annuity benefit payment options listed below. Once annuity benefit payments begin under the annuity benefit payment option you selected, the annuity benefit payment option may not be changed. In addition, once annuity benefit payments begin you may not surrender or otherwise liquidate or commute any of the portion of your accumulated value that has been annuitized.

Annuity Benefit Payment Options

We offer fixed annuity benefit payments only. No surrender charge is imposed on any portion of your accumulated value that has been annuitized.

You may choose from several fixed annuity benefit payment options. Payments will be made on the frequency you choose. You may elect to have your annuity benefit payments made on a monthly, quarterly, semiannual or annual basis. The dollar amount of the payments is specified for the entire payment period according to the option selected. There is no right to take any total or partial surrenders after the annuitization date.

The amount of the fixed annuity benefit payment depends on:

• the amount of accumulated value applied to the annuity benefit payment option;

• the annuity benefit payment option selected; and

• the age and gender of the annuitant and joint annuitant, if any (unless the fixed period income option is selected).

Annuity benefit payments are determined in accordance with annuity tables and other provisions contained in the Contract. The annuity benefit payment tables contained in this Contract are based on the Annuity 2000 Mortality Table. These tables are guaranteed for the life of the Contract. The amount of the initial payment is determined by applying all or a portion of the accumulated value as of the date of the application to the annuity table for the annuitant’s annuity benefit option, gender, and age.

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Annuity benefit payments generally are higher for male annuitants than for female annuitants with an otherwise identical Contract. This is because statistically females have longer life expectancies than males. In certain states, this difference may not be taken into consideration in fixing the payment amount. Additionally, Contracts with no gender distinctions are made available for certain employer-sponsored plans because, under most such plans, gender discrimination is prohibited by law.

You may select an annuity benefit payment option by written request only. Your selection of an annuity benefit payment option for a partial annuitization must be in writing and may not be changed after payments begin. Your election of an annuity benefit payment option for any portion not annuitized may be changed by written request prior to the annuitization date. If you do not elect an annuity benefit payment option, we will automatically apply:

• for Contracts with one annuitant - Life Income with annuity payments guaranteed for a period of 10 years.

• for Contracts with joint annuitants - Joint and Full Survivor Life Income with annuity payments guaranteed for a period of 10 years.

The available annuity benefit payment options for both full and partial annuitizations include:

• Fixed Period Income - Level payments are made for a fixed period. You may select from a range of 5 to 30 years (state variations may apply). If the annuitant dies before the fixed period expires, payments continue to you or the person(s) you designate until the end of the period. Payments stop after all guaranteed payments are made.

• Life Income - Level payments are made during the annuitant’s lifetime only. NOTE: There is no death benefit value remaining or further payments when the annuitant dies. If you defer the first payment date, it is possible that you would receive no payments if the annuitant dies before the first payment date.

• Life Income with Period Certain - Level payments continue during the annuitant’s lifetime with a guaranteed payment period of 5 to 30 years. If the annuitant dies before all of the guaranteed payments have been made, the guaranteed payments continue to you or the person(s) you designate until the end of the guaranteed payment period.

• Joint and Survivor - Payments continue as long as either the annuitant or the joint annuitant is alive. You may also choose an option that lowers the amount of income after the death of a joint annuitant. It is possible that you would only receive one payment under this option if both annuitants die before the second payment is due. If you defer the first payment date, it is possible that you would receive no payments if both annuitants die before the first payment date. NOTE:There is no death benefit value remaining or future payments after both annuitants have died.

• Joint and Survivor with Period Certain- Payments continue as long as either the annuitant or the joint annuitant is alive with a guaranteed payment period of 5 to 30 years. You may choose an option that lowers the amount of income after the death of a joint annuitant. If both annuitants die before all guaranteed payments have been made, the guaranteed payments continue to you or the person(s) you designate until the end of the guaranteed payment period.

Other annuity benefit payment options may be available with our approval.

Supplementary Contract

When you annuitize all or a portion of your Contract’s accumulated value, we issue a supplementary fixed annuity contract that provides an annuity benefit payment based on the amount you have annuitized and the annuity benefit payment option that you have selected. The date of the first annuity payment under the supplementary contract is the effective date of that supplementary contract unless you select a date for the first payment that is later than the supplementary contract effective date. The first annuity benefit payment must be made within one year of the supplementary contract effective date.

Tax Considerations Regarding Annuity Benefit Payment Options

If you own one or more tax qualified annuity contracts, you may avoid tax penalties if payments from at least one of your tax qualified contracts begin no later than April 1 following the calendar year in which you turn age 70½ The required minimum distribution payment must be in equal (or substantially equal) amounts over your life or over the joint lives of you and your designated beneficiary. These required minimum distribution payments must be made at least once a year. Tax penalties may apply at your death on certain excess accumulations. You should confer with your tax advisor about any potential tax penalties before you select an annuity payment option or take other distributions from the Contract.

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Additional rules apply to distributions under non-qualified contracts (see RequiredDistributions for Non-Qualified Contracts).

Death of Annuitant (during the annuity benefit payment period)

If the annuitant dies during the annuity benefit payment period, remaining payments are made to the owner throughout the guarantee period, if any, or for the life of any joint annuitant, if any. If the owner is the annuitant, remaining payments are made to the contingent owner. In all cases the person entitled to receive payments also receives any rights and privileges under the annuity benefit payment option.

CHARGES AND DEDUCTIONS

Certain charges are deducted under the Contract. If the charge is not sufficient to cover our costs, we bear the loss. If the charge is more than our costs, the excess is profit to the Company. We expect a profit from all the fees and charges listed below, except the Premium Tax.

In addition to the charges under the Contract, there are also deductions from and expenses paid out of the assets of the underlying mutual funds which are described in the underlying mutual funds’ prospectuses.

Mortality and Expense Risks Charge

We assess each division with a daily charge for mortality and expense risks. Currently, the annual rate of the charge is 0.95% of the accumulated value. We guarantee that this charge will not exceed an annual rate of 1.25% of the accumulated value. This charge is assessed only prior to the annuitization date. The charge is assessed daily when the value of a unit is calculated.

We have a mortality risk in that we guarantee payment of a death benefit in a single payment or under an annuity benefit payment option. No surrender charge is imposed on a death benefit payment which gives us an additional mortality risk.

The expense risk that we assume is that the actual expenses incurred in issuing and administering the Contract exceed the Contract limits on administration charges.

If the mortality and expense risks charge is not enough to cover the costs, we bear the loss. If the amount of mortality and expense risks charge deducted is more than our costs, the excess is profit to the Company.

Transaction Fee

We reserve the right to charge a transaction fee of the lesser of $30 or 2% of each unscheduled partial surrender after the 12th unscheduled partial surrender in a contract year. The transaction fee would be deducted from the accumulated value remaining in the division(s) from which the amount is surrendered, on a pro rata basis.

Transfer Fee

We also reserve the right to charge a transfer fee of the lesser of $25 or 2% of each unscheduled transfer after the first unscheduled transfer in a contract year. The transfer fee would be deducted from the division(s) from which the amount is transferred, on a pro rata basis.

Premium Taxes

We reserve the right to deduct an amount to cover any premium taxes imposed by states or other jurisdictions. Any deduction is made from a premium payment when we receive it or the accumulated value either when you request a surrender (total or partial) or you request application of the accumulated value (full or partial) to an annuity benefit payment option. Premium taxes currently range from 0% to 3.50%.

Surrender Charge

No sales charge is collected or deducted when premium payments are applied under the Contract. A surrender charge is assessed on certain total or partial surrenders. The amounts we receive from the surrender charge are used to cover some of the expenses of the sale of the Contract (commissions and other promotional or distribution expenses). If the surrender charge collected is not enough to cover the actual costs of distribution, the costs are paid from the Company’s General Account assets which include profit, if any, from the mortality and expense risks charge.

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The applicable percentage applied during each contract year is determined by the following table.

Table of Surrender Charges
Contract Year	Surrender Charge
1	3%
2	2%
3	1%
4 and later	0%

For purposes of calculating surrender charges, we assume that surrenders are made in the following order:

•first from the amount of the free surrender privilege; and

•then from the amount subject to a surrender charge.

NOTE: Partial surrenders may be subject to both the surrender charge and the transaction fee, if any.

Free Surrender Privilege

The free surrender privilege is an amount normally subject to a surrender charge that may be surrendered without a charge. The free surrender privilege is the greater of:

• earnings in the Contract (earnings = accumulated value less unsurrendered premium payments as of the date of the surrender or partial annuitization); or

• 10% of the premium payments, decreased by any partial surrenders and any partial annuitizations since the last contract anniversary.

Any amount not taken under the free surrender privilege in a contract year is not added to the amount available under the free surrender privilege for any following contract year(s).

Unscheduled partial surrenders of the free surrender privilege may be subject to the transaction fee described above.

Waiver of Surrender Charge

The surrender charge does not apply to amounts:

• applied under an annuity benefit payment option; or

• paid under a death benefit; or

• surrendered from a Contract which has been continued by a surviving spouse; or

• distributed to satisfy the minimum distribution requirement of Section 401(a)9 of the Internal Revenue Code provided that the amount surrendered does not exceed the minimum distribution amount which would have been calculated based on the value of this Contract alone; or

• transferred from a Contract used to fund an IRA to another annuity contract issued by the Company to fund an IRA of the participant’s spouse when the distribution is made pursuant to a divorce decree.

Waiver of Surrender Charge Rider

This Waiver of Surrender Charge rider waives the surrender charge on surrenders made after the first contract anniversary if the original owner or original annuitant has a critical need. This rider is automatically made a part of the Contract at issue. There is no charge for this rider. This rider may not be available in all states or through all broker dealers and may be subject to additional restrictions. Some rider provisions may vary from state to state. We may withdraw or prospectively restrict the availability of this rider at any time. For more information regarding availability or features of this rider, you may contact your registered representative or call us at 1-800-852-4450.

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Waiver of the surrender charge is available for critical need if the following conditions are met:

• the original owner or original annuitant has a critical need (NOTE: A change of ownership will terminate this rider; once terminated the rider may not be reinstated); and

• the critical need did not exist before the contract date.

• For the purposes of this section, the following definitions apply:

• critical need – owner’s or annuitant’s confinement to a health care facility, terminal illness diagnosis or total and permanent disability. If the critical need is confinement to a health care facility, the confinement must continue for at least 60 consecutive days after the contract date and the surrender must occur within 90 days of the confinement’s end.

• health care facility – a licensed hospital or inpatient nursing facility providing daily medical treatment and keeping daily medical records for each patient (not primarily providing just residency or retirement care). This does not include a facility primarily providing drug or alcohol treatment, or a facility owned or operated by the owner, annuitant or a member of their immediate families.

• terminal illness – sickness or injury that results in the owner’s or annuitant’s life expectancy being 12 months or less from the date notice to receive a distribution from the Contract is received by the Company. In Texas and New Jersey terminal illness is not included in the criteria for critical need.

• total and permanent disability – a disability that occurs after the contract date but before the original owner or annuitant reaches age 65 and qualifies to receive social security disability benefits. In New York, a different definition of total and permanent disability applies. In Oregon, total and permanent disability is not included in the criteria for critical need.

NOTE: The waiver of surrender charge rider is not available in Massachusetts.

Separate Account Administration Charge

Currently, we do not impose a separate account administration charge. However, we reserve the right to assess each division with a daily separate account administration charge not to exceed the annual rate of 0.15% of the average daily net assets of the Separate Account divisions. This charge would only be imposed before the annuitization date. Separate account administration includes issuing the Contract, clerical, record keeping and bookkeeping services, keeping the required financial and accounting records, communicating with owners and making regulatory filings.

Special Provisions for Group or Sponsored Arrangements

Where permitted by state law, Contracts may be purchased under group or sponsored arrangements as well as on an individual basis.

Group Arrangement – program under which a trustee, employer or similar entity purchases Contracts covering a group of individuals on a group basis.

Sponsored Arrangement – program under which an employer permits group solicitation of its employees or an association permits group solicitation of its members for the purchase of Contracts on an individual basis.

The charges and deductions described above may be reduced or eliminated for Contracts issued in connection with group or sponsored arrangements. The rules in effect at the time the application is approved will determine if reductions apply. Reductions may include but are not limited to sales of Contracts without, or with reduced, mortality and expense risks charges or surrender charges.

Eligibility for and the amount of these reductions are determined by a number of factors, including the number of individuals in the group, the amount of expected premium payments, total assets under management for the owner, the relationship among the group’s members, the purpose for which the Contract is being purchased, the expected persistency of the Contract, and any other circumstances which, in our opinion are rationally related to the expected reduction in expenses. Reductions reflect the reduced sales efforts and administration costs resulting from these arrangements. We may modify the criteria for and the amount of the reduction in the future. Modifications will not unfairly discriminate against any person, including affected owners and other owners with contracts funded by the Separate Account.

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GENERAL PROVISIONS

The Contract

The entire Contract is made up of the Contract, amendments, riders and endorsements and data page. Only our corporate officers can agree to change or waive any provisions of a Contract. Any change or waiver must be in writing and signed by an officer of the Company.

Delay of Payments

Surrendered amounts are generally disbursed within seven calendar days after we receive your instruction for a surrender in a form acceptable to us. This period may be shorter where required by law. However, payment of any amount upon total or partial surrender, death, full or partial annuitization of accumulated value or the transfer to or from a division may be deferred during any period when the right to sell mutual fund shares is suspended as permitted under provisions of the Investment Company Act of 1940 (as amended).

The right to sell shares may be suspended during any period when:

• trading on the NYSE is restricted as determined by the SEC or when the NYSE is closed for other than weekends and holidays; or

• an emergency exists, as determined by the SEC, as a result of which:

•disposal by a mutual fund of securities owned by it is not reasonably practicable;

•it is not reasonably practicable for a mutual fund to fairly determine the value of its net assets; or

•the SEC permits suspension for the protection of security holders.

If payments are delayed the transfer will be processed on the first valuation date following the expiration of the permitted delay unless we receive your written instructions to cancel your surrender, annuitization, or transfer. Your written instruction must be received in the home office prior to the expiration of the permitted delay. The transaction will be completed within seven business days.

In addition, we reserve the right to defer payment of that portion of your accumulated value that is attributable to a premium payment made by check for a reasonable period of time (not to exceed 15 business days) to allow the check to clear the banking system.

Misstatement of Age or Gender

If the age or, where applicable, gender of the annuitant has been misstated, we adjust the annuity benefit payment under your Contract to reflect the amount that would have been payable at the correct age and gender. If we make any overpayment because of incorrect information about age or gender, or any error or miscalculation, we deduct the overpayment from the next payment or payments due. Underpayments are added to the next payment.

Assignment

If your Contract is part of your qualified plan, IRA, SEP, or Simple IRA, you may not assign ownership.

You may assign your non-qualified Contract. Each assignment is subject to any payments made or action taken by the Company prior to our notification of the assignment. We assume no responsibility for the validity of any assignment. An assignment or pledge of a Contract may have adverse tax consequences.

An assignment must be made in writing and filed with us at the home office. The irrevocable beneficiary(ies), if any, must authorize any assignment in writing. Your rights, as well as those of the annuitant and beneficiary, are subject to any assignment on file with us. Any amounts paid to an assignee are treated as a partial surrender and are paid in a single payment lump sum.

The Company may refuse any assignment or transfer at any time on a non-discriminatory basis and may refuse any assignment where it believes such assignment may cause the development of a trading market.

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Change of Owner or Annuitant

If your Contract is part of your qualified plan, IRA, SEP, or SIMPLE-IRA, you may not change either the owner or the annuitant.

You may change the owner and/or annuitant of your non-qualified Contract at any time. Your request must be in writing and approved by us. After approval, the change is effective as of the date you signed the request for change. If ownership is changed, the waiver of surrender charge rider is not available.

If an annuitant who is not an owner dies while the Contract is in force, a new annuitant may be named unless the owner is a corporation, trust or other entity.

Beneficiary

While this Contract is in force, you have the right to name or change a beneficiary. This may be done as part of the application process or by sending us notice. Unless you have named an irrevocable beneficiary, you may change your beneficiary designation by sending us notice.

Contract Termination

We reserve the right to terminate the Contract and make a single payment (without imposing any charges) to you if you have not made a premium payment during two consecutive contract years and your accumulated value is less than $2,000. Before the Contract is terminated, we will send you a notice to increase the accumulated value to $2,000 within 60 days. Termination of the Contract will not unfairly discriminate against any owner.

Reinstatement

Reinstatement is only available for full surrender of your Contract. You cannot reinstate a partial surrender or partial annuitization; if you return either of these amounts, they will be considered new premium payments.

If you have replaced this Contract with an annuity contract from another company and want to reinstate this Contract, the following apply:

• the remaining surrender charge period, if any, is calculated based on the number of years since the original contract date;

• we apply the amount received from the other company and the amount of the surrender charge you paid when you surrendered the Contract, if any;

• these amounts are priced on the valuation date the money from the other company is received by us;

• commissions are not paid on the reinstatement amounts; and

• new data page is sent to your address of record.

Reports

We will mail you a statement of your current accumulated value, along with any reports required by state law, at least once per year prior to the annuitization date. After the annuitization date, any reports will be mailed to the person receiving the annuity benefit payments.

Quarterly statements reflect purchases, partial annuitizations and partial surrenders occurring during the quarter as well as the balance of units owned and accumulated values.

Important Information about Customer Identification Procedures

To help the government fight the funding of terrorism and money laundering activities, Federal law requires financial institutions to obtain, verify, and record information that identifies each person who applies for a Contract. When you apply for a Contract, we will ask for your name, address, date of birth, and other information that will allow us to verify your identity. We may also ask to see your driver’s license or other identifying documents.

If concerns arise with verification of your identification, no transactions will be permitted while we attempt to reconcile the concerns. If we are unable to verify your identity within 30 days of our receipt of your original premium payment, the Contract will be terminated and any value surrendered in accordance with normal redemption procedures.

We do not knowingly sell annuities that are for the benefit of a business/organization that is illegal under Federal and/or State law (such as a marijuana clinic), or a person who owns or receives income from such an entity or whose source of funds is illegal.

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RIGHTS RESERVED BY THE COMPANY

We reserve the right to make certain changes if, in our judgment, the changes best serve the interests of you and the annuitant or are appropriate in carrying out the purpose of the Contract. Any changes will be made only to the extent and in the manner permitted by applicable laws. Also, when required by law, we will obtain your approval of the changes and approval from any appropriate regulatory authority. Approvals may not be required in all cases.

Examples of the changes the Company may make include:

• transferring assets in any division to another division;

• adding, combining or eliminating a division(s);

• substituting the units of a division for the units of another division:

• if units of a division are no longer available for investment; or

• if in our judgment, investment in a division becomes inappropriate considering the purposes of the Separate Account.

Frequent Trading and Market-Timing (Abusive Trading Practices)

This Contract is not designed for frequent trading or market timing activity of the divisions. If you intend to trade frequently and/or use market timing investment strategies, you should not purchase this Contract. The Company does not accommodate market timing.

We consider frequent trading and market timing activities to be abusive trading practices because they:

• Disrupt the management of the underlying mutual funds by:

• forcing the fund to hold short-term (liquid) assets rather than investing for long term growth, which results in lost investment opportunities for the fund; and

•causing unplanned portfolio turnover;

• Hurt the portfolio performance of the underlying mutual funds; and

• Increase expenses of the underlying mutual fund and separate account due to:

•increased broker-dealer commissions; and

•increased record keeping and related costs.

If we are not able to identify such abusive trading practices, the abuses described above will negatively impact the Contract and cause investors to suffer the harms described.

We have adopted policies and procedures to help us identify and prevent abusive trading practices. In addition, the underlying mutual funds monitor trading activity to identify and take action against abuses. While our policies and procedures are designed to identify and protect against abusive trading practices, there can be no certainty that we will identify and prevent abusive trading in all instances. When we do identify abusive trading, we will apply our policies and procedures in a fair and uniform manner.

If we, or an underlying mutual fund that is a division with the Contract, deem abusive trading practices to be occurring, we will take action that may include, but is not limited to:

• Rejecting transfer instructions from a Contract owner or other person authorized by the owner to direct transfers;

• Restricting submission of transfer requests by, for example, allowing transfer requests to be submitted by 1st class U.S. mail only and disallowing requests made via the internet, by facsimile, by overnight courier or by telephone;

• Limiting the number of unscheduled transfers during a Contract year to no more than 12;

• Prohibiting you from requesting a transfer among the divisions for a minimum of thirty days where there is evidence of at least one round-trip transaction (exchange or redemption of shares that were purchased within 30 days of the exchange/redemption) by you; and

• Taking such other action as directed by the underlying mutual fund.

We will support the underlying mutual funds’ right to accept, reject or restrict, without prior written notice, any transfer requests into a fund.

In some instances, a transfer may be completed prior to a determination of abusive trading. In those instances, we will reverse the transfer (within two business days of the transfer) and return the Contract to the investment option holdings it had prior to the transfer. We will give you notice in writing in this instance.

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DISTRIBUTION OF THE CONTRACT

The Company has appointed Princor Financial Services Corporation (“Princor”) (Des Moines, Iowa 50392-0200), a broker-dealer registered under the Securities Exchange Act of 1934, a member of the Financial Industry Regulatory Authority and affiliate of the Company, as the distributor and principal underwriter of the Contract. Princor is paid 6.5% of premium payments by the Company for the distribution of the Contract. Princor also may receive 12b-1 fees in connection with purchases and sales of mutual funds underlying the Contracts. The 12b-1 fees for the underlying mutual funds are shown in this Contract prospectus in Summary of Expense Information.

Applications for the Contracts are solicited by registered representatives of Princor or such other broker-dealers as have entered into selling agreements with Princor. Such registered representatives act as appointed agents of the Company under applicable state insurance law and must be licensed to sell variable insurance products. The Company intends to offer the Contract in all jurisdictions where it is licensed to do business and where the Contract is approved.

The distributor and/or its affiliates provide services to and/or funding vehicles for retirement plans and employer sponsored benefit programs. The distributor and its affiliates may pay a bonus or other consideration or incentive to intermediaries if a participant in such a retirement plan establishes a rollover individual retirement account with the assistance of a registered representative of an affiliate of distributor, if the intermediary sold the funding vehicle the retirement plan utilizes or if the intermediary subsequently became the broker of record with regard to the retirement plan. The distributor and its affiliates may pay a bonus or other consideration or incentive to intermediaries if an employee covered under an employer sponsored benefit program purchases a product from an affiliate of distributor with the assistance of a registered representative of an affiliate of distributor, if the intermediary sold the funding vehicle the employer sponsored benefit program utilizes or if the intermediary subsequently became the broker of record with regard to the employer sponsored benefit program.

The intermediary may pay to its financial professionals some or all of the amounts the distributor and its affiliates pay to the intermediary.

PERFORMANCE CALCULATION

The Separate Account may publish advertisements containing information (including graphs, charts, tables and examples) about the hypothetical performance of its divisions for this Contract as if the Contract had been issued on or after the date the underlying mutual fund in which the division invests was first offered. The hypothetical performance from the date of the inception of the underlying mutual fund in which the division invests is calculated by reducing the actual performance of the underlying mutual fund by the fees and charges of this Contract as if it had been in existence.

The yield and total return figures described below vary depending upon market conditions, composition of the underlying mutual fund’s portfolios and operating expenses. These factors and possible differences in the methods used in calculating yield and total return should be considered when comparing the Separate Account performance figures to performance figures published for other investment vehicles.

The Separate Account may also quote rankings, yields or returns as published by independent statistical services or publishers and information regarding performance of certain market indices. Any performance data quoted for the Separate Account represents only historical performance and is not intended to indicate future performance. For further information on how the Separate Account calculates yield and total return figures, see the SAI.

From time to time the Separate Account advertises its Money Market Division’s “yield” and “effective yield” for these Contracts. Both yield figures are based on historical earnings and are not intended to indicate future performance. The “yield” of the division refers to the income generated by an investment in the division over a 7-day period (which period is stated in the advertisement). This income is then “annualized.” That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The “effective yield” is calculated similarly but, when annualized, the income earned by an investment in the division is assumed to be reinvested. The “effective yield” is slightly higher than the “yield” because of the compounding effect of the assumed reinvestment.

The Separate Account also advertises the average annual total return of its various divisions. The average annual total return for any of the divisions is computed by calculating the average annual compounded rate of return over the stated period that would equate an initial $1,000 investment to the ending redeemable accumulated value.

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FEDERAL TAX MATTERS

The following description is a general summary of the tax rules, primarily related to federal income taxes, which in our opinion are currently in effect. These rules are based on laws, regulations and interpretations which are subject to change at any time. This summary is not comprehensive and is not intended as tax advice. Federal estate and gift tax considerations, as well as state and local taxes, may also be material. You should consult a tax advisor about the tax implications of taking action under a Contract or related retirement plan.

Non-Qualified Contracts

Section 72 of the Internal Revenue Code governs the income taxation of annuities in general.

• Premium payments made under non-qualified Contracts are not excludable or deductible from your gross income or any other person’s gross income.

• An increase in the accumulated value of a non-qualified Contract owned by a natural person is generally not taxable until paid out as surrender proceeds, death benefit proceeds, or otherwise.

• Generally, owners who are not natural persons are immediately taxed on any increase in the accumulated value.

The following discussion applies generally to Contracts owned by natural persons.

• Surrenders or partial surrenders are taxed as ordinary income to the extent of the accumulated income or gain under the Contract.

• The value of the Contract pledged or assigned is taxed as ordinary income to the same extent as a partial surrender.

• Annuity benefit payments:

• The “investment in the contract” is generally the total of the premium payments made.

• The basic rule for taxing annuity benefit payments is that part of each annuity benefit payment is considered a nontaxable return of the investment in the contract and part is considered taxable income. An “exclusion ratio” is applied to each annuity benefit payment to determine how much of the payment is excludable from gross income. The remainder of the annuity benefit payment is includable in gross income for the year received.

• After the premium payment(s) in the Contract is paid out, the full amount of any annuity benefit payment is taxable.

For purposes of determining the amount of taxable income resulting from distributions, all Contracts and other annuity contracts issued by us or our affiliates to the same owner within the same calendar year are treated as if they are a single contract.

Transfer of ownership may have tax consequences to the owner. Please consult with your tax advisor before changing ownership of the Contract.

Required Distributions for Non-Qualified Contracts

In order for a non-qualified Contract to be treated as an annuity contract for federal income tax purposes, the Internal Revenue Code requires:

• If the person receiving payments dies on or after the annuitization date but prior to the time the entire interest in the Contract has been distributed, the remaining portion of the interest is distributed at least as rapidly as under the method of distribution being used as of the date of that person’s death.

• If you die prior to the annuitization date, the entire interest in the Contract will be distributed:

• within five years after the date of your death; or

• as annuity benefit payments which begin within one year of your death and which are made over the life of your designated beneficiary or over a period not extending beyond the life expectancy of that beneficiary.

• If you take a distribution from the Contract before you are 59½, you may incur an income tax penalty.

Generally, unless the beneficiary elects otherwise, the above requirements are satisfied prior to the annuitization date by paying the death benefit in a single payment, subject to proof of your death. The beneficiary may elect, by written request, to receive an annuity benefit payment option instead of a single payment.

If your designated primary beneficiary is your surviving spouse, the Contract may be continued with your spouse deemed to be the new owner for purposes of the Internal Revenue Code.

Where the owner or other person receiving payments is not a natural person, the required distributions provided for in the Internal Revenue Code apply upon the death of the annuitant.

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IRA, SEP, and SIMPLE-IRA

The Contract may be used to fund IRAs, SEPs, and SIMPLE-IRAs.

• IRA – An Individual Retirement Annuity (IRA) is a retirement savings annuity. Contributions grow tax deferred.

• SEP-IRA – SEP stands for Simplified Employee Pension and is a form of IRA. A SEP allows you, as an employer, to provide retirement benefits for your employees by contributing to their IRAs.

• SIMPLE-IRA – SIMPLE stands for Savings Incentive Match Plan for Employees. A SIMPLE-IRA allows employees to save for retirement by deferring salary on a pre-tax basis and receiving predetermined company contributions.

The tax rules applicable to owners, annuitants and other payees vary according to the type of plan and the terms and conditions of the plan itself. In general, premium payments made under a retirement program recognized under the Internal Revenue Code are excluded from the participant’s gross income for tax purposes prior to the annuity benefit payment date (subject to applicable state law). The portion, if any, of any premium payment made that is not excluded from their gross income is their investment in the Contract. Aggregate deferrals under all plans at the employee’s option may be subject to limitations.

Net Investment Income Tax Change for 2013

Beginning in 2013, the Net Investment Income tax will be imposed at a rate of 3.8% on unearned income for higher tax bracket individuals.

As part of the Health Care and Reconciliation Act of 2010, the new tax increase may apply to individuals' net investment come with an Adjustable Gross Income over $200,000 (single filers) or $250,000 for married couples filing jointly. The tax applies to income from interest, dividends, annuities, royalties and rents not obtained in a normal trade of business. The tax may also apply to certain trusts and estates with net investment income.

Income from annuities that are part of a qualified retirement plan (as described in the following section) are not treated as investment income for the purpose of this new tax and thus are not subject to the new 3.8% rate but may be includible for purposes of determining whether the applicable Net Investment Income Tax income limits are exceeded.

Tax-qualified retirement arrangements, such as IRAs, SEPs, and SIMPLE-IRAs, aretax-deferred. You derive no additional benefit from the tax deferral feature of theannuity. Consequently, an annuity should be used to fund an IRA, or other tax qualified retirement arrangement to benefit from the annuity’s features other than tax deferral. These features may include guaranteed lifetime income, death benefits without surrender charges, guaranteed caps on fees, and the ability to transfer among investment options without sales or withdrawal charges.

With respect to IRAs, IRA rollovers, SEP-IRAs and SIMPLE-IRAs there is a 10% penalty under the Internal Revenue Code on the taxable portion of a “premature distribution.” The tax is increased to 25% in the case of distributions from SIMPLE-IRAs during the first two years of participation. Generally, an amount is a “premature distribution” unless the distribution is:

• made on or after you reach age 59½;

• made to a beneficiary on or after your death;

• made upon your disability;

• part of a series of substantially equal periodic payments for the life or life expectancy of you or you and the beneficiary;

• made to pay certain medical expenses;

• for health insurance premiums while unemployed;

• for first home purchases (up to $10,000);

• for qualified higher education expenses;

• for qualified disaster tax relief distributions (up to $100,000);

• for qualified reservist distributions;

• for amounts levied by the IRS directly against your IRA;

• for earnings associated with refunds of excess IRA contributions paid prior to your tax filing deadline;

• for certain Roth IRA conversions; or

• for transfer of IRA incident to divorce.

For more information regarding premature distributions, please reference IRS Publication 590 and consult your tax advisor.

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Rollover IRAs

If you receive a lump-sum distribution from a qualified retirement plan, tax-sheltered annuity or governmental 457(b) plan, you may maintain the tax-deferred status of the distribution by rolling it over into an eligible retirement plan or IRA. You can accomplish this by electing a direct rollover from the plan, or you can receive the distribution and roll it over into an eligible retirement plan or IRA within 60 days. However, if you do not elect a direct rollover from the plan, the plan is required to withhold 20% of the distribution. This amount is sent to the IRS as income tax withholding to be credited against your taxes. Amounts received prior to age 59½ and not rolled over may be subject to an additional 10% excise tax. You may roll over amounts from a qualified plan directly to a Roth IRA. As part of this rollover, previously taxed deferred funds from the qualified plan are converted to after-tax funds under a Roth IRA. Generally, the entire rollover is taxable (unless it includes after-tax dollars) and is included in gross income in the year of the rollover/conversion. For more information, please see your tax advisor.

When considering all the IRA accounts you own in the aggregate, you may be limited to executing just one IRA-to-IRA indirect rollover per twelve month period. For more information, please see your tax advisor.

Roth IRAs

The Contract may be purchased to fund a Roth IRA. Contributions to a Roth IRA are not deductible from taxable income. Subject to certain limitations, a traditional IRA, SIMPLE-IRA or SEP-IRA may be converted into a Roth IRA or a distribution from such an arrangement may be rolled over to a Roth IRA. However, a conversion or a rollover to a Roth IRA is not excludable from gross income. If certain conditions are met, qualified distributions from a Roth IRA are tax-free. For more information, please contact your tax advisor.

Required Minimum Distributions for IRAs

The Required Minimum Distribution (RMD) regulations dictate when individuals must start taking payments from their IRA. Generally speaking, RMDs for IRAs must begin no later than April 1 following the close of the calendar year in which you turn 70½. Thereafter, the RMD is required no later than December 31 of each calendar year.

The RMD rules apply to traditional IRAs, as well as SEP-IRAs and SIMPLE-IRAs, during the lifetime and after the death of IRA owners. They do not , however, apply to Roth IRAs during the lifetime of the Roth IRA owner. If an individual owns more than one IRA, the RMD amount must be determined for each, but the actual distribution can be satisfied from a combination of one or more of the owner’s IRAs (not applicable to Roth IRAs).

Failure to comply with the RMD rules can result in an excise tax penalty.

Withholding

Annuity benefit payments and other amounts received under the Contract are subject to income tax withholding unless the recipient elects not to have taxes withheld. The amounts withheld vary among recipients depending on the tax status of the individual and the type of payments from which taxes are withheld.

Notwithstanding the recipient’s election, withholding may be required on payments delivered outside the United States. Moreover, special “backup withholding” rules may require us to disregard the recipient’s election if the recipient fails to supply us with a “TIN” or taxpayer identification number (social security number for individuals), or if the Internal Revenue Service notifies us that the TIN provided by the recipient is incorrect.

MUTUAL FUND DIVERSIFICATION

The United States Treasury Department has adopted regulations under Section 817(h) of the Internal Revenue Code which establish standards of diversification for the investments underlying the Contracts. Under this Internal Revenue Code Section, Separate Account investments must be adequately diversified in order for the increase in the value of non-qualified Contracts to receive tax-deferred treatment. In order to be adequately diversified, the portfolio of each underlying mutual fund must, as of the end of each calendar quarter or within 30 days thereafter, have no more than 55% of its assets invested in any one investment, 70% in any two investments, 80% in any three investments and 90% in any four investments. Failure of an underlying mutual fund to meet the diversification requirements could result in tax liability to non-qualified Contract holders.

The investment opportunities of the underlying mutual funds could conceivably be limited by adhering to the above diversification requirements. This would affect all owners, including owners of Contracts for whom diversification is not a requirement for tax-deferred treatment.

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STATE REGULATION

The Company is subject to the laws of the State of Iowa governing insurance companies and to regulation by the Insurance Department of the State of Iowa. An annual statement in a prescribed form must be filed by March 1 in each year covering our operations for the preceding year and our financial condition on December 31 of the prior year. Our books and assets are subject to examination by the Commissioner of Insurance of the State of Iowa, or the Commissioner’s representatives, at all times. A full examination of our operations is conducted periodically by the National Association of Insurance Commissioners. Iowa law and regulations also prescribe permissible investments, but this does not involve supervision of the investment management or policy of the Company.

In addition, we are subject to the insurance laws and regulations of other states and jurisdictions where we are licensed to operate. Generally, the insurance departments of these states and jurisdictions apply the laws of the state of domicile in determining the field of permissible investments.

GENERAL INFORMATION

Reservation of Rights

The Company reserves the right to:

• increase the minimum amount for each premium payment to not more than $1,000; and

• terminate a Contract and send you the accumulated value if no premium payments are made during two consecutive calendar years and the accumulated value (or total premium payments less partial surrenders and applicable surrender charges) is less than $2,000. The Company will first notify you of its intent to exercise this right and give you 60 days to increase the accumulated value to at least $2,000.

Legal Opinions

Legal matters applicable to the issue and sale of the Contracts, including our right to issue Contracts under Iowa Insurance Law, have been passed upon by Karen Shaff, Executive Vice President, General Counsel and Secretary.

Legal Proceedings

There are no legal proceedings pending to which Separate Account B is a party or which would materially affect Separate Account B.

Other Variable Annuity Contracts

The Company currently offers other variable annuity contracts that participate in Separate Account B. In the future, we may designate additional group or individual variable annuity contracts as participating in Separate Account B.

Householding

To avoid sending duplicate copies of materials to owners, only one copy of the prospectus and annual and semi-annual reports for the funds will be mailed to owners having the same name and address on our records. The consolidation of these mailings, called householding, benefits us through reduced mailing expense. If you want to receive multiple copies of these materials, you may call us at 1-800-852-4450. You may also notify us in writing. Individual copies of prospectuses and reports will be sent to you within thirty (30) days after we receive your request to stop householding.

Payments to Financial Intermediaries

The Company pays compensation to broker-dealers, financial institutions, and other parties (“Financial Intermediaries”) for the sale of the Contract according to schedules in the sales agreements and other agreements reached between the Company and the Financial Intermediaries. Such compensation generally consists of commissions on premiums paid on the Contract. The Company and/or its affiliates may also pay other amounts (“Additional Payments”) that include, but are not limited to, marketing allowances, expense reimbursements, and educational payments. These Additional Payments are designed to provide incentives for the sale of the Contracts as well as other products sold by the Company and may influence the Financial intermediary or its registered representative to recommend the purchase of this Contract over competing annuity contracts or other investment options. You may ask your registered representative about these differing and divergent interests, how your registered representative is personally compensated, and how your registered representative’s broker-dealer is compensated for soliciting applications for the Contract.

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We and/or our affiliates provide services to and/or funding vehicles for welfare benefit plans, retirement plans and employer sponsored benefits. We and our affiliates may pay a bonus or other consideration or incentive to brokers or dealers:

• if a participant in such a welfare benefit or retirement plan or an employee covered under an employer sponsored benefit purchases an individual product with the assistance of a registered representative of an affiliate of ours;

• if a participant in such a retirement plan establishes a rollover individual retirement account with the assistance of a registered representative of an affiliate of ours;

• if the broker or dealer sold the funding vehicle the welfare benefit or retirement plan or employer sponsored benefit utilizes; or

• based on the broker's or dealer's relationship to the welfare benefit or retirement plan or employer sponsored benefit.

The broker or dealer may pay to its financial professionals some or all of the amounts we pay to the broker or dealer.

Service Arrangements and Compensation

The Company has entered into agreements with the distributors, advisers, and/or the affiliates of some of the mutual funds underlying the Contract and receives compensation for providing certain services including, but not limited to, distribution and operational support services, to the underlying mutual fund. Fees for these services are paid periodically (typically, quarterly or monthly) based on the average daily net asset value of shares of each fund held by the Separate Account and purchased at the Contract owners’ instructions. Because the Company receives such fees, it may be subject to competing interests in making these funds available as investment options under the Contract. The Company takes into consideration the anticipated payments from underlying mutual funds when it determines the charges assessed under the Contract. Without these payments, charges under the Contract are expected to be higher.

Independent Registered Public Accounting Firm

The financial statements of Principal Life Insurance Company Separate Account B and the consolidated financial statements of Principal Life Insurance Company are included in the SAI. Those statements have been audited by Ernst & Young LLP, independent registered public accounting firm, 801 Grand Avenue, Des Moines, Iowa 50309, for the periods indicated in their reports which also appear in the SAI.

FINANCIAL STATEMENTS

The consolidated financial statements of Principal Life Insurance Company which are included in the SAI should be considered only as they relate to our ability to meet our obligations under the Contract. They do not relate to investment performance of the assets held in the Separate Account.

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TABLE OF SEPARATE ACCOUNT DIVISIONS

The following is a brief summary of the investment objectives of each division. There is no guarantee that the objectives will be met.

American Century VP Income & Growth Division
Invests in:	American Century VP Income & Growth Fund – Class I
Investment Advisor:	American Century Investment Management, Inc.
Investment Objective:	seeks capital growth by investing in common stocks. Income is a secondary objective.

Fidelity VIP Mid Cap Division
Invests in:	Fidelity VIP Mid Cap Portfolio – Service Class
Investment Advisor:	Fidelity Management & Research Company
Investment Objective:	seeks long-term growth of capital.

Bond & Mortgage Securities Division
Invests in:	Principal Variable Contracts Funds Bond & Mortgage Securities Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide current income.

Diversified International Division
Invests in:	Principal Variable Contracts Funds Diversified International Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

Government & High Quality Bond Division
Invests in:	Principal Variable Contracts Funds Government & High Quality Bond Account – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a high level of current income consistent with safety and liquidity.

33

LargeCap Growth I Division
Invests in:	Principal Variable Contracts Funds LargeCap Growth Account I – Class 1
Investment Advisor:	T. Rowe Price Associates, Inc. and Brown Advisory LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

LargeCap S&P 500 Index Division
Invests in:	Principal Variable Contracts Funds LargeCap S&P 500 Index Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

LargeCap Value Division
Invests in:	Principal Variable Contracts Funds LargeCap Value Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

MidCap Division (no longer available to new investors with an application signature dated on or after 08/16/2013)
Invests in:	Principal Variable Contracts Funds MidCap Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

Money Market Division
Invests in:	Principal Variable Contracts Funds Money Market Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks as high a level of current income as is considered consistent with preservation of principal and maintenance of liquidity.

34

Principal Capital Appreciation Division
Invests in:	Variable Contracts Funds Principal Capital Appreciation Account – Class 1
Investment Advisor:	Edge Asset Management, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide long-term growth of capital.

Principal LifeTime 2010 Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime 2010 Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a total return consisting of long-term growth of capital and current income.

Principal LifeTime 2020 Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime 2020 Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a total return consisting of long-term growth of capital and current income.

Principal LifeTime 2030 Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime 2030 Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a total return consisting of long-term growth of capital and current income.

Principal LifeTime 2040 Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime 2040 Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a total return consisting of long-term growth of capital and current income.

35

Principal LifeTime 2050 Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime 2050 Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks a total return consisting of long-term growth of capital and current income.

Principal LifeTime Strategic Income Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Principal LifeTime Strategic Income Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks current income, and as a secondary objective, capital appreciation.

Real Estate Securities Division
Invests in:	Principal Variable Contracts Funds Real Estate Securities Account – Class 1
Investment Advisor:	Principal Real Estate Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to generate a total return.

Short-Term Income Division
Invests in:	Principal Variable Contracts Funds Short-Term Income Account – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide as high a level of current income as is consistent with prudent investment management and stability of principal.

SmallCap Blend Division
Invests in:	Principal Variable Contracts Funds SmallCap Blend Account – Class 1
Investment Advisor:	Principal Global Investors, LLC through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks long-term growth of capital.

36

SAM Balanced Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Strategic Asset Management Portfolios – Balanced Portfolio – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide a high level of total return (consisting of reinvested income and capital appreciation), as is consistent with reasonable risk. In general, relative to the other Portfolios, the Balanced Portfolio should offer investors the potential for a medium level of income and medium level of capital growth, while exposing them to a medium level of principal risk.

SAM Conservative Balanced Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Strategic Asset Management Portfolios – Conservative Balanced Portfolio – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide a high level of total return (consisting of reinvestment of income and capital appreciation), consistent with a moderate degree of principal risk. In general, relative to the other Portfolios, the Conservative Balanced Portfolio should offer investors the potential for a medium to high level of income and a medium to low level of capital growth, while exposing them to a medium to low level of principal risk.

SAM Conservative Growth Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Strategic Asset Management Portfolios – Conservative Growth Portfolio – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide long-term capital appreciation. In general, relative to the other Portfolios, the Conservative Growth Portfolio should offer investors the potential for a low to medium level of income and a medium to high level of capital growth, while exposing them to a medium to high level of principal risk.

37

SAM Flexible Income (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Strategic Asset Management Portfolios – Flexible Income Portfolio – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide a high level of total return (consisting of reinvestment of income with some capital appreciation). In general, relative to the other Portfolios, the Flexible Income Portfolio should offer investors the potential for a high level of income and a low level of capital growth, while exposing them to a low level of principal risk.

SAM Strategic Growth Division (This underlying mutual fund is a fund of funds.)
Invests in:	Principal Variable Contracts Funds Strategic Asset Management Portfolios – Strategic Growth Portfolio – Class 1
Investment Advisor:	Edge Asset Management, Inc. through a sub-advisory agreement with Principal Management Corporation
Investment Objective:	seeks to provide long-term capital appreciation. In general, relative to the other Portfolios, the Strategic Growth Portfolio should offer investors the potential for a high level of capital growth, and a corresponding level of principal risk.

38

Registration Statement

This prospectus (Part A of the registration statement) omits some information contained in the Statement of Additional Information (Part B of the registration statement) and Part C of the registration statement which the Company has filed with the SEC. The SAI is hereby incorporated by reference into this prospectus. You may request a free copy of the SAI by contacting your registered representative or calling us at 1-800-852-4450.

Information about the Contract (including the Statement of Additional Information and Part C of the registration statement) can be reviewed and copied at the Securities and Exchange Commission’s Public Reference Room in Washington, D.C. Information on the operation of the public reference room may be obtained by calling the Commission at 202-551-8090. Reports and other information about the Contract are available on the Commission’s internet site at http://www.sec.gov. Copies of this information may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the Commission, 100 F Street NE, Washington, D.C. 20549-0102.

The registration number for the Contract is 333-128079.

Customer Inquiries

Your questions should be directed to us: Principal Freedom Variable Annuity 2, Principal Financial Group, P.O. Box 9382, Des Moines, Iowa 50306-9382, 1-800-852-4450.

TABLE OF CONTENTS OF THE SAI

The table of contents for the Statement of Additional Information is provided below.

TABLE OF CONTENTS
	Page
GENERAL INFORMATION AND HISTORY	3
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	3
PRINCIPAL UNDERWRITER	3
CALCULATION OF PERFORMANCE DATA	3
TAXATION UNDER CERTAIN RETIREMENT PLANS	6
Principal Life Insurance Company Separate Account B
Report of Independent Registered Public Accounting Firm	11
Financial Statements	12
Principal Life Insurance Company
Report of Independent Registered Public Accounting Firm	193
Financial Statements	194

To obtain a copy of the Statement of Additional Information, free of charge, write or telephone:

Princor Financial Services Corporation

a company of

the Principal Financial Group

Des Moines, IA 50392-2080

Telephone: 1-800-852-4450

39

CONDENSED FINANCIAL INFORMATION

Financial statements are included in the Statement of Additional Information. Following are unit values for the Contract for the periods ended December 31.

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
American Century VP Income & Growth
2014	$14.909	$16.614	11.44%	8
2013	11.082	14.909	34.53	4
2012	9.750	11.082	13.66	4
2011	9.546	9.750	2.14	4
2010	8.443	9.546	13.06	5
2009	7.217	8.443	16.99	9
2008	11.139	7.217	-35.21	13
2007	11.253	11.139	-1.01	14
2006(1)	10.250	11.253	9.79	‑
Bond & Mortgage Securities
2014	12.806	13.349	4.24	27
2013	13.040	12.806	-1.79	30
2012	12.242	13.040	6.52	41
2011	11.542	12.242	6.06	34
2010	10.436	11.542	10.59	40
2009	8.713	10.436	19.78	39
2008	10.606	8.713	-17.85	59
2007	10.355	10.606	2.42	43
2006(1)	10.134	10.355	2.18	5
Diversified International
2014	12.914	12.381	-4.13	37
2013	10.976	12.914	17.66	42
2012	9.356	10.976	17.32	46
2011	10.599	9.356	-11.73	73
2010	9.411	10.599	12.62	79
2009	7.372	9.411	27.66	83
2008	13.839	7.372	-46.73	87
2007	12.035	13.839	14.99	107
2006(1)	10.722	12.035	12.25	6
Fidelity VIP MidCap
2014(4)	10.000	10.661	6.61	7
Government & High Quality Bond
2014	11.856	12.340	4.08	22
2013	12.093	11.856	-1.96	27
2012	11.749	12.093	2.93	27
2011	11.166	11.749	5.22	25
2010	10.650	11.166	4.85	28
2009	10.098	10.650	5.47	1
2008(2)	10.000	10.098	0.98	‑

40

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
LargeCap Growth I
2014	$16.415	$17.660	7.58%	11
2013	12.173	16.415	34.85	7
2012	10.560	12.173	15.27	8
2011	10.696	10.560	-1.27	9
2010	9.028	10.696	18.47	9
2009	5.968	9.028	51.27	10
2008	10.144	5.968	-41.17	11
2007	9.561	10.144	6.10	8
2006(1)	8.997	9.561	6.27	2
LargeCap S&P 500 Index
2014	15.417	17.301	12.22	31
2013	11.787	15.417	30.80	34
2012	10.303	11.787	14.40	36
2011	10.224	10.303	0.77	57
2010	9.001	10.224	13.59	62
2009	7.194	9.001	25.12	72
2008	11.546	7.194	-37.69	75
2007	11.086	11.546	4.15	61
2006(1)	10.307	11.086	7.56	8
LargeCap Value
2014	14.257	15.700	10.12	23
2013	11.002	14.257	29.59	25
2012	9.367	11.002	17.45	30
2011	9.346	9.367	0.22	48
2010	8.271	9.346	13.00	52
2009	7.180	8.271	15.19	56
2008	11.180	7.180	-35.78	61
2007	11.298	11.180	-1.04	48
2006(1)	10.460	11.298	8.01	2
MidCap
2014	21.534	24.101	11.92	29
2013	16.233	21.534	32.66	33
2012	13.720	16.233	18.31	35
2011	12.791	13.720	7.26	57
2010	10.405	12.791	22.93	68
2009	7.853	10.405	32.50	36
2008	11.999	7.853	-34.55	36
2007	11.068	11.999	8.41	27
2006(1)	10.276	11.068	7.71	1

41

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
Money Market
2014	$10.415	$10.316	-0.95%	22
2013	10.514	10.415	-0.94	26
2012	10.615	10.514	-0.95	38
2011	10.716	10.615	-0.94	72
2010	10.818	10.716	-0.94	78
2009	10.897	10.818	-0.72	131
2008	10.725	10.897	1.60	139
2007	10.323	10.725	3.89	29
2006(1)	10.213	10.323	1.08	--
Principal Capital Appreciation
2014	14.798	16.484	11.39	3
2013	11.262	14.798	31.40	3
2012	9.989	11.262	12.74	4
2011	10.071	9.989	-0.81	7
2010	8.810	10.071	14.31	7
2009	6.851	8.810	28.59	7
2008	10.381	6.851	-34.00	7
2007(3)	10.000	10.381	3.81	2
Principal LifeTime 2010
2014	13.038	13.535	3.81	113
2013	11.875	13.038	9.79	176
2012	10.724	11.875	10.73	181
2011	10.672	10.724	0.49	223
2010	9.456	10.672	12.86	322
2009	7.633	9.456	23.88	338
2008	11.153	7.633	-31.56	404
2007	10.854	11.153	2.75	326
2006(1)	10.294	10.854	5.44	47
Principal LifeTime 2020
2014	13.780	14.434	4.75	326
2013	11.991	13.780	14.92	343
2012	10.549	11.991	13.67	376
2011	10.765	10.549	-2.01	427
2010	9.446	10.765	13.96	491
2009	7.479	9.446	26.30	512
2008	11.469	7.479	-34.79	568
2007	11.042	11.469	3.87	535
2006(1)	10.359	11.042	6.59	10
Principal LifeTime 2030
2014	13.807	14.505	5.06	202
2013	11.711	13.807	17.90	211
2012	10.230	11.711	14.48	231
2011	10.562	10.230	-3.14	255
2010	9.240	10.562	14.31	295
2009	7.275	9.240	27.01	308
2008	11.553	7.275	-37.03	381
2007	11.007	11.553	4.96	255
2006(1)	10.292	11.007	6.95	3

42

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
Principal LifeTime 2040
2014	$14.094	$14.827	5.20%	25
2013	11.616	14.094	21.33	24
2012	10.048	11.616	15.60	22
2011	10.477	10.048	-4.09	20
2010	9.133	10.477	14.72	28
2009	7.117	9.133	28.33	30
2008	11.620	7.117	-38.75	41
2007	11.011	11.620	5.53	44
2006(1)	10.253	11.011	7.39	9
Principal LifeTime 2050
2014	14.099	14.833	5.21	11
2013	11.497	14.099	22.63	14
2012	9.915	11.497	15.95	14
2011	10.420	9.915	-4.85	11
2010	9.052	10.420	15.11	11
2009	7.028	9.052	28.80	14
2008	11.640	7.028	-39.62	19
2007	11.022	11.640	5.61	19
2006(1)	10.219	11.022	7.86	--
Principal LifeTime Strategic Income
2014	12.299	12.740	3.59	61
2013	11.811	12.299	4.13	67
2012	10.875	11.811	8.61	72
2011	10.605	10.875	2.55	77
2010	9.625	10.605	10.18	78
2009	8.169	9.625	17.82	99
2008	10.835	8.169	-24.61	109
2007	10.712	10.835	1.15	152
2006(1)	10.316	10.712	3.84	--
Real Estate Securities
2014	13.831	18.196	31.56	12
2013	13.413	13.831	3.12	13
2012	11.557	13.413	16.16	15
2011	10.710	11.557	7.91	17
2010	8.601	10.710	24.52	20
2009	6.736	8.601	27.69	22
2008	10.128	6.736	-33.49	26
2007	12.423	10.128	-18.47	23
2006(1)	11.410	12.423	8.88	1
Short-Term Income
2014	11.747	11.837	0.77	7
2013	11.726	11.747	0.18	8
2012	11.274	11.726	4.01	19
2011	11.228	11.274	0.41	18
2010	10.879	11.228	3.21	6
2009	9.990	10.879	8.90	5
2008(2)	10.000	9.990	-0.10	‑

43

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
SmallCap Blend
2014	$15.963	$16.586	3.90%	4
2013	10.903	15.963	46.41	7
2012	9.596	10.903	13.62	8
2011	9.833	9.596	-2.41	10
2010	7.989	9.833	23.08	11
2009	6.601	7.989	21.03	11
2008	10.533	6.601	-37.33	13
2007	10.462	10.533	0.68	13
2006(1)	9.653	10.462	8.38	‑
SmallCap Growth II
2014	15.775	16.684	5.76	3
2013	10.803	15.775	46.02	3
2012	9.378	10.803	15.19	4
2011	9.902	9.378	-5.29	13
2010	7.876	9.902	25.73	13
2009	6.035	7.876	30.51	13
2008	10.353	6.035	-41.71	14
2007	9.955	10.353	4.00	19
2006(1)	9.575	9.955	3.97	1
SmallCap Value I
2014	15.016	15.941	6.16	13
2013	10.846	15.016	38.45	14
2012	8.996	10.846	20.57	17
2011	9.427	8.996	-4.57	27
2010	7.549	9.427	24.87	32
2009	6.559	7.549	15.09	33
2008	9.711	6.559	-32.46	38
2007	10.836	9.711	-10.38	39
2006(1)	10.009	10.836	8.26	2
SAM Balanced
2014	13.588	14.378	5.81	122
2013	11.653	13.588	16.61	131
2012	10.435	11.653	11.68	152
2011	10.431	10.435	0.04	188
2010	9.269	10.431	12.54	197
2009	7.556	9.269	22.67	199
2008	10.335	7.556	-26.89	141
2007(3)	10.000	10.335	3.35	3
SAM Conservative Balanced
2014	13.520	14.225	5.21	104
2013	12.236	13.520	10.49	127
2012	11.110	12.236	10.13	124
2011	10.964	11.110	1.33	122
2010	9.897	10.964	10.79	113
2009	8.247	9.897	20.01	53
2008	10.307	8.247	-19.99	43
2007(3)	10.000	10.307	3.07	‑

44

Accumulation Unit Value
Division	Beginning of Period	End of Period	Percentage Change from Prior Period	Number of Accumulation Units Outstanding End of Period (in thousands)
SAM Conservative Growth
2014	$13.233	$14.082	6.42%	123
2013	10.851	13.233	21.95	115
2012	9.594	10.851	13.10	103
2011	9.730	9.594	-1.40	125
2010	8.526	9.730	14.12	118
2009	6.847	8.526	24.52	125
2008	10.335	6.847	-33.75	95
2007(3)	10.000	10.335	3.35	7
SAM Flexible Income
2014	13.633	14.319	5.03	121
2013	12.772	13.633	6.74	158
2012	11.655	12.772	9.58	159
2011	11.381	11.655	2.41	98
2010	10.396	11.381	9.47	47
2009	8.750	10.396	18.81	7
2008	10.243	8.750	-14.58	‑
2007(3)	10.000	10.243	2.43	‑
SAM Strategic Growth
2014	13.084	14.085	7.65	67
2013	10.363	13.084	26.26	80
2012	9.056	10.363	14.43	72
2011	9.319	9.056	-2.82	70
2010	8.083	9.319	15.29	77
2009	6.402	8.083	26.26	75
2008	10.329	6.402	-38.02	28
2007(3)	10.000	10.329	3.29	1

⁽¹⁾ Commenced operations on September 18, 2006.

⁽²⁾ Commenced operations on November 24, 2008.

⁽³⁾ Commenced operations on May 1, 2007.

⁽⁴⁾ Commenced operations on May 17, 2014.

45

PART B

PRINCIPAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT B

PRINCIPAL FREEDOM^SM VARIABLE ANNUITY 2 CONTRACT

Statement of Additional Information

dated May 1, 2015

This Statement of Additional Information provides information about the Principal Freedom Variable Annuity 2 (the "Contract") in addition to the information that is contained in the Contract’s Prospectus, dated May 1, 2015.

This Statement of Additional Information is not a prospectus. It should be read in conjunction with the Prospectus, a copy of which can be obtained free of charge by writing or telephoning:

Principal Freedom Variable Annuity 2

The Principal Financial Group

P.O. Box 9382

Des Moines Iowa 50306-9382

Telephone:

1-800-852-4450

TABLE OF CONTENTS
	Page
GENERAL INFORMATION AND HISTORY	3
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM	3
PRINCIPAL UNDERWRITER	3
CALCULATION OF PERFORMANCE DATA	3
TAXATION UNDER CERTAIN RETIREMENT PLANS	6
Principal Life Insurance Company Separate Account B
Report of Independent Registered Public Accounting Firm	11
Financial Statements	12
Principal Life Insurance Company
Report of Independent Registered Public Accounting Firm	193
Financial Statements	194

2

GENERAL INFORMATION AND HISTORY

Principal Life Insurance Company (the “Company”) is the issuer of the Principal Freedom Variable Annuity 2 (the “Contract”) and serves as custodian of its assets. The Company is a stock life insurance company with authority to transact life and annuity business in all states of the United States and the District of Columbia. The Company’s home office is located at: Principal Financial Group, Des Moines, Iowa 50392. The Company is a wholly owned subsidiary of Principal Financial Services, Inc., which in turn, is a wholly owned direct subsidiary of Principal Financial Group, Inc., a publicly-traded company.

On June 24,1879, the Company was incorporated under Iowa law as a mutual assessment life insurance company named Bankers Life Association. The Company became a legal reserve life insurance company and changed its name to Bankers Life Company in 1911. In 1986, the Company changed its name to Principal Mutual Life Insurance Company. In 1998, the Company became Principal Life Insurance Company, a subsidiary stock life insurance company of Principal Mutual Holding Company, as part of a reorganization into a mutual insurance holding company structure. In 2001, Principal Mutual Holding Company converted to a stock company through a process called demutualization, resulting in the current organizational structure.

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Ernst & Young LLP, 801 Grand Avenue, Suite 3000, Des Moines, Iowa 50309, serves as the independent registered public accounting firm for Principal Life Insurance Company Separate Account B and the Principal Life Insurance Company.

PRINCIPAL UNDERWRITER

The principal underwriter of the Contract is Princor Financial Services Corporation (“Princor”) which is a wholly owned subsidiary of Principal Financial Services, Inc. and an affiliate of the Company. The address of Princor is the Principal Financial Group, 655 9th Street, Des Moines, Iowa 50392. Princor was incorporated in Iowa in 1968 and is a securities broker-dealer registered with the Securities Exchange Commission as well as a member of the FINRA. The Contracts may also be sold through other broker-dealers authorized by Princor and applicable law to do so. Registered representatives of such broker-dealers may be paid on a different basis than described below.

The Contract’s offering to the public is continuous. As the principal underwriter, Princor is paid for the distribution of the Contract. For the last three fiscal years Princor has received and retained the following commissions:

2014 received/retained	2013 received/retained	2012 received/retained
$1,903/$0	$1,822/$0	$2,015/$0

CALCULATION OF PEFORMANCE DATA

The Separate Account may publish advertisements containing information (including graphs, charts, tables and examples) about the performance of one or more of its Divisions.

The Contract was not offered prior to September 18, 2006. However, the certain divisions invest in underlying mutual funds which were offered prior to the date the Contract was available. Thus, the Separate Account may publish advertisements containing information about the hypothetical performance of one or more of its divisions for this Contract as the Contract was issued on or after the date the underlying mutual fund was first offered. The hypothetical performance from the date of inception of the underlying mutual fund in which the division invests is derived by reducing the actual performance of the underlying mutual fund by the highest level of fees and charges of the Contract as if it had been in existence.

In addition, as certain of the underlying mutual funds have added classes since the inception of the fund, performance may be shown for periods prior to the inception date of the new class which represents the historical results of initial class shares, adjusted to reflect the fees and expenses of the new class.

The yield and total return figures described below will vary depending upon market conditions, the composition of the underlying mutual fund’s portfolios and operating expenses. These factors and possible differences in the methods used in calculating yield and total return should be considered when comparing the Separate Account performance figures to performance figures published for other investment vehicles.

3

The Separate Account may also quote rankings, yields or returns as published by independent statistical services or publishers and information regarding performance of certain market indices. Any performance data quoted for the Separate Account represents only historical performance and is not intended to indicate future performance.

From time to time the Separate Account advertises its Money Market Division’s “yield” and “effective yield” for the Contract. Both yield figures are based on historical earnings and are not intended to indicate future performance. The “yield” of the division refers to the income generated by an investment under the Contract in the division over a 7-day period (which period will be stated in the advertisement). This income is then “annualized.” That is, the amount of income generated by the investment during that week is assumed to be generated each week over a 52-week period and is shown as a percentage of the investment. The “effective yield” is calculated similarly but, when annualized, the income earned by an investment in the Division is assumed to be reinvested. The “effective yield” will be slightly higher than the “yield” because of the compounding effect of this assumed reinvestment. Neither yield quotation reflects a sales load deducted from purchase payments which, if included, would reduce the “yield” and “effective yield.

	Yield For the Period Ended December 31, 2014
For Contracts:	7-day annualized yield	7-day effective yield
without a surrender charge	-0.95%	-0.95%
with a surrender charge	-3.95%	-3.95%

Also, from time to time, the Separate Account will advertise the average annual total return of its various divisions. The average annual total return for any of the divisions is computed by calculating the average annual compounded rate of return over the stated period that would equate an initial $1,000 investment to the ending redeemable Contract value. In this calculation for the Contract, the ending value is reduced by a surrender charge that decreases from 3% to 0% over a period of 4 years. The Separate Account may also advertise total return figures for its divisions for a specified period that does not take into account the surrender charge in order to illustrate the change in the division’s unit value over time. See “Charges and Deductions” in the Prospectus for a discussion of surrender charges.

4

Following are the hypothetical average annual total returns for the period ending December 31, 2014 assuming the Contract had been offered as of the effective dates of the underlying mutual funds in which the divisions invest:

	For Contracts With Surrender Charge
Division	Effective Date	One Year	Five Years	Ten Years
American Century VP Income & Growth	10/31/1997	8.74%	14.50%	5.90%
Bond & Mortgage Securities	12/18/1987	1.54%	5.05%	3.10%
Diversified International	05/02/1994	-6.83%	5.64%	4.81%
Fidelity VIP MidCap	12/28/1998	2.19%	12.69%	8.47%
Government & High Quality Bond	05/06/1993	1.08%	2.99%	3.32%
LargeCap Growth I	06/01/1994	4.59%	14.36%	7.48%
LargeCap S&P 500 Index	05/03/1999	9.52%	13.96%	6.33%
LargeCap Value	05/13/1970	7.42%	13.68%	5.74%
MidCap	12/18/1987	9.22%	18.29%	10.30%
Money Market	03/18/1983	-3.65%	-0.95%	0.52%
Principal Capital Appreciation	04/28/1998	8.39%	13.35%	7.32%
Principal LifeTime 2010	08/30/2004	1.11%	7.44%	3.80%
Principal LifeTime 2020	08/30/2004	2.05%	8.85%	4.66%
Principal LifeTime 2030	08/30/2004	2.36%	9.44%	4.72%
Principal LifeTime 2040	08/30/2004	2.50%	10.18%	5.02%
Principal LifeTime 2050	08/30/2004	2.50%	10.38%	5.07%
Principal LifeTime Strategic Income	08/30/2004	0.88%	5.77%	3.05%
Real Estate Securities	05/01/1998	28.87%	16.17%	8.57%
SAM Balanced	06/03/1997	2.81%	9.18%	5.52%
SAM Conservative Balanced	04/23/1998	2.21%	7.52%	5.01%
SAM Conservative Growth	06/03/1997	3.42%	10.56%	5.61%
SAM Flexible Income	09/09/1997	2.03%	6.61%	4.69%
SAM Strategic Growth	06/03/1997	4.65%	11.75%	5.80%
Short-Term Income	01/12/1994	-2.23%	1.70%	2.23%
SmallCap Blend	05/01/1998	1.20%	15.73%	6.50%
SmallCap Growth II	05/01/1998	3.06%	16.20%	6.69%
SmallCap Value I	05/01/1998	3.45%	16.12%	6.17%

5

	For Contracts Without Surrender Charge
Division	Effective Date	One Year	Five Years	Ten Years
American Century VP Income & Growth	10/31/1997	11.44%	14.50%	5.90%
Bond & Mortgage Securities	12/18/1987	4.24%	5.05%	3.10%
Diversified International	05/02/1994	-4.13%	5.64%	4.81%
Fidelity VIP MidCap	12/28/1998	5.19%	12.69%	8.47%
Government & High Quality Bond	05/06/1993	4.08%	2.99%	3.32%
LargeCap Growth I	06/01/1994	7.59%	14.36%	7.48%
LargeCap S&P 500 Index	05/03/1999	12.22%	13.96%	6.33%
LargeCap Value	05/13/1970	10.12%	13.68%	5.74%
MidCap	12/18/1987	11.92%	18.29%	10.30%
Money Market	03/18/1983	-0.95%	-0.95%	0.52%
Principal Capital Appreciation	04/28/1998	11.39%	13.35%	7.32%
Principal LifeTime 2010	08/30/2004	3.81%	7.44%	3.80%
Principal LifeTime 2020	08/30/2004	4.75%	8.85%	4.66%
Principal LifeTime 2030	08/30/2004	5.06%	9.44%	4.72%
Principal LifeTime 2040	08/30/2004	5.20%	10.18%	5.02%
Principal LifeTime 2050	08/30/2004	5.20%	10.38%	5.07%
Principal LifeTime Strategic Income	08/30/2004	3.58%	5.77%	3.05%
Real Estate Securities	05/01/1998	31.57%	16.17%	8.57%
SAM Balanced	06/03/1997	5.81%	9.18%	5.52%
SAM Conservative Balanced	04/23/1998	5.21%	7.52%	5.01%
SAM Conservative Growth	06/03/1997	6.42%	10.56%	5.61%
SAM Flexible Income	09/09/1997	5.03%	6.61%	4.69%
SAM Strategic Growth	06/03/1997	7.65%	11.75%	5.80%
Short-Term Income	01/12/1994	0.77%	1.70%	2.23%
SmallCap Blend	05/01/1998	3.90%	15.73%	6.50%
SmallCap Growth II	05/01/1998	5.76%	16.20%	6.69%
SmallCap Value I	05/01/1998	6.15%	16.12%	6.17%

TAXATION UNDER CERTAIN RETIREMENT PLANS

INDIVIDUAL RETIREMENT ANNUITIES

Contributions. Individuals may make contributions for individual retirement annuity (IRA) contracts. Individuals may make deductible contributions (for any year) up to the lesser of the amount shown in the chart or 100% of compensation.

Individuals age 50 or over are also permitted to make additional “catch-up” contributions. The additional contribution is $1,000 in 2014 and 2015.

Such individuals may establish a traditional IRA for a non-working spouse (if they file a joint return). The annual contribution for both spouses’ contracts cannot exceed the lesser of the amount shown in the chart or 100% of the working spouse’s compensation. No more than the individual IRA limit may be contributed to either spouse’s IRA for any year.

IRA- Maximum Annual Contribution
Year	Individual IRA	Individual IRA + Spousal IRA
2014	$5,500	$11,000
2015	$5,500	$11,000

For succeeding years, limits are indexed to inflation.

Contributions may be tax deductible. If an individual and his/her spouse do not participate in a qualified retirement plan, the contributions to an IRA are fully tax deductible regardless of income. If an individual is an active participant in a qualified retirement plan, his/her ability to deduct the contributions depends upon his/her income level.

For individuals who are not active participants but whose spouses are, deductibility of traditional IRA contributions is phased out if the couple files a joint return and the Adjusted Gross Income is between $183,000 and $193,000 in 2015.

6

Deductibility of Traditional IRA Contributions for Active Participants
Married Individuals (Filing Jointly)			Single Individual
Year	Limited Deduction	No Deduction	Year	Limited Deduction	No Deduction
2014	$96,000	$116,000	2014	$60,000	$70,000
2015	$98,000	$118,000	2015	$61,000	$71,000

An individual may make non-deductible IRA contributions to the extent of the excess of:

1)    The lesser of maximum annual contribution or 100% of compensation, over

2)    The IRA deductible contributions made with respect to the individual.

A person whose filing status is "married, filing separately" may not make a full Traditional IRA deductible contribution, unless the couple are separated and have been living apart for the entire year. Only a partial deductible contribution is allowed if the Modified Adjusted Gross Income is less than $10,000.

An individual may not make any contribution to his/her own IRA for the year in which he/she reaches age 70½ or for any year thereafter.

Taxation of Distributions. Distributions from IRA Contracts are taxed as ordinary income to the recipient, although special rules exist for the tax-free return of non-deductible contributions. In addition, taxable distributions received under an IRA Contract prior to age 59½ are subject to a 10% penalty tax in addition to regular income tax. Exempted from this 10% tax penalty are the following distributions: death; disability; if the distribution is paid as part of a series of substantially equal periodic payments made for the life (or life expectancy) of the Owner or the joint lives (or joint life expectancies) of the Owner and the Owner's designated Beneficiary; distributions to pay medical expenses; distributions for medical insurance premiums after losing job; distributions for first-time home purchases (up to $10,000) and distributions for higher education expenses and distributions for certain natural disaster victims.

Required Distributions. Generally, distributions from IRA Contracts must commence not later than April 1 of the calendar year following the calendar year in which the owner attains age 70½, and such distributions must be made over a period that does not exceed the uniform life distribution period established by the IRS. A penalty tax of 50% may be imposed on any amount by which the minimum required distribution in any year exceeded the amount actually distributed in that year. In addition, in the event that the owner dies before his or her entire interest in the Contract has been distributed, the owner’s entire interest must be distributed in accordance with rules similar to those applicable upon the death of the Contract Owner in the case of a non-qualified Contract, as described in the Prospectus.

Tax-Free Rollovers. The Internal Revenue Code (the “Code”) permits funds to be transferred in a tax-free rollover from a qualified retirement plan, tax-deferred annuity plan, or governmental 457(b) plan to an IRA Contract if certain conditions are met, and if the rollover of assets is completed within 60 days after the distribution from the qualified plan is received. A direct rollover of funds may avoid a 20% federal tax withholding generally applicable to qualified plans, tax-deferred annuity plans, or governmental 457(b) plan distributions. In addition, not more frequently than once every twelve months, an individual may execute one tax-free rollover from one IRA to another, subject to the 60-day limitation and other requirements. The once-per- year limitation on rollovers does not apply to direct transfers of funds between IRA custodians or trustees or to Roth IRA conversions.

SIMPLIFIED EMPLOYEE PENSION (SEP) PLANS AND SALARY REDUCTION SIMPLIFIED EMPLOYEE PENSION (SAR/SEP) PLANS

Contributions. Under Section 408(k) of the Code, employers may establish a type of IRA plan referred to as a simplified employee pension plan (SEP). Contributions cannot exceed the lesser of 25% of compensation or $53,000 for 2015.

Employees of certain small employers may have contributions made to the salary reduction simplified employee pension plan (SAR/SEP) on their behalf on a salary reduction basis. The amount that an employee chooses to defer and contribute to the SAR/SEP is referred to as an elective deferral.

These elective deferrals are subject to the same cap as elective deferrals to IRC Section 401(k) plans, see table below. In addition to the elective deferrals, SAR/SEP may permit additional elective deferrals by individuals age 50 or over, referred to as “catch-up contributions”.

7

No new SAR/SEP are permitted after 1996 for any employer, but those in effect prior to 1997 may continue to operate, receive contributions, and add new employees.

Employees of tax-exempt organizations and state and local government agencies are not eligible for SAR/SEPs.

Salary Reduction Simplified Employee Pension Plan (SAR/SEP)
Year	Elective Deferral	Catch-up Contribution
2014	$17,500	$5,500
2015	$17,500	$6,000

Taxation of Distributions. Generally, distribution payments from SEPs are subject to the same distribution rules described above for IRAs.

Required Distributions. SEPs are subject to the same minimum required distribution rules described above for IRAs.

Tax-Free Rollovers. Generally, rollovers and direct transfers may be made to and from SEPs in the same manner as described above for IRAs, subject to the same conditions and limitations.

SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE IRA)

Contributions. Under Section 408(p) of the Code, employers may establish a type of IRA plan known as a SIMPLE IRA. Employees may have contributions made to the SIMPLE IRA on a salary reduction basis. The amount that an employee chooses to defer and contribute to the SIMPLE IRA is referred to as an elective deferral.

These elective deferrals cannot exceed the amounts shown in the chart. In addition to the elective deferrals, SIMPLE IRA may permit additional elective deferrals by individuals age 50 or over, referred to as “catch-up contributions” in an amount equal to $3,000 for 2015.

Elective contribution amounts made under the salary reduction portions (i.e., those subject to the $12,500 limit in 2015) of a SIMPLE IRA plan are counted in the overall limit on elective deferrals by any individual. For example, an individual under age 50 who defers the maximum of $12,500 to a SIMPLE IRA of one employer and also participates in a 401(k) plan of another employer, would be limited to an elective deferral of $5,500 in 2015 ($18,000 – $12,500) to the 401(k) plan.

The employer generally must match either 100% of the employee’s elective deferral, up to 3% of the employee’s compensation or fixed nonelective contributions of 2% of compensation.

Savings Incentive Match Plan for Employees (SIMPLE IRA)
Year	Elective Deferral	Catch-up Contribution	401(k) Elective Deferral
2014	$12,000	$2,500	$17,500
2015	$12,500	$3,000	$18,000

Taxation of Distributions. Generally, distribution payments from SIMPLE IRAs are subject to the same distribution rules described above for IRAs, except that distributions made within two years of the date of an employee’s first participation in a SIMPLE IRA of an employer are subject to a 25% penalty tax instead of the 10% penalty tax discussed previously.

Required Distributions. SIMPLE IRAs are subject to the same minimum required distribution rules described above for IRAs.

Tax-Free Rollovers. Direct transfers may be made among SIMPLE IRAs in the same manner as described above for IRAs, subject to the same conditions and limitations. Rollovers from SIMPLE IRAs to other types of IRAs and certain qualified plans are permitted after two years have elapsed from the date of an employee’s first participation in a SIMPLE IRA of the employer. Rollovers to SIMPLE IRAs from other plans are not permitted.

ROTH INDIVIDUAL RETIREMENT ANNUITIES (ROTH IRA)

Contribution. Under Section 408A of the Code, individuals may contribute to a Roth IRA on his/her own behalf up to the lesser of maximum annual contribution limit as shown in the chart or 100% of compensation. In addition, the contribution must be reduced by the amount of any contributions made to other IRAs for the benefit of the same individual.

8

Individuals age 50 or over are also permitted to make additional “catch-up” contributions. The additional contribution is $1,000 for 2014 and 2015.

Roth IRA - Maximum Annual Contribution
Year	Individual Roth IRA	Catch-up Contribution
2014	$5,500	$1,000
2015	$5,500	$1,000

For succeeding years, individual Roth IRA limits are indexed for cost-of-living.

For 2015, the maximum contribution is phased out for single taxpayers with adjusted gross income between $116,000 and $131,000 and for joint filers with adjusted gross income between $183,000 and $193,000 (see chart below).

Modified Adjusted Gross Income Limits – 2015
Single	Married Filing Joint	ROTH IRA Contribution
$116,000 or less	$183,000 or less	Full Contribution
$116,000 – $131,000	$183,000 – $193,000	Partial Contribution*
$131,000 & over	$193,000 & over	No Contribution

* Those entitled to only a partial contribution should check with a tax advisor to determine the allowable contribution.

Married person whose filing status is “married, filing separately” may not make a full Roth IRA contribution, unless the couple are separated and have been living apart for the entire year. Only a partial contribution is allowed if the Modified Adjusted Gross Income is less than $10,000.

Taxation of Distribution. Qualified distributions are received income-tax free by the Roth IRA owner, or beneficiary in case of the Roth IRA owner’s death. A qualified distribution is any distribution made after five years if the IRA owner is over age 59½, dies, becomes disabled, or uses the funds for first-time home buyer expenses at the time of distribution. The five-year period for converted amounts begins from the year of the conversion.

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10

Report of Independent Registered Public Accounting Firm

The Board of Directors and Participants

Principal Life Insurance Company

We have audited the accompanying statements of assets and liabilities of Principal Life Insurance Company Separate Account B (“Separate Account”), comprised of subaccounts as listed in the accompanying statements of assets and liabilities, as of December 31, 2014, and the related statements of operations for the year or period then ended, and the statements of changes in net assets for the years or periods ended December 31, 2014 and 2013. These financial statements are the responsibility of the Separate Account’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Separate Account’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Separate Account’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2014, by correspondence with the fund companies or their transfer agents. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of each of the respective subaccounts of Principal Life Insurance Company Separate Account B at December 31, 2014, the results of its operations for the year or period then ended, and the changes in its net assets for the years or periods ended December 31, 2014 and 2013, in conformity with U.S. generally accepted accounting principles.

/s/Ernst & Young LLP

Des Moines, Iowa

April 29, 2015

11

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities
December 31, 2014
		AllianceBernstein Small Cap Growth Class A Division		AllianceBernstein Small/Mid Cap Value Class A Division		American Century VP Capital Appreciation Class I Division
Assets
Investments in shares of mutual funds, at market		$	4,944,580	$	2,320,465	$	2,603,507
Liabilities			—		—		—
Net assets		$	4,944,580	$	2,320,465	$	2,603,507
Net assets
Applicable to accumulation units
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		266,096		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		4,082,426		1,604,388		2,147,021
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		862,154		449,981		456,486
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	4,944,580	$	2,320,465	$	2,603,507
Investments in shares of mutual funds, at cost		$	4,587,741	$	2,358,989	$	2,353,474
Shares of mutual fund owned			235,793		105,716		165,618
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		21,709		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		158,381		131,078		198,851
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		35,596		37,123		42,453
	Principal Lifetime Income Solutions				—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		12.26		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		12.14		—
	Principal Investment Plus Variable Annuity		25.78		12.24		10.80
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		24.22		12.12		10.75
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

12

		American Century VP Inflation Protection Class II Division										American Funds Insurance Series Blue Chip Income & Growth Fund Class 4 Division
American Century VP Income & Growth Class I Division				American Century VP MidCap Value Class II Division		American Century VP Ultra Class I Division		American Century VP Ultra Class II Division		American Century VP Value Class II Division
$	14,435,615	$	65,192,081	$	5,329,347	$	3,695,933	$	44,865,140	$	18,210,559	$	103,521
	—		—		—		—		—		—		—
$	14,435,615	$	65,192,081	$	5,329,347	$	3,695,933	$	44,865,140	$	18,210,559	$	103,521
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	3,210,398		—		—		—		—		—		—
	128,544		—		—		—		—		—		—
	11,093,447		—		1,462,326		3,668,823		—		18,121,383		—
	3,226		—		—		27,110		—		53,904		—
	—		59,045,213		3,204,163		—		39,840,849		—		—
	—		6,131,145		662,858		—		5,024,291		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		21,234		74,931
	—		15,723		—		—		—		14,038		28,590
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	14,435,615	$	65,192,081	$	5,329,347	$	3,695,933	$	44,865,140	$	18,210,559	$	103,521
$	9,037,539	$	69,642,854	$	4,545,534	$	2,043,897	$	23,459,912	$	12,637,215	$	104,412
	1,427,855		6,274,503		268,481		229,134		2,819,933		1,933,180		7,076
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	174,245		—		—		—		—		—		—
	7,737		—		—		—		—		—		—
	633,406		—		76,359		233,744		—		852,509		—
	200		—		—		1,874		—		2,736		—
	—		4,503,766		167,550		—		2,159,444		—		—
	—		497,678		35,635		—		289,806		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		2,093		7,327
	—		1,583		—		—		—		1,385		2,798
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	18.42		—		—		—		—		—		—
	16.61		—		—		—		—		—		—
	17.51		—		19.15		15.69		—		21.26		—
	16.14		—		18.63		14.46		—		19.70		—
	—		13.11		19.12		—		18.45		—		—
	—		12.32		18.60		—		17.34		—		—
	—		—		—		—		—		—		—
	—		9.94		—		—		—		10.15		10.23
	—		9.93		—		—		—		10.14		10.22
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

13

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		American Funds Insurance Series Global Small Capitalization Fund Class 2 Division		American Funds Insurance Series Global Small Capitalization Fund Class 4 Division		American Funds Insurance Series High-Income Bond Class 2 Division
Assets
Investments in shares of mutual funds, at market		$	95,978	$	7,865	$	210,998
Liabilities			—		—		—
Net assets		$	95,978	$	7,865	$	210,998
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		95,978		—		210,998
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		7,865		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	95,978	$	7,865	$	210,998
Investments in shares of mutual funds, at cost		$	96,350	$	7,840	$	226,336
Shares of mutual fund owned			3,743		303		20,269
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		9,378		—		21,793
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		798		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		10.23		—		9.69
	The Principal Variable Annuity with Purchase Payment Credit Rider		10.20		—		9.65
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		9.86		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		9.85		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

14

American Funds Insurance Series Managed Risk Asset Allocation Fund Class P2 Division		American Funds Insurance Series Managed Risk Growth Fund Class P2 Division		American Funds Insurance Series Managed Risk International Fund Class P2 Division		American Funds Insurance Series New World Fund Class 2 Division		American Funds Insurance Series New World Fund Class 4 Division		Balanced Class 1 Division		Bond & Mortgage Securities Class 1 Division
$	—	$	29,899	$	17,896	$	152,357	$	51,966	$	34,954,263	$	180,940,143
	—		—		—		—		—		—		—
$	—	$	29,899	$	17,896	$	152,357	$	51,966	$	34,954,263	$	180,940,143
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		550,062		214,444
	—		—		—		—		—		2,934,966		2,668,003
	—		—		—		—		—		—		6,037,998
	—		—		—		—		—		—		362,523
	—		—		—		152,357		—		31,422,320		74,701,608
	—		—		—		—		—		46,915		211,459
	—		—		—		—		—		—		85,794,405
	—		—		—		—		—		—		10,949,703
	—		—		—		—		—		—		—
	—		29,899		17,896		—		51,966		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	—	$	29,899	$	17,896	$	152,357	$	51,966	$	34,954,263	$	180,940,143
$	—	$	30,012	$	17,996	$	174,741	$	52,403	$	25,509,534	$	171,159,951
	—		2,634		1,774		7,418		2,528		1,814,863		15,788,844
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		174,254		79,156
	—		—		—		—		—		889,353		941,861
	—		—		—		—		—		—		337,521
	—		—		—		—		—		—		27,158
	—		—		—		16,758		—		1,102,088		3,139,989
	—		—		—		—		—		1,791		9,673
	—		—		—		—		—		—		3,611,465
	—		—		—		—		—		—		501,632
	—		—		—		—		—		—		—
	—		3,056		1,897		—		5,772		—		—
	—		—		—		—		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		3.16		2.71
	—		—		—		—		—		3.30		2.83
	—		—		—		—		—		—		17.89
	—		—		—		—		—		—		13.35
	—		—		—		9.09		—		28.51		23.79
	—		—		—		9.06		—		26.20		21.86
	—		—		—		—		—		—		23.76
	—		—		—		—		—		—		21.83
	—		—		—		—		—		—		—
	9.91		9.78		9.43		—		9.00		—		—
	9.90		9.78		9.43		—		9.00		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

15

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Calvert EAFE International Index Class F Division		Calvert Russell 2000 Small Cap Index Class F Division		Calvert S&P MidCap 400 Index Class F Division
Assets
Investments in shares of mutual funds, at market		$	5,480	$	21,466	$	35,720
Liabilities			—		—		—
Net assets		$	5,480	$	21,466	$	35,720
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		12,656		25,114
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		5,480		8,810		10,606
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	5,480	$	21,466	$	35,720
Investments in shares of mutual funds, at cost		$	5,764	$	23,608	$	38,543
Shares of mutual fund owned			69		281		367
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		1,208		2,456
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		593		841		1,038
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		9.25		10.48		10.23
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		9.25		10.47		10.22
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

16

Delaware Small Cap Value Service Class Division		Diversified Balanced Class 2 Division		Diversified Balanced Managed Volatility Class 2 Division		Diversified Growth Class 2 Division		Diversified Growth Managed Volatility Class 2 Division		Diversified Income Class 2 Division		Diversified International Class 1 Division
$	745,584	$	1,011,135,001	$	84,544,416	$	2,881,637,488	$	151,625,281	$	168,519,198	$	154,008,936
	—		—		—		—		—		—		—
$	745,584	$	1,011,135,001	$	84,544,416	$	2,881,637,488	$	151,625,281	$	168,519,198	$	154,008,936
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		283,524
	—		—		—		—		—		—		3,015,047
	—		—		—		—		—		—		2,343,521
	—		—		—		—		—		—		454,751
	35,503		—		—		—		—		—		96,587,048
	1,722		—		—		—		—		—		295,438
	567,937		900,939,050		65,148,483		2,644,417,036		120,826,299		152,880,589		44,445,227
	140,422		76,840,511		4,132,445		199,270,837		10,644,293		8,641,699		6,584,380
	—		33,355,440		15,255,933		37,949,615		20,127,908		6,996,910		—
	—		—		7,555		—		26,781		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	745,584	$	1,011,135,001	$	84,544,416	$	2,881,637,488	$	151,625,281	$	168,519,198	$	154,008,936
$	751,835	$	848,453,349	$	81,731,222	$	2,385,832,008	$	146,005,627	$	157,235,628	$	122,946,921
	18,602		70,266,504		7,770,627		187,119,317		13,796,659		14,008,246		10,938,135
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		92,648
	—		—		—		—		—		—		942,451
	—		—		—		—		—		—		138,918
	—		—		—		—		—		—		36,724
	2,988		—		—		—		—		—		3,555,571
	146		—		—		—		—		—		11,837
	47,866		63,234,861		6,136,999		173,923,019		11,309,355		12,955,006		1,638,464
	11,951		5,557,552		391,915		13,505,234		1,003,060		743,899		264,181
	—		2,341,194		1,437,110		2,495,985		1,883,972		592,919		—
	—		—		743		—		2,641		—		—
	—		—		—		—		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		3.06
	—		—		—		—		—		—		3.20
	—		—		—		—		—		—		16.87
	—		—		—		—		—		—		12.38
	11.88		—		—		—		—		—		27.16
	11.77		—		—		—		—		—		24.96
	11.87		14.25		10.62		15.20		10.68		11.80		27.13
	11.75		13.83		10.54		14.76		10.61		11.62		24.92
	—		14.25		10.62		15.20		10.68		11.80		—
	—		—		10.16		—		10.14		—		—
	—		—		10.16		—		10.14		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

17

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Diversified International Class 2 Division		Dreyfus Investment Portfolio Technology Growth Service Shares Division		DWS Alternative Asset Allocation Class B Division
Assets
Investments in shares of mutual funds, at market		$	26,006	$	5,040,592	$	—
Liabilities			—		—		—
Net assets		$	26,006	$	5,040,592	$	—
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		4,016,688		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		1,023,904		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		26,006		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	26,006	$	5,040,592	$	—
Investments in shares of mutual funds, at cost		$	26,239	$	4,319,488	$	—
Shares of mutual fund owned			1,833		279,877		—
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		178,164		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		48,332		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		2,773		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		—
	Principal Investment Plus Variable Annuity		—		22.55		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		21.19		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		9.38		—		9.83
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		9.37		—		9.82
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

18

DWS Equity 500 Index Class B2 Division		DWS Small Mid Cap Value Class B Division		Equity Income Class 1 Division		Equity Income Class 2 Division		Fidelity VIP Contrafund Service Class Division		Fidelity VIP Contrafund Service Class 2 Division		Fidelity VIP Equity-Income Service Class 2 Division
$	59,239	$	615,048	$	258,966,881	$	81,145	$	48,139,718	$	55,141,526	$	37,543,510
	—		—		—		—		—		—		—
$	59,239	$	615,048	$	258,966,880	$	81,145	$	48,139,718	$	55,141,526	$	37,543,510
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		55,837		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		39,503		57,897,951		—		47,938,340		—		25,687,491
	—		—		159,802		—		201,378		—		147,067
	—		461,364		179,749,113		—		—		48,873,294		9,829,292
	—		114,181		21,104,177		—		—		6,141,255		1,879,660
	—		—		—		—		—		—		—
	17,464		—		—		59,800		—		100,619		—
	41,775		—		—		21,345		—		26,358		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	59,239	$	615,048	$	258,966,880	$	81,145	$	48,139,718	$	55,141,526	$	37,543,510
$	58,463	$	583,254	$	179,421,258	$	79,811	$	32,847,200	$	34,273,234	$	32,126,422
	2,904		34,612		11,200,990		3,534		1,293,036		1,502,494		1,575,472
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		28,395		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		3,344		3,866,826		—		2,015,034		—		1,441,966
	—		—		11,197		—		9,213		—		8,906
	—		39,112		12,022,063		—		—		2,136,393		552,596
	—		9,774		1,480,866		—		—		285,686		113,995
	—		—		—		—		—		—		—
	1,704		—		—		5,845		—		9,898		—
	4,079		—		—		2,088		—		2,595		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		1.97		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		11.81		14.97		—		23.79		—		17.81
	—		11.70		14.27		—		21.86		—		16.51
	—		11.80		14.95		—		—		22.88		17.79
	—		11.68		14.25		—		—		21.50		16.49
	—		—		—		—		—		—		—
	10.25		10.09		—		10.23		—		10.17		—
	10.24		10.08		—		10.22		—		10.16		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

19

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Fidelity VIP Growth Service Class Division		Fidelity VIP Growth Service Class 2 Division		Fidelity VIP Mid Cap Service Class Division
Assets
Investments in shares of mutual funds, at market		$	15,184,681	$	9,441,585	$	71,177
Liabilities			—		—		—
Net assets		$	15,184,681	$	9,441,585	$	71,177
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		71,177
	The Principal Variable Annuity		15,158,337		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		26,344		—		—
	Principal Investment Plus Variable Annuity		—		7,636,342		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		1,805,243		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	15,184,681	$	9,441,585	$	71,177
Investments in shares of mutual funds, at cost		$	9,715,036	$	6,172,918	$	70,374
Shares of mutual fund owned			239,809		150,344		1,901
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		6,676
	The Principal Variable Annuity		1,035,058		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		1,958		—		—
	Principal Investment Plus Variable Annuity		—		384,395		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		96,705		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		10.66
	The Principal Variable Annuity		14.64		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		13.46		—		—
	Principal Investment Plus Variable Annuity		—		19.87		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		18.67		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

20

Fidelity VIP Mid Cap Service Class 2 Division		Fidelity VIP Overseas Service Class 2 Division		Franklin Global Real Estate VIP Class 2 Division		Franklin Rising Dividends VIP Class 4 Division		Franklin Small Cap Value VIP Class 2 Division		Goldman Sachs VIT Mid Cap Value Institutional Shares Division		Goldman Sachs VIT Mid Cap Value Service Shares Division
$	17,955,535	$	37,741,368	$	41,510	$	71,380	$	3,577,341	$	18,542,627	$	17,462
	—		—		—		—		—		—		—
$	17,955,535	$	37,741,368	$	41,510	$	71,380	$	3,577,341	$	18,542,627	$	17,462
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		193,426		166,504		—
	—		—		—		—		5,747		—		—
	15,658,678		32,486,844		—		—		3,000,102		16,002,633		—
	2,140,462		5,250,276		—		—		378,066		2,373,490		—
	—		—		—		—		—		—		—
	142,684		1,464		15,998		10,234		—		—		10,007
	13,711		2,784		25,512		61,146		—		—		7,455
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	17,955,535	$	37,741,368	$	41,510	$	71,380	$	3,577,341	$	18,542,627	$	17,462
$	15,631,033	$	29,302,241	$	41,441	$	70,785	$	3,345,344	$	16,370,949	$	17,455
	487,392		2,034,575		2,603		2,445		160,275		1,063,834		1,001
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		10,294		6,846		—
	—		—		—		—		315		—		—
	603,840		2,019,822		—		—		159,896		658,856		—
	87,841		347,387		—		—		20,764		103,994		—
	—		—		—		—		—		—		—
	14,187		155		1,516		989		—		—		976
	1,364		295		2,418		5,916		—		—		728
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		18.79		24.32		—
	—		—		—		—		18.23		22.86		—
	25.94		16.08		—		—		18.76		24.29		—
	24.37		15.11		—		—		18.21		22.82		—
	—		—		—		—		—		—		—
	10.06		9.43		10.56		10.34		—		—		10.25
	10.05		9.43		10.55		10.34		—		—		10.24
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

21

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Goldman Sachs VIT Small Cap Equity Insights Institutional Shares Division		Goldman Sachs VIT Small Cap Equity Insights Service Shares Division		Government & High Quality Bond Class 1 Division
Assets
Investments in shares of mutual funds, at market		$	6,977,815	$	5,178	$	141,358,649
Liabilities			—		—		—
Net assets		$	6,977,815	$	5,178	$	141,358,650
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		75,530
	Pension Builder Plus – Rollover IRA		—		—		32,371
	Personal Variable		—		—		156,903
	Premier Variable		—		—		2,722,771
	Principal Freedom Variable Annuity		—		—		2,734,040
	Principal Freedom Variable Annuity 2		—		—		272,007
	The Principal Variable Annuity		97,939		—		75,647,716
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		175,154
	Principal Investment Plus Variable Annuity		6,278,479		—		52,011,564
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		601,397		—		7,530,594
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		5,178		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	6,977,815	$	5,178	$	141,358,650
Investments in shares of mutual funds, at cost		$	6,360,979	$	5,732	$	143,197,487
Shares of mutual fund owned			510,447		381		13,540,100
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		22,861
	Pension Builder Plus – Rollover IRA		—		—		8,547
	Personal Variable		—		—		59,162
	Premier Variable		—		—		977,174
	Principal Freedom Variable Annuity		—		—		220,208
	Principal Freedom Variable Annuity 2		—		—		22,044
	The Principal Variable Annuity		5,329		—		6,248,035
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		15,007
	Principal Investment Plus Variable Annuity		342,105		—		4,302,018
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		34,873		—		646,137
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		488		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		3.30
	Pension Builder Plus – Rollover IRA		—		—		3.79
	Personal Variable		—		—		2.65
	Premier Variable		—		—		2.79
	Principal Freedom Variable Annuity		—		—		12.42
	Principal Freedom Variable Annuity 2		—		—		12.34
	The Principal Variable Annuity		18.38		—		12.11
	The Principal Variable Annuity with Purchase Payment Credit Rider		17.27		—		11.67
	Principal Investment Plus Variable Annuity		18.35		—		12.09
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		17.25		—		11.65
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		10.62		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		10.61		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		8,547
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

22

Government & High Quality Bond Class 2 Division		Guggenheim Floating Rate Strategies Series F Division		Guggenheim Investments Global Managed Futures Strategy Division		Guggenheim Investments Long Short Equity Division		Guggenheim Investments Multi-Hedge Strategies Division		Guggenheim Macro Opportunities Series M Division		International Emerging Markets Class 1 Division
$	19,924	$	12,908	$	21.331	$	42,859	$	7,869	$	—	$	64,254,651
	—		—		—		—		—		—		—
$	19,924	$	12,908	$	21.331	$	42,859	$	7,869	$	—	$	64,254,651
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		428,963
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		26,768,311
	—		—		—		—		—		—		233,393
	—		—		—		—		—		—		31,934,017
	—		—		—		—		—		—		4,889,967
	—		—		—		—		—		—		—
	11,870		2,242		21,331		37,393		4,194		—		—
	8,054		10,666		—		5,466		3,675		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	19,924	$	12,908	$	21,331	$	42,859	$	7,869	$	—	$	64,254,651
$	19,906	$	12,983	$	20,994	$	42,859	$	7,754	$	—	$	65,784,618
	1,907		492		1,022		2,842		330		—		4,224,501
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		118,613
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		841,063
	—		—		—		—		—		—		7,981
	—		—		—		—		—		—		1,004,867
	—		—		—		—		—		—		167,468
	—		—		—		—		—		—		—
	1,173		226		1,984		3,580		409		—		—
	796		1,074		—		524		358		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		3.62
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		31.82
	—		—		—		—		—		—		29.24
	—		—		—		—		—		—		31.78
	—		—		—		—		—		—		29.20
	—		—		—		—		—		—		—
	10.12		9.94		10.75		10.45		10.26		10.06		—
	10.12		9.93		10.74		10.44		10.25		10.05		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

23

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Invesco American Franchise Series I Division		Invesco Balanced-Risk Allocation Series II Division		Invesco Core Equity Series I Division
Assets
Investments in shares of mutual funds, at market		$	4,607,004	$	—	$	21,496,633
Liabilities			—		—		—
Net assets		$	4,607,004	$	—	$	21,496,633
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		4,589,585		—		21,487,012
	The Principal Variable Annuity with Purchase Payment Credit Rider		17,419		—		9,621
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	4,607,004	$	—	$	21,496,633
Investments in shares of mutual funds, at cost		$	3,182,485	$	—	$	13,682,968
Shares of mutual fund owned			83,947		—		524,180
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		320,260		—		1,368,655
	The Principal Variable Annuity with Purchase Payment Credit Rider		1,235		—		667
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		14.33		—		15.70
	The Principal Variable Annuity with Purchase Payment Credit Rider		14.10		—		14.42
	Principal Investment Plus Variable Annuity		—		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		10.08		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		10.08		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

24

Invesco Global Health Care Series I Division		Invesco Global Health Care Series II Division		Invesco International Growth Series I Division		Invesco International Growth Series II Division		Invesco Mid Cap Growth Series I Division		Invesco Small Cap Equity Series I Division		Invesco Technology Series I Division
$	10,917,261	$	71,400	$	10,425,490	$	32,230	$	1,553,721	$	9,327,320	$	3,772,446
	—		—		—		—		—		—		—
$	10,917,261	$	71,400	$	10,425,490	$	32,230	$	1,553,721	$	9,327,320	$	3,772,446
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	10,854,882		—		—		—		1,505,029		2,818,107		3,750,932
	62,379		—		—		—		48,692		21,479		21,514
	—		—		9,468,131		—		—		5,606,492		—
	—		—		957,359		—		—		881,242		—
	—		—		—		—		—		—		—
	—		66,990		—		26,583		—		—		—
	—		4,410		—		5,647		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	10,917,261	$	71,400	$	10,425,490	$	32,230	$	1,553,721	$	9,327,320	$	3,772,446
$	6,793,229	$	71,797	$	9,230,540	$	32,306	$	389,552	$	7,587,132	$	3,159,289
	323,187		2,177		298,982		936		268,810		394,557		191,010
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	482,186		—		—		—		106,512		122,382		408,638
	3,007		—		—		—		3,502		993		2,544
	—		—		852,944		—		—		243,845		—
	—		—		89,745		—		—		40,789		—
	—		—		—		—		—		—		—
	—		6,479		—		2,766		—		—		—
	—		427		—		588		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	22.51		—		—		—		14.13		23.03		9.18
	20.74		—		—		—		13.90		21.64		8.46
	—		—		11.10		—		—		22.99		—
	—		—		10.67		—		—		21.61		—
	—		—		—		—		—		—		—
	—		10.34		—		9.61		—		—		—
	—		10.33		—		9.60		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

25

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Invesco Value Opportunities Series I Division		Janus Aspen Enterprise Service Shares Division		Janus Aspen Flexible Bond Service Shares Division
Assets
Investments in shares of mutual funds, at market		$	5,347,559	$	9,503,129	$	72,658
Liabilities			—		—		—
Net assets		$	5,347,559	$	9,503,129	$	72,658
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		9,440,460		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		62,669		—
	Principal Investment Plus Variable Annuity		4,575,116		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		772,443		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		24,203
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		48,455
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	5,347,559	$	9,503,129	$	72,658
Investments in shares of mutual funds, at cost		$	3,649,084	$	5,002,811	$	72,735
Shares of mutual fund owned			543,451		160,363		5,598
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		638,080		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		4,610		—
	Principal Investment Plus Variable Annuity		305,103		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		54,820		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		2,408
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		4,825
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		14.79		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		13.59		—
	Principal Investment Plus Variable Annuity		15.00		—		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		14.09		—		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		10.05
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		10.04
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

26

LargeCap Blend II Class 1 Division		LargeCap Blend II Class 2 Division		LargeCap Growth Class 1 Division		LargeCap Growth Class 2 Division		LargeCap Growth I Class 1 Division		LargeCap S&P 500 Index Class 1 Division		LargeCap Value Class 1 Division
$	118,690,704	$	—	$	53,469,496	$	5,974	$	109,225,666	$	102,363,487	$	91,485,357
	—		—		—		—		—		—		—
$	118,690,704	$	—	$	53,469,495	$	5,974	$	109,225,666	$	102,363,487	$	91,485,357
$	—	$	—	$	—	$	—	$	—	$	—	$	901,394
	—		—		—		—		—		—		2,172,625
	—		—		—		—		—		—		112,254
	—		—		774,712		—		—		—		353,074
	—		—		4,250,492		—		480,796		327,958		6,354,081
	—		—		—		—		1,733,168		8,796,671		2,942,737
	—		—		—		—		187,729		538,761		367,031
	41,648,973		—		34,559,321		—		88,625,941		49,318,934		59,370,502
	65,517		—		69,963		—		99,682		159,649		28,925
	68,321,071		—		11,302,092		—		16,167,279		38,192,637		15,491,489
	8,655,143		—		2,512,915		—		1,931,071		5,028,877		3,277,243
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		5,974		—		—		—
	—		—		—		—		—		—		(6)
	—		—		—		—		—		—		114,008
$	118,690,704	$	—	$	53,469,495	$	5,974	$	109,225,666	$	102,363,487	$	91,485,357
$	81,508,866	$	—	$	34,635,612	$	6,047	$	78,742,999	$	62,432,717	$	76,841,725
	10,702,498		—		2,173,557		244		3,805,772		6,996,821		2,706,668
	—		—		—		—		—		—		14,702
	—		—		—		—		—		—		223,361
	—		—		—		—		—		—		9,622
	—		—		244,464		—		—		—		70,148
	—		—		1,282,924		—		232,508		164,719		1,201,666
	—		—		—		—		97,383		512,917		171,511
	—		—		—		—		10,629		31,142		23,378
	2,143,051		—		1,181,047		—		1,616,063		3,063,992		1,490,438
	3,637		—		2,602		—		1,978		10,795		790
	3,520,453		—		386,818		—		295,225		2,376,213		389,455
	481,103		—		93,606		—		38,379		340,524		89,669
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		591		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	61.32
	—		—		—		—		—		—		9.73
	—		—		—		—		—		—		11.67
	—		—		3.17		—		—		—		5.03
	—		—		3.31		—		2.07		1.99		5.29
	—		—		—		—		17.80		17.15		17.16
	—		—		—		—		17.66		17.30		15.70
	19.43		—		29.26		—		54.84		16.10		39.83
	18.02		—		26.88		—		50.39		14.79		36.60
	19.41		—		29.22		—		54.76		16.07		39.78
	17.99		—		26.85		—		50.32		14.77		36.55
	—		—		—		—		—		—		—
	—		10.13		—		10.12		—		—		—
	—		10.12		—		10.11		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		9,773
	—		—		—		—		—		—		61.32
	—		—		—		—		—		—		11.67

27

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		MFS VIT International Value Service Class Division		MFS VIT New Discovery Service Class Division		MFS VIT Utilities Service Class Division
Assets
Investments in shares of mutual funds, at market		$	61,084	$	943,807	$	12,181,402
Liabilities			—		—		—
Net assets		$	61,084	$	943,807	$	12,181,402
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		221,490		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		5,765		—
	Principal Investment Plus Variable Annuity		—		604,871		10,306,073
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		111,681		1,728,089
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		57,608		—		110,525
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		3,476		—		36,715
Applicable to contracts in annuitization period:			—
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	61,084	$	943,807	$	12,181,402
Investments in shares of mutual funds, at cost		$	61,667	$	1,113,730	$	11,446,994
Shares of mutual fund owned			2,849		61,687		363,841
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		20,488		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		539		—
	Principal Investment Plus Variable Annuity		—		56,031		456,080
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		10,447		79,101
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		5,858		—		11,274
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		354		—		3,748
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		—		10.81		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		10.71		—
	Principal Investment Plus Variable Annuity		—		10.80		22.60
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		10.69		21.85
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		9.83		—		9.80
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		9.83		—		9.80
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

28

MFS VIT Value Service Class Division		MidCap Class 1 Division		Money Market Class 1 Division		Money Market Class 2 Division		Neuberger Berman AMT Large Cap Value I Class Division		Neuberger Berman AMT Small-Cap Growth S Class Division		Neuberger Berman AMT Socially Responsive I Class Division
$	5,175,047	$	389,291,120	$	55,230,360	$	217,310	$	5,241,195	$	3,087,692	$	6,077,273
	—		—		—		—		—		—		—
$	5,175,047	$	389,291,120	$	55,230,360	$	217,310	$	5,241,195	$	3,087,692	$	6,077,273
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		95,763		—		—		—		—
	—		—		1		—		—		—		—
	—		1,108,009		475,529		—		—		—		—
	—		6,977,891		4,299,647		—		—		—		—
	—		9,751,806		1,695,142		—		—		—		—
	—		700,361		222,735		—		—		—		—
	—		226,683,020		24,287,406		—		—		—		—
	—		630,448		30,673		—		—		—		—
	4,368,519		126,963,940		21,374,104		—		4,718,383		2,492,195		5,196,101
	806,528		16,475,645		2,624,616		—		522,812		595,497		881,172
	—		—		124,744		—		—		—		—
	—		—		—		217,310		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	5,175,047	$	389,291,120	$	55,230,360	$	217,310	$	5,241,195	$	3,087,692	$	6,077,273
$	4,291,602	$	238,836,309	$	55,230,360	$	217,310	$	3,658,318	$	2,310,156	$	3,930,003
	258,107		6,403,868		55,230,360		217,310		319,780		172,208		254,492
	—		—		—		—		—		—		—
	—		—		44,972		—		—		—		—
	—		—		—		—		—		—		—
	—		122,417		298,716		—		—		—		—
	—		737,304		2,568,603		—		—		—		—
	—		219,342		142,508		—		—		—		—
	—		29,057		21,636		—		—		—		—
	—		2,777,142		1,806,788		—		—		—		—
	—		8,406		2,483		—		—		—		—
	200,153		1,557,678		1,592,459		—		246,607		164,299		245,886
	38,222		219,991		212,819		—		29,079		41,779		44,375
	—		—		9,295		—		—		—		—
	—		—		—		21,802		—		—		—
	—		—		—		—		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		2.13		—		—		—		—
	—		—		—		—		—		—		—
	—		9.05		1.59		—		—		—		—
	—		9.46		1.67		—		—		—		—
	—		44.46		11.89		—		—		—		—
	—		24.10		10.32		—		—		—		—
	—		81.62		13.44		—		—		—		—
	—		75.00		12.35		—		—		—		—
	21.83		81.51		13.42		—		19.13		15.17		21.13
	21.10		74.89		12.33		—		17.98		14.25		19.86
	—		—		13.42		—		—		—		—
	—		—		—		9.97		—		—		—
	—		—		—		9.96		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

29

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Oppenheimer Main Street Small Cap Service Shares Division		PIMCO All Asset Administrative Class Division		PIMCO High Yield Administrative Class Division
Assets
Investments in shares of mutual funds, at market		$	658,213	$	5,246,587	$	16,014,793
Liabilities			—		—		—
Net assets		$	658,213	$	5,246,587	$	16,014,793
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		656,447		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		1,766		—		—
	Principal Investment Plus Variable Annuity		—		4,722,314		14,538,298
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		524,273		1,456,546
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		1,944
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		18,005
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	658,213	$	5,246,587	$	16,014,793
Investments in shares of mutual funds, at cost		$	662,330	$	5,729,392	$	16,341,183
Shares of mutual fund owned			25,065		506,427		2,024,626
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		51,640		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		140		—		—
	Principal Investment Plus Variable Annuity		—		328,397		1,049,667
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		37,712		108,367
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		197
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		1,823
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		—		—
	The Principal Variable Annuity		12.71		—		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		12.59		—		—
	Principal Investment Plus Variable Annuity		—		14.38		13.86
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		13.90		13.45
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		9.88
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		9.88
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

30

PIMCO Total Return Administrative Class Division		Principal Capital Appreciation Class 1 Division		Principal Capital Appreciation Class 2 Division		Principal LifeTime Strategic Income Class 1 Division		Principal LifeTime 2010 Class 1 Division		Principal LifeTime 2020 Class 1 Division		Principal LifeTime 2030 Class 1 Division
$	29,159,222	$	18,505,464	$	192,372	$	21,738,392	$	33,742,664	$	143,694,951	$	73,233,074
	—		—		—		—		—		—		—
$	29,159,222	$	18,505,464	$	192,372	$	21,738,392	$	33,742,664	$	143,694,951	$	73,233,074
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		46,437		—		777,981		1,529,479		4,709,130		2,925,229
	—		—		—		3,508,882		1,942,472		5,223,151		2,082,336
	—		—		—		48,538		—		—		—
	27,084,861		15,030,987		—		15,427,899		28,776,857		117,194,099		56,992,820
	2,038,999		3,428,040		—		1,975,092		1,493,856		16,568,571		11,232,689
	—		—		—		—		—		—		—
	—		—		192,372		—		—		—		—
	35,362		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	29,159,222	$	18,505,464	$	192,372	$	21,738,392	$	33,742,664	$	143,694,951	$	73,233,074
$	29,935,797	$	18,381,635	$	191,074	$	19,225,395	$	27,993,252	$	116,597,668	$	61,337,286
	2,603,502		829,469		8,701		1,888,653		2,677,989		10,435,363		5,934,609
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		2,817		—		61,069		113,004		326,250		201,665
	—		—		—		249,923		126,672		310,014		123,003
	—		—		—		3,678		—		—		—
	2,158,504		935,167		—		1,100,408		1,879,636		6,965,432		3,371,186
	168,081		223,333		—		149,893		103,821		1,047,796		706,962
	—		—		—		—		—		—		—
	—		—		18,646		—		—		—		—
	3,500		—		—		—		—		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		16.48		—		12.74		13.54		14.43		14.51
	—		—		—		14.04		15.33		16.85		16.93
	—		—		—		13.20		14.41		15.84		15.91
	12.55		16.07		—		14.02		15.31		16.82		16.91
	12.13		15.35		—		13.18		14.39		15.81		15.89
	—		—		—		—		—		—		—
	10.11		—		10.32		—		—		—		—
	10.10		—		10.31		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

31

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		Principal LifeTime 2040 Class 1 Division		Principal LifeTime 2050 Class 1 Division		Real Estate Securities Class 1 Division
Assets
Investments in shares of mutual funds, at market		$	14,503,892	$	8,617,890	$	87,932,182
Liabilities			—		—		—
Net assets		$	14,503,892	$	8,617,890	$	87,932,182
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		263,552
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		367,042		168,840		225,446
	The Principal Variable Annuity		567,102		353,862		48,624,884
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		233,279
	Principal Investment Plus Variable Annuity		12,415,617		7,176,447		32,059,534
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,154,131		918,741		6,525,487
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	14,503,892	$	8,617,890	$	87,932,182
Investments in shares of mutual funds, at cost		$	12,172,685	$	7,375,290	$	56,566,011
Shares of mutual fund owned			1,000,268		607,750		3,937,850
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		54,232
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		24,755		11,383		12,390
	The Principal Variable Annuity		32,197		19,994		935,350
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		—		4,884
	Principal Investment Plus Variable Annuity		705,872		406,045		617,609
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		69,818		55,311		136,815
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		4.86
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		14.83		14.83		18.20
	The Principal Variable Annuity		17.61		17.70		51.98
	The Principal Variable Annuity with Purchase Payment Credit Rider		16.55		16.63		47.76
	Principal Investment Plus Variable Annuity		17.59		17.67		51.91
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		16.53		16.61		47.70
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		—		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

32

Real Estate Securities Class 2 Division		Rydex Commodities Strategy Division		Rydex NASDAQ 100 Division		SAM Balanced Portfolio Class 1 Division		SAM Balanced Portfolio Class 2 Division		SAM Conservative Balanced Portfolio Class 1 Division		SAM Conservative Balanced Portfolio Class 2 Division
$	180,905	$	11,373	$	97,315	$	687,747,541	$	634,173	$	168,581,522	$	553,159
	—		—		—		—		—		—		—
$	180,905	$	11,373	$	97,315	$	687,747,541	$	634,173	$	168,581,522	$	553,159
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		304,513		—		—		—
	—		—		—		—		—		—		—
	—		—		—		1,758,410		—		1,476,168		—
	—		—		—		65,708,407		—		17,897,624		—
	—		—		—		386,763		—		—		—
	—		—		—		551,309,446		—		129,222,136		—
	—		—		—		68,280,002		—		19,985,594		—
	—		—		—		—		—		—		—
	166,400		6,808		97,315		—		547,917		—		244,672
	14,505		4,565		—		—		86,256		—		308,487
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	180,905	$	11,373	$	97,315	$	687,747,541	$	634,173	$	168,581,522	$	553,159
$	178,979	$	13,581	$	97,832	$	594,998,280	$	635,617	$	155,510,110	$	555,023
	8,058		1,588		2,888		41,656,423		38,740		13,379,486		44,324
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		150,628		—		—		—
	—		—		—		—		—		—		—
	—		—		—		122,305		—		103,779		—
	—		—		—		4,679,921		—		1,288,426		—
	—		—		—		28,845		—		—		—
	—		—		—		39,321,138		—		9,315,838		—
	—		—		—		5,099,498		—		1,508,708		—
	—		—		—		—		—		—		—
	14,612		962		9,463		—		54,569		—		24,371
	1,275		645		—		—		8,597		—		30,749
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		2.02		—		—		—
	—		—		—		—		—		—		—
	—		—		—		14.38		—		14.22		—
	—		—		—		14.04		—		13.89		—
	—		—		—		13.41		—		13.27		—
	—		—		—		14.02		—		13.87		—
	—		—		—		13.39		—		13.25		—
	—		—		—		—		—		—		—
	11.39		7.08		10.28		—		10.04		—		10.04
	11.38		7.07		10.28		—		10.03		—		10.03
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

33

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		SAM Conservative Growth Portfolio Class 1 Division		SAM Conservative Growth Portfolio Class 2 Division		SAM Flexible Income Portfolio Class 1 Division
Assets
Investments in shares of mutual funds, at market		$	101,757,493	$	430,365	$	185,235,460
Liabilities			—		—		—
Net assets		$	101,757,493	$	430,365	$	185,235,460
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		1,727,646		—		1,729,151
	The Principal Variable Annuity		15,110,946		—		34,435,411
	The Principal Variable Annuity with Purchase Payment Credit Rider		102,382		—		69,606
	Principal Investment Plus Variable Annuity		68,060,093		—		126,793,331
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		16,756,426		—		22,207,961
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		421,082		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		9,283		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	101,757,493	$	430,365	$	185,235,460
Investments in shares of mutual funds, at cost		$	87,735,593	$	431,052	$	177,895,995
Shares of mutual fund owned			5,350,026		22,867		14,011,759
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		122,687		—		120,766
	The Principal Variable Annuity		1,098,867		—		2,462,743
	The Principal Variable Annuity with Purchase Payment Credit Rider		7,796		—		5,213
	Principal Investment Plus Variable Annuity		4,956,304		—		9,080,769
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,277,773		—		1,665,469
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		41,887		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		924		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		—		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		14.08		—		14.32
	The Principal Variable Annuity		13.75		—		13.98
	The Principal Variable Annuity with Purchase Payment Credit Rider		13.13		—		13.35
	Principal Investment Plus Variable Annuity		13.73		—		13.96
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		13.11		—		13.33
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		—		10.05		—
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		10.05		—
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

34

SAM Flexible Income Portfolio Class 2 Division		SAM Strategic Growth Portfolio Class 1 Division		SAM Strategic Growth Portfolio Class 2 Division		Short-Term Income Class 1 Division		Short-Term Income Class 2 Division		SmallCap Blend Class 1 Division		SmallCap Growth II Class 1 Division
$	418,129	$	65,972,384	$	624,127	$	131,611,548	$	93,629	$	33,528,364	$	30,427,185
	—		—		—		—		—		—		—
$	418,129	$	65,972,384	$	624,127	$	131,611,548	$	93,629	$	33,528,364	$	30,427,185
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		124,143		77,318
	—		—		—		1,594,461		—		3,261,081		958,205
	—		948,573		—		82,284		—		73,462		49,949
	—		9,689,724		—		20,170,634		—		25,948,021		18,720,163
	—		9,476		—		32,571		—		31,830		73,079
	—		40,589,476		—		99,252,045		—		3,417,648		9,185,134
	—		14,735,135		—		10,479,553		—		672,179		1,363,337
	—		—		—		—		—		—		—
	20,398		—		608,866		—		14,459		—		—
	397,731		—		15,261		—		79,170		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
$	418,129	$	65,972,384	$	624,127	$	131,611,548	$	93,629	$	33,528,364	$	30,427,185
$	416,848	$	56,106,355	$	625,267	$	130,471,586	$	93,706	$	22,177,265	$	18,884,798
	31,870		3,141,542		30,006		50,815,269		36,290		2,396,595		1,556,378
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		57,170		55,578
	—		—		—		133,875		—		120,705		58,703
	—		67,351		—		6,953		—		4,429		2,994
	—		704,522		—		1,736,672		—		1,251,815		1,064,323
	—		721		—		2,909		—		1,671		4,522
	—		2,955,323		—		8,557,972		—		165,119		522,984
	—		1,123,451		—		937,346		—		35,345		84,488
	—		—		—		—		—		—		—
	2,034		—		60,353		—		1,445		—		—
	39,689		—		1,514		—		7,918		—		—
$	—	$	—	$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		2.17		1.39
	—		—		—		11.91		—		27.02		16.32
	—		14.08		—		11.84		—		16.59		16.68
	—		13.75		—		11.61		—		20.73		17.59
	—		13.13		—		11.20		—		19.05		16.16
	—		13.73		—		11.60		—		20.70		17.56
	—		13.12		—		11.18		—		19.02		16.14
	—		—		—		—		—		—		—
	10.03		—		10.09		—		10.01		—		—
	10.02		—		10.08		—		10.00		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—
	—		—		—		—		—		—		—

35

Principal Life Insurance Company - Separate Account B
Statements of Assets and Liabilities (continued)
December 31, 2014
		SmallCap Growth II Class 2 Division		SmallCap Value I Class 1 Division		SmallCap Value I Class 2 Division
Assets
Investments in shares of mutual funds, at market		$	6,829	$	72,971,660	$	30,106
Liabilities			—		—		—
Net assets		$	6,829	$	72,971,660	$	30,106
Net assets
Applicable to accumulation units:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		313,868		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		207,199		—
	The Principal Variable Annuity		—		29,355,878		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		127,642		—
	Principal Investment Plus Variable Annuity		—		38,199,231		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		4,767,842		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		6,829		—		30,106
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Applicable to contracts in annuitization period:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Total net assets		$	6,829	$	72,971,660	$	30,106
Investments in shares of mutual funds, at cost		$	6,865	$	45,713,059	$	29,907
Shares of mutual fund owned			356		3,544,034		1,472
Accumulation units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		101,751		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		12,998		—
	The Principal Variable Annuity		—		787,119		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		3,725		—
	Principal Investment Plus Variable Annuity		—		1,025,675		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		139,330		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		633		—		2,840
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—		—
Accumulation unit value:
	Bankers Flexible Annuity	$	—	$	—	$	—
	Pension Builder Plus		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
	Personal Variable		—		—		—
	Premier Variable		—		3.08		—
	Principal Freedom Variable Annuity		—		—		—
	Principal Freedom Variable Annuity 2		—		15.94		—
	The Principal Variable Annuity		—		37.30		—
	The Principal Variable Annuity with Purchase Payment Credit Rider		—		34.27		—
	Principal Investment Plus Variable Annuity		—		37.24		—
	Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		—		34.22		—
	Principal Lifetime Income Solutions		—		—		—
	Principal Pivot Series Variable Annuity		10.80		—		10.60
	Principal Pivot Series Variable Annuity with Liquidity Max Rider		10.79		—		10.59
Annuitized units outstanding:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
Annuitized unit value:
	Bankers Flexible Annuity		—		—		—
	Pension Builder Plus – Rollover IRA		—		—		—
See accompanying notes.

36

T. Rowe Price Blue Chip Growth Portfolio II Division		T. Rowe Price Health Sciences Portfolio II Division		Templeton Global Bond VIP Class 4 Division		Templeton Growth VIP Class 2 Division		Van Eck Global Hard Assets Class S Division
$	12,612,679	$	30,107,162	$	67,554	$	960,023	$	7,087,059
	—		—		—		—		—
$	12,612,679	$	30,107,162	$	67,554	$	960,023	$	7,087,059
$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		960,023		—
	—		—		—		—		—
	—		—		—		—		1,505,107
	—		—		—		—		1,969
	10,698,020		25,338,209		—		—		4,636,210
	1,914,659		4,768,953		—		—		834,729
	—		—		—		—		—
	—		—		14,825		—		96,273
	—		—		52,729		—		12,771
	—		—		—		—		—
	—		—		—		—		—
$	12,612,679	$	30,107,162	$	67,554	$	960,023	$	7,087,059
$	8,498,940	$	20,908,380	$	68,342	$	769,863	$	8,461,192
	624,699		830,542		3,675		65,710		287,624
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		45,409		—
	—		—		—		—		—
	—		—		—		—		123,789
	—		—		—		—		168
	487,904		571,286		—		—		381,855
	92,928		114,424		—		—		71,115
	—		—		—		—		—
	—		—		1,520		—		12,646
	—		—		5,412		—		1,679
$	—	$	—	$	—	$	—	$	—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		21.14		—
	—		—		—		—		—
	—		—		—		—		12.16
	—		—		—		—		11.75
	21.93		44.36		—		—		12.14
	20.61		41.68		—		—		11.74
	—		—		—		—		—
	—		—		9.75		—		7.61
	—		—		9.74		—		7.61
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—
	—		—		—		—		—

37

Principal Life Insurance Company
Separate Account B
Statements of Operations
December 31, 2014
		AllianceBernstein Small Cap Growth Class A Division		AllianceBernstein Small/Mid Cap Value Class A Division		American Century VP Capital Appreciation Class I Division (1)
Investment income (loss)
Income
	Dividends	$	—	$	13,887	$	—
Expenses
	Mortality and expense risks		67,486		21,896		22,698
	Administrative charges		8,099		2,393		2,738
	Separate account rider charges		7,268		2,061		2,262
Net investment income (loss)			(82,853)		(12,463)		(27,698)
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			254,764		26,279		21,929
Capital gains distributions			457,169		229,054		—
Total realized gains (losses) on investments			711,933		255,333		21,929
Change in net unrealized appreciation or depreciation of investments			(834,462)		(103,979)		250,033
Net gains (losses) on investments			(205,382)		138,891		244,264
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	(205,382)	$	138,891	$	244,264
(1) Commenced operations April 24, 2014. (2) Commenced operations November 10, 2014. See accompanying notes.

38

American Century VP Income & Growth Class I Division		American Century VP Inflation Protection Class II Division		American Century VP MidCap Value Class II Division		American Century VP Ultra Class I Division		American Century VP Ultra Class II Division		American Century VP Value Class II Division		American Funds Insurance Series Blue Chip Income & Growth Fund Class 4 Division (2)
$	292,182	$	909,286	$	45,930	$	14,572	$	119,348	$	264,784	$	558
	167,233		902,991		55,426		47,296		619,483		237,559		32
	5,586		108,371		5,342		1,893		74,347		9,505		4
	185		59,281		3,753		238		45,825		1,248		—
	119,178		(161,357)		(18,591)		(34,855)		(620,307)		16,472		522
	811,414		425,744		245,107		330,844		5,452,590		703,639		(235)
	—		1,885,718		257,438		—		—		—		—
	811,414		2,311,462		502,545		330,844		5,452,590		703,639		(235)
	588,288		(569,158)		122,659		5,663		(1,063,112)		1,330,760		(891)
	1,518,880		1,580,947		606,613		301,652		3,769,171		2,050,871		(604)
	—		—		—		—		—		—		—
$	1,518,880	$	1,580,947	$	606,613	$	301,652	$	3,769,171	$	2,050,871	$	(604)

39

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		American Funds Insurance Series Global Small Capitalization Fund Class 2 Division (1)		American Funds Insurance Series Global Small Capitalization Fund Class 4 Division (2)		American Funds Insurance Series High-Income Bond Class 2 Division (1)
Investment income (loss)
Income
	Dividends	$	124	$	1	$	11,462
Expenses
	Mortality and expense risks		513		2		1,351
	Administrative charges		21		—		54
	Separate account rider charges		—		—		—
Net investment income (loss)			(410)		(1)		10,057
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			266		—		(2,174)
Capital gains distributions			150		—		—
Total realized gains (losses) on investments			416		—		(2,174)
Change in net unrealized appreciation or depreciation of investments			(372)		25		(15,338)
Net gains (losses) on investments			(366)		24		(7,455)
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	(366)	$	24	$	(7,455)
(1) Commenced operations May 17, 2014. (2) Commenced operations November 10, 2014. See accompanying notes.

40

American Funds Insurance Series Managed Risk Asset Allocation Fund Class P2 Division (2)		American Funds Insurance Series Managed Risk Growth Fund Class P2 Division (2)		American Funds Insurance Series Managed Risk International Fund Class P2 Division (2)		American Funds Insurance Series New World Fund Class 2 Division (1)		American Funds Insurance Series New World Fund Class 4 Division (2)		Balanced Class 1 Division		Bond & Mortgage Securities Class 1 Division
$	—	$	—	$	—	$	1,543	$	375	$	615,270	$	5,952,369
	—		6		3		900		25		419,506		2,349,673
	—		1		1		36		4		16,155		194,768
	—		—		—		—		—		716		97,428
	—		(7)		(4)		607		346		178,893		3,310,500
	—		—		—		(1,229)		(632)		1,285,488		(697,163)
	—		—		—		4,960		—		—		—
	—		—		—		3,731		(632)		1,285,488		(697,163)
	—		(113)		(100)		(22,384)		(437)		1,105,685		4,749,114
	—		(120)		(104)		(18,046)		(723)		2,570,066		7,362,451
	—		—		—		—		—		—		—
$	—	$	(120)	$	(104)	$	(18,046)	$	(723)	$	2,570,066	$	7,362,451

41

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Calvert EAFE International Index Class F Division (1)		Calvert Russell 2000 Small Cap Index Class F Division (1)		Calvert S&P MidCap 400 Index Class F Division (1)
Investment income (loss)
Income
	Dividends	$	120	$	71	$	210
Expenses
	Mortality and expense risks		4		18		28
	Administrative charges		—		2		4
	Separate account rider charges		—		—		—
Net investment income (loss)			116		51		178
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			(1)		(1)		—
Capital gains distributions			—		2,375		2,812
Total realized gains (losses) on investments			(1)		2,374		2,812
Change in net unrealized appreciation or depreciation of investments			(284)		(2,142)		(2,823)
Net gains (losses) on investments			(169)		283		167
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	(169)	$	283	$	167
(1) Commenced operations November 10, 2014. See accompanying notes.

42

Delaware Small Cap Value Service Class Division		Diversified Balanced Class 2 Division		Diversified Balanced Managed Volatility Class 2 Division		Diversified Growth Class 2 Division		Diversified Growth Managed Volatility Class 2 Division		Diversified Income Class 2 Division		Diversified International Class 1 Division
$	1,698	$	8,430,900	$	2,646	$	24,839,166	$	15,221	$	783,964	$	3,691,678
	7,154		11,710,349		501,209		31,908,827		959,642		1,714,369		2,090,539
	825		1,405,406		60,152		3,829,506		115,171		205,749		137,258
	665		418,393		12,431		1,079,082		31,995		47,240		60,469
	(6,946)		(5,103,248)		(571,146)		(11,978,249)		(1,091,587)		(1,183,394)		1,403,412
	7,322		7,126,463		63,848		7,197,606		137,598		2,002,444		2,123,040
	43,231		10,099,586		5,293		32,951,679		28,652		824,450		—
	50,553		17,226,049		69,141		40,149,285		166,250		2,826,894		2,123,040
	(24,718)		41,256,299		2,805,987		129,051,299		5,573,416		5,516,168		(10,768,603)
	18,889		53,379,100		2,303,982		157,222,335		4,648,079		7,159,668		(7,242,151)
	—		—		—		—		—		—		—
$	18,889	$	53,379,100	$	2,303,982	$	157,222,335	$	4,648,079	$	7,159,668	$	(7,242,151)

43

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Diversified International Class 2 Division (1)		Dreyfus Investment Portfolio Technology Growth Service Shares Division		DWS Alternative Asset Allocation Class B Division (1)
Investment income (loss)
Income
	Dividends	$	—	$	—	$	—
Expenses
	Mortality and expense risks		9		60,480		—
	Administrative charges		1		7,258		—
	Separate account rider charges		—		6,664		—
Net investment income (loss)			(10)		(74,402)		—
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			—		339,304		—
Capital gains distributions			—		262,615		—
Total realized gains (losses) on investments			—		601,919		—
Change in net unrealized appreciation or depreciation of investments			(233)		(337,264)		—
Net gains (losses) on investments			(243)		190,253		—
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	(243)	$	190,253	$	—
(1) Commenced operations November 10, 2014. See accompanying notes.

44

DWS Equity 500 Index Class B2 Division (1)		DWS Small Mid Cap Value Class B Division		Equity Income Class 1 Division		Equity Income Class 2 Division (1)		Fidelity VIP Contrafund Service Class Division		Fidelity VIP Contrafund Service Class 2 Division		Fidelity VIP Equity-Income Service Class 2 Division
$	—	$	1,805	$	6,443,295	$	—	$	403,224	$	393,828	$	983,744
	34		5,335		3,434,427		49		613,391		684,809		480,342
	4		615		352,825		7		24,538		82,189		30,774
	—		492		184,797		—		1,775		44,701		14,953
	(38)		(4,637)		2,471,246		(56)		(236,480)		(417,871)		457,675
	—		4,319		21,436,943		—		2,426,899		1,591,267		337,882
	—		1,919		—		—		943,796		1,096,570		534,938
	—		6,238		21,436,943		—		3,370,695		2,687,837		872,820
	776		18,717		5,170,721		1,334		1,670,519		2,939,300		1,250,674
	738		20,318		29,078,910		1,278		4,804,734		5,209,266		2,581,169
	—		—		—		—		—		—		—
$	738	$	20,318	$	29,078,910	$	1,278	$	4,804,734	$	5,209,266	$	2,581,169

45

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Fidelity VIP Growth Service Class Division		Fidelity VIP Growth Service Class 2 Division		Fidelity VIP Mid Cap Service Class Division (1)
Investment income (loss)
Income
	Dividends	$	13,941	$	—	$	113
Expenses
	Mortality and expense risks		200,518		110,768		280
	Administrative charges		8,022		13,294		—
	Separate account rider charges		361		12,387		—
Net investment income (loss)			(194,960)		(136,449)		(167)
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			1,066,857		653,557		(2)
Capital gains distributions			—		—		543
Total realized gains (losses) on investments			1,066,857		653,557		541
Change in net unrealized appreciation or depreciation of investments			627,231		258,174		803
Net gains (losses) on investments			1,499,128		775,282		1,177
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	1,499,128	$	775,282	$	1,177
(1) Commenced operations May 17, 2014. (2) Commenced operations November 10, 2014. (3) Represented the operations of Franklin Small Cap Value Securities Class 2 Division until May 17, 2014. See accompanying notes.

46

Fidelity VIP Mid Cap Service Class 2 Division		Fidelity VIP Overseas Service Class 2 Division		Franklin Global Real Estate VIP Class 2 Division (2)		Franklin Rising Dividends VIP Class 4 Division (2)		Franklin Small Cap Value VIP Class 2 Division (3)		Goldman Sachs VIT Mid Cap Value Institutional Shares Division		Goldman Sachs VIT Mid Cap Value Service Shares Division (2)
$	3,376	$	425,690	$	—	$	—	$	21,644	$	181,922	$	74
	207,542		512,581		20		41		43,791		228,996		9
	24,911		61,517		3		5		5,067		27,354		1
	13,248		43,542		—		—		2,529		20.207		—
	(242,325)		(191,950)		(23)		(46)		(29,743)		(94,635)		64
	537,080		(207,218)		—		502		268,983		748,878		(1,240)
	384,657		10,870		—		—		260,997		3,029,537		1,603
	921,737		(196,348)		—		502		529,980		3,778,415		363
	71,824		(3,762,189)		69		595		(547,683)		(1,635,687)		7
	751,236		(4,150,487)		46		1,051		(47,446)		2,048,093		434
	—		—		—		—		—		—		—
$	751,236	$	(4,150,487)	$	46	$	1,051	$	(47,446)	$	2,048,093	$	434

47

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Goldman Sachs VIT Small Cap Equity Insights Institutional Shares Division (1)		Goldman Sachs VIT Small Cap Equity Insights Service Shares Division (2)		Government & High Quality Bond Class 1 Division
Investment income (loss)
Income
	Dividends	$	52,395	$	26	$	5,632,839
Expenses
	Mortality and expense risks		85,784		4		1,837,475
	Administrative charges		10,202		1		134,849
	Separate account rider charges		6,067		—		61,629
Net investment income (loss)			(49,658)		21		3,598,886
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			404,975		—		(203,842)
Capital gains distributions			983,827		733		—
Total realized gains (losses) on investments			1,388,802		733		(203,842)
Change in net unrealized appreciation or depreciation of investments			(984,276)		(554)		2,078,450
Net gains (losses) on investments			354,868		200		5,473,494
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	354,868	$	200	$	5,473,494
(1) Represented the operations of Goldman Sachs VIT Structured Small Cap Equity Service Class I Division until May 17, 2014. (2) Commenced operations until November 10, 2014. See accompanying notes.

48

Government & High Quality Bond Class 2 Division (2)		Guggenheim Floating Rate Strategies Series F Division (2)		Guggenheim Investments Global Managed Future Strategy Division (2)		Guggenheim Investments Long Short Equity Division (2)		Guggenheim Investments Multi-Hedge Strategies Division (2)		Guggenheim Macro Opportunities Series M Division (2)		International Emerging Markets Class 1 Division
$	—	$	—	$	—	$	—	$	—	$	—	$	645,301
	12		13		5		13		5		1		883,399
	2		1		1		2		1		—		74,905
	—		—		—		—		—		—		40,626
	(14)		(14)		(6)		(15)		(6)		(1)		(353,629)
	(12)		—		—		—		—		(6)		(1,258,213)
	—		—		—		—		—		—		—
	(12)		—		—		—		—		(6)		(1,258,213)
	18		(75)		337		—		115		—		(1,840,421)
	(8)		(89)		331		(15)		109		(7)		(3,452,263)
	—		—		—		—		—		—		—
$	(8)	$	(89)	$	331	$	(15)	$	109	$	(7)	$	(3,452,263)

49

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Invesco American Franchise Series I Division		Invesco Balanced-Risk Allocation Series II Division (1)		Invesco Core Equity Series I Division
Investment income (loss)
Income
	Dividends	$	1,979	$	—	$	188,893
Expenses
	Mortality and expense risks		59,321		—		283,309
	Administrative charges		2,374		—		11,333
	Separate account rider charges		131		—		68
Net investment income (loss)			(59,847)		—		(105,817)
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			290,027		—		1,508,836
Capital gains distributions			—		—		105,462
Total realized gains (losses) on investments			290,027		—		1,614,298
Change in net unrealized appreciation or depreciation of investments			76,495		—		(7,629)
Net gains (losses) on investments			306,675		—		1,500,852
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	306,675	$	—	$	1,500,852
(1) Commenced operations November 10, 2014. See accompanying notes.

50

Invesco Global Health Care Series I Division		Invesco Global Health Care Series II Division (1)		Invesco International Growth Series I Division		Invesco International Growth Series II Division (1)		Invesco Mid Cap Growth Series I Division		Invesco Small Cap Equity Series I Division		Invesco Technology Series I Division
$	—	$	—	$	165,226	$	—	$	—	$	—	$	—
	129,426		40		121,724		21		20,129		120,110		45,422
	5,178		6		14,608		3		806		11,217		1,817
	861		—		5,111		—		538		6,257		329
	(135,465)		(46)		23,783		(24)		(21,473)		(137,584)		(47,568)
	1,138,696		237		337,819		(220)		375,481		811,599		229,883
	391,059		—		—		—		—		831,129		310,119
	1,529,755		237		337,819		(220)		375,481		1,642,728		540,002
	294,532		(397)		(512,905)		(76)		(250,833)		(1,438,151)		(177,191)
	1,688,822		(206)		(151,303)		(320)		103,175		66,993		315,243
	—		—		—		—		—		—		—
$	1,688,822	$	(206)	$	(151,303)	$	(320)	$	103,175	$	66,993	$	315,243

51

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Invesco Value Opportunities Series I Division		Janus Aspen Enterprise Service Shares Division		Janus Aspen Flexible Bond Service Shares Division (1)
Investment income (loss)
Income
	Dividends	$	75,193	$	3,172	$	384
Expenses
	Mortality and expense risks		68,648		116,796		60
	Administrative charges		8,239		4,672		8
	Separate account rider charges		5,422		418		—
Net investment income (loss)			(7,116)		(118,714)		316
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			357,914		840,446		(260)
Capital gains distributions			—		662,365		—
Total realized gains (losses) on investments			357,914		1,502,811		(260)
Change in net unrealized appreciation or depreciation of investments			(76,879)		(428,379)		(77)
Net gains (losses) on investments			273,919		955,718		(21)
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	273,919	$	955,718	$	(21)
(1) Commenced operations November 10, 2014. See accompanying notes.

52

LargeCap Blend II Class 1 Division		LargeCap Blend II Class 2 Division (1)		LargeCap Growth Class 1 Division		LargeCap Growth Class 2 Division (1)		LargeCap Growth I Class 1 Division		LargeCap S&P 500 Index Class 1 Division		LargeCap Value Class 1 Division
$	1,553,497	$	—	$	292,664	$	—	$	130,790	$	1,253,552	$	2,046,187
	1,574,714		—		634,231		7		1,359,557		1,218,528		1,082,261
	146,069		—		38,740		1		70,979		86,732		57,964
	146,069		—		18,566		—		15,799		36,149		24,572
	(248,147)		—		(398,873)		(8)		(1,315,545)		(87,857)		881,390
	2,749,207		—		4,042,057		(46)		7,280,733		5,786,595		3,834,804
	—		—		—		—		20,386,747		2,239,839		12,377,048
	2,749,207		—		4,042,057		(46)		27,667,480		8,026,434		16,211,852
	9,029,903		—		1,327,791		(73)		(18,840,451)		3,249,988		(8,506,475)
	11,530,963		—		4,970,975		(127)		7,511,484		11,188,565		8,586,767
	—		—		—		—		—		—		—
$	11,530,963	$	—	$	4,970,975	$	(127)	$	7,511,484	$	11,188,565	$	8,586,767

53

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		MFS VIT International Value Service Class Division (1)		MFS VIT New Discovery Service Class Division		MFS VIT Utilities Service Class Division
Investment income (loss)
Income
	Dividends	$	—	$	—	$	222,043
Expenses
	Mortality and expense risks		46		10,522		133,797
	Administrative charges		7		1,018		16,060
	Separate account rider charges		—		802		9,651
Net investment income (loss)			(53)		(12,342)		62,535
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			(233)		(45,072)		552,605
Capital gains distributions			—		198,958		427,991
Total realized gains (losses) on investments			(233)		153,886		980,596
Change in net unrealized appreciation or depreciation of investments			(582)		(212,134)		(93,732)
Net gains (losses) on investments			(868)		(70,590)		949,399
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	(868)	$	(70,590)	$	949,399
(1) Commenced operations November 10, 2014. See accompanying notes.

54

MFS VIT Value Service Class Division		MidCap Class 1 Division		Money Market Class 1 Division		Money Market Class 2 Division (1)		Neuberger Berman AMT Large Cap Value I Class Division		Neuberger Berman AMT Small-Cap Growth S Class Division		Neuberger Berman AMT Socially Responsive I Class Division
$	65,149	$	2,000,205	$	19	$	—	$	38,594	$	—	$	22,788
	60,363		4,825,123		683,708		233		66,455		39,956		81,544
	7,244		336,448		50,247		35		7,976		4,795		9,786
	4,571		134,207		21,466		—		4,211		4,438		6,240
	(7,029)		(3,295,573)		(755,402)		(268)		(40,048)		(49,189)		(74,782)
	272,320		33,897,048		—		—		396,207		380,243		1,076,131
	152,855		34,755,353		—		—		—		280,357		—
	425,175		68,652,401		—		—		396,207		660,600		1,076,131
	(7,797)		(22,942,508)		—		—		65,815		(569,384)		(496,844)
	410,349		42,414,320		(755,402)		(268)		421,974		42,027		504,505
	—		—		—		—		—		—		—
$	410,349	$	42,414,320	$	(755,402)	$	(268)	$	421,974	$	42,027	$	504,505

55

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Oppenheimer Main Street Small Cap Service Shares Division		PIMCO All Asset Administrative Class Division		PIMCO High Yield Administrative Class Division
Investment income (loss)
Income
	Dividends	$	4,221	$	280,007	$	835,675
Expenses
	Mortality and expense risks		7,683		66,834		197,871
	Administrative charges		307		8,021		23,748
	Separate account rider charges		14		3,727		9,701
Net investment income (loss)			(3,783)		201,425		604,355
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			(298)		(10,798)		79,195
Capital gains distributions			93,683		—		—
Total realized gains (losses) on investments			93,385		(10,798)		79,195
Change in net unrealized appreciation or depreciation of investments			(27,039)		(271,826)		(431,109)
Net gains (losses) on investments			62,563		(81,199)		252,441
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	62,563	$	(81,199)	$	252,441
(1) Commenced operations November 10, 2014. See accompanying notes.

56

PIMCO Total Return Administrative Class Division		Principal Capital Appreciation Class 1 Division		Principal Capital Appreciation Class 2 Division (1)		Principal LifeTime Strategic Income Class 1 Division		Principal LifeTime 2010 Class 1 Division		Principal LifeTime 2020 Class 1 Division		Principal LifeTime 2030 Class 1 Division
$	659,220	$	548,129	$	—	$	569,834	$	764,659	$	3,680,713	$	1,581,273
	377,111		217,144		167		282,198		435,959		1,983,509		908,012
	45,259		26,008		25		29,366		48,407		226,881		103,191
	12,070		19,284		—		14,126		13,369		147,188		67,653
	224,780		285,693		(192)		244,144		266,924		1,323,135		502,417
	(18,070)		389,106		1		593,959		310,635		3,935,672		2,323,775
	—		2,777,041		—		—		—		3,234,566		11,158,103
	(18,070)		3,166,147		1		593,959		310,635		7,170,238		13,481,878
	629,305		(1,656,566)		1,298		(133,715)		607,302		(1,951,174)		(10,747,978)
	836,015		1,795,274		1,107		704,388		1,184,861		6,542,199		3,236,317
	—		—		—		—		—		—		—
$	836,015	$	1,795,274	$	1,107	$	704,388	$	1,184,861	$	6,542,199	$	3,236,317

57

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		Principal LifeTime 2040 Class 1 Division		Principal LifeTime 2050 Class 1 Division		Real Estate Securities Class 1 Division
Investment income (loss)
Income
	Dividends	$	283,536	$	189,454	$	1,290,021
Expenses
	Mortality and expense risks		175,042		107,289		1,003,398
	Administrative charges		20,076		12,225		73,815
	Separate account rider charges		8,603		6,645		40,002
Net investment income (loss)			79,815		63,295		172,806
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			194,842		178,007		2,192,506
Capital gains distributions			950,286		743,613		—
Total realized gains (losses) on investments			1,145,128		921,620		2,192,506
Change in net unrealized appreciation or depreciation of investments			(574,127)		(587,998)		19,163,492
Net gains (losses) on investments			650,816		396,917		21,528,804
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	650,816	$	396,917	$	21,528,804
(1) Commenced operations November 10, 2014. See accompanying notes.

58

Real Estate Securities Class 2 Division (1)		Rydex Commodities Strategy Division (1)		Rydex NASDAQ 100 Division (1)		SAM Balanced Portfolio Class 1 Division		SAM Balanced Portfolio Class 2 Division (1)		SAM Conservative Balanced Portfolio Class 1 Division		SAM Conservative Balanced Portfolio Class 2 Division (1)
$	—	$	—	$	—	$	19,449,599	$	—	$	5,172,643	$	—
	131		13		88		9,152,642		321		2,169,071		122
	19		2		13		1,027,666		47		240,028		17
	—		—		—		457,946		—		129,305		—
	(150)		(15)		(101)		8,811,345		(368)		2,634,239		(139)
	585		(1)		—		36,719,553		1		7,981,626		(1)
	—		—		—		100,364,250		—		14,699,102		—
	585		(1)		—		137,083,803		1		22,680,728		(1)
	1,926		(2,208)		(517)		(108,056,045)		(1,444)		(17,320,821)		(1,863)
	2,361		(2,224)		(618)		37,839,103		(1,811)		7,994,146		(2,003)
	—		—		—		—		—		—		—
$	2,361	$	(2,224)	$	(618)	$	37,839,103	$	(1,811)	$	7,994,146	$	(2,003)

59

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		SAM Conservative Growth Portfolio Class 1 Division		SAM Conservative Growth Portfolio Class 2 Division (1)		SAM Flexible Income Portfolio Class 1 Division
Investment income (loss)
Income
	Dividends	$	1,737,071	$	—	$	6,695,294
Expenses
	Mortality and expense risks		1,181,179		244		2,314,725
	Administrative charges		124,067		36		241,703
	Separate account rider charges		96,936		—		145,106
Net investment income (loss)			334,889		(280)		3,993,760
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			3,308,287		—		4,814,188
Capital gains distributions			11,629,521		—		10,352,104
Total realized gains (losses) on investments			14,937,808		—		15,166,292
Change in net unrealized appreciation or depreciation of investments			(9,886,503)		(687)		(11,000,369)
Net gains (losses) on investments			5,386,194		(967)		8,159,683
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	5,386,194	$	(967)	$	8,159,683
(1) Commenced operations November 10, 2014. See accompanying notes.

60

SAM Flexible Income Portfolio Class 2 Division (1)		SAM Strategic Growth Portfolio Class 1 Division		SAM Strategic Growth Portfolio Class 2 Division (1)		Short-Term Income Class 1 Division		Short-Term Income Class 2 Division (1)		SmallCap Blend Class 1 Division		SmallCap Growth II Class 1 Division
$	—	$	938,567	$	—	$	2,358,328	$	—	$	119,026	$	—
	284		761,902		412		1,752,524		45		409,307		381,487
	34		80,114		61		186,362		6		18,256		25,384
	—		83,088		—		91,937		—		4,707		10,033
	(318)		13,463		(473)		327,505		(51)		(313,244)		(416,904)
	(1)		2,381,192		(3)		997,364		—		2,187,088		2,433,205
	—		9,953,221		—		—		—		991,070		—
	(1)		12,334,413		(3)		997,364		—		3,178,158		2,433,205
	1,281		(8,132,619)		(1,140)		(890,451)		(77)		(1,699,886)		(598,320)
	962		4,215,257		(1,616)		434,418		(128)		1,165,028		1,417,981
	—		—		—		—		—		—		—
$	962	$	4,215,257	$	(1,616)	$	434,418	$	(128)	$	1,165,028	$	1,417,981

61

Principal Life Insurance Company
Separate Account B
Statements of Operations (continued)
December 31, 2014
		SmallCap Growth II Class 2 Division (1)		SmallCap Value I Class 1 Division		SmallCap Value I Class 2 Division (1)
Investment income (loss)
Income
	Dividends	$	—	$	567,482	$	—
Expenses
	Mortality and expense risks		5		951,667		9
	Administrative charges		1		83,558		1
	Separate account rider charges		—		40,788		—
Net investment income (loss)			(6)		(508,531)		(10)
Realized gains (losses) on investments
Realized gains (losses) on sale of fund shares			360		4,928,938		541
Capital gains distributions			—		8,032,051		—
Total realized gains (losses) on investments			360		12,960,989		541
Change in net unrealized appreciation or depreciation of investments			(36)		(8,377,893)		199
Net gains (losses) on investments			318		4,074,565		730
Payment from affiliate			—		—		—
Net increase (decrease) in net assets resulting from operations		$	318	$	4,074,565	$	730
(1) Commenced operations November 10, 2014. (2) Represented the operations of Templeton Growth Securities Class 2 Division until May 17, 2014. See accompanying notes.

62

T. Rowe Price Blue Chip Growth Portfolio II Division		T. Rowe Price Health Sciences Portfolio II Division		Templeton Global Bond VIP Class 4 Division (1)		Templeton Growth VIP Class 2 Division (2)		Van Eck Global Hard Assets Class S Division
$	—	$	—	$	—	$	13,877	$	—
	151,010		314,997		62		8,825		109,796
	18,123		37,804		8		—		10,985
	11,195		26,826		—		—		6,181
	(180,328)		(379,627)		(70)		5,052		(126,962)
	994,904		2,459,600		(1)		21,912		(449,127)
	—		2,172,933		—		—		—
	994,904		4,632,533		(1)		21,912		(449,127)
	49,729		2,222,956		(788)		(61,483)		(1,185,645)
	864,305		6,475,862		(859)		(34,519)		(1,761,734)
	—		—		—		—		—
$	864,305	$	6,475,862	$	(859)	$	(34,519)	$	(1,761,734)

63

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets
Years ended December 31, 2014 and 2013, except as noted
		AllianceBernstein Small Cap Growth Class A Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(82,853)	$	(74,085)
	Total realized gains (losses) on investments		711,933		939,697
	Change in net unrealized appreciation or depreciation of investments		(834,462)		953,491
	Net gains (losses) from investments		(205,382)		1,819,103
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			(205,382)		1,819,103
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		883,376		1,367,497
	Administration charges		(575)		(697)
	Contingent sales charges		(5,340)		(4,681)
	Contract terminations		(515,559)		(329,539)
	Death benefit payments		(32,960)		—
	Flexible withdrawal option payments		(16,721)		(19,931)
	Transfers to other contracts		(1,345,012)		(796,987)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(1,032,791)		215,662
Total increase (decrease)			(1,238,173)		2,034,765
Net assets at beginning of period			6,182,753		4,147,988
Net assets at end of period		$	4,944,580	$	6,182,753
(1) Commenced operations May 20, 2013. (2) Commenced operations April 24, 2014. See accompanying notes.

64

AllianceBernstein Small/Mid Cap Value Class A Division (1)				American Century VP Capital Appreciation Class I Division (2)		American Century VP Income & Growth Class I Division
2014		2013		2014		2014		2013
$	(12,463)	$	(2,783)	$	(27,698)	$	119,178	$	139,876
	255,333		10,666		21,929		811,414		566,865
	(103,979)		65,455		250,033		588,288		3,377,547
	138,891		73,338		244,264		1,518,880		4,084,288
	—		—		—		—		—
	138,891		73,338		244,264		1,518,880		4,084,288
	1,756,451		1,018,060		3,015,252		624,667		2,135,473
	(60)		—		(1,154)		(1,891)		(1,855)
	(375)		(4)		(2,204)		(2,062)		(3,559)
	(76,395)		(887)		(212,790)		(1,528,791)		(1,879,657)
	(10,551)		—		(18,522)		(111,850)		(74,554)
	(13,164)		(1,324)		(13,909)		(164,308)		(181,392)
	(549,664)		(13,851)		(407,430)		(884,451)		(1,838,559)
	—		—		—		—		—
	1,106,242		1,001,994		2,359,243		(2,068,686)		(1,844,103)
	1,245,133		1,075,332		2,603,507		(549,806)		2,240,185
	1,075,332		—		—		14,985,421		12,745,236
$	2,320,465	$	1,075,332	$	2,603,507	$	14,435,615	$	14,985,421

65

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		American Century VP Inflation Protection Class II Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(161,357)	$	155,755
	Total realized gains (losses) on investments		2,311,462		4,336,669
	Change in net unrealized appreciation or depreciation of investments		(569,158)		(12,950,643)
	Net gains (losses) from investments		1,580,947		(8,458,219)
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			1,580,947		(8,458,219)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		13,312,143		25,339,967
	Administration charges		(368,840)		(438,184)
	Contingent sales charges		(83,724)		(90,331)
	Contract terminations		(8,083,732)		(6,359,227)
	Death benefit payments		(456,869)		(303,050)
	Flexible withdrawal option payments		(2,013,619)		(2,108,167)
	Transfers to other contracts		(17,534,228)		(17,902,858)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(15,228,869)		(1,861,850)
Total increase (decrease)			(13,647,922)		(10,320,069)
Net assets at beginning of period			78,840,003		89,160,072
Net assets at end of period		$	65,192,081	$	78,840,003
See accompanying notes.

66

American Century VP MidCap Value Class II Division				American Century VP Ultra Class I Division				American Century VP Ultra Class II Division
2014		2013		2014		2013		2014		2013
$	(18,591)	$	(9,838)	$	(34,855)	$	(28,477)	$	(620,307)	$	(575,059)
	502,545		230,648		330,844		296,679		5,452,590		4,590,171
	122,659		548,170		5,663		900,103		(1,063,112)		12,826,675
	606,613		768,980		301,652		1,168,305		3,769,171		16,841,787
	—		—		—		—		—		—
	606,613		768,980		301,652		1,168,305		3,769,171		16,841,787
	2,495,268		2,001,893		213,536		511,488		6,983,627		5,026,808
	(517)		(321)		(846)		(607)		(283,549)		(347,785)
	(3,227)		(3,785)		(700)		(1,007)		(65,566)		(64,968)
	(446,735)		(450,282)		(567,666)		(513,202)		(6,330,547)		(4,573,711)
	(92,761)		(5,577)		(18,560)		(34,953)		(281,760)		(167,401)
	(27,075)		(19,048)		(54,106)		(61,911)		(1,480,963)		(1,501,761)
	(1,016,734)		(1,069,551)		(276,896)		(684,119)		(11,843,761)		(16,186,129)
	—		—		—		—		—		—
	908,219		453,329		(705,238)		(784,311)		(13,302,519)		(17,814,947)
	1,514,832		1,222,309		(403,586)		383,994		(9,533,348)		(973,160)
	3,814,515		2,592,206		4,099,519		3,715,525		54,398,488		55,371,648
$	5,329,347	$	3,814,515	$	3,695,933	$	4,099,519	$	44,865,140	$	54,398,488

67

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		American Century VP Value Class II Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	16,472	$	34,980
	Total realized gains (losses) on investments		703,639		109,311
	Change in net unrealized appreciation or depreciation of investments		1,330,760		4,970,892
	Net gains (losses) from investments		2,050,871		5,115,183
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			2,050,871		5,115,183
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		1,607,095		2,765,007
	Administration charges		(3,393)		(3,991)
	Contingent sales charges		(3,965)		(6,457)
	Contract terminations		(3,215,888)		(3,291,486)
	Death benefit payments		(93,993)		(133,904)
	Flexible withdrawal option payments		(216,110)		(215,425)
	Transfers to other contracts		(1,627,230)		(3,389,138)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(3,553,484)		(4,275,394)
Total increase (decrease)			(1,502,613)		839,789
Net assets at beginning of period			19,713,172		18,873,383
Net assets at end of period		$	18,210,559	$	19,713,172
(1) Commenced operations November 10, 2014. (2) Commenced operations May 17, 2014. See accompanying notes.

68

American Funds Insurance Series Blue Chip Income & Growth Fund Class 4 Division (1)		American Funds Insurance Series Global Small Capitalization Fund Class 2 Division (2)		American Funds Insurance Series Global Small Capitalization Fund Class 4 Division (1)
2014		2014		2014
$	522	$	(410)	$	(1)
	(235)		416		—
	(891)		(372)		25
	(604)		(366)		24
	—		—		—
	(604)		(366)		24
	104,128		113,699		7,841
	(3)		—		—
	—		(5)		—
	—		(3,834)		—
	—		—		—
	—		—		—
	—		(13,516)		—
	—		—		—
	104,125		96,344		7,841
	103,521		95,978		7,865
	—		—		—
$	103,521	$	95,978	$	7,865

69

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		American Funds Insurance Series High-Income Bond Class 2 Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	10,057
	Total realized gains (losses) on investments		(2,174)
	Change in net unrealized appreciation or depreciation of investments		(15,338)
	Net gains (losses) from investments		(7,455)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(7,455)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		318,020
	Administration charges		(1)
	Contingent sales charges		(74)
	Contract terminations		(60,154)
	Death benefit payments		—
	Flexible withdrawal option payments		(1,200)
	Transfers to other contracts		(38,138)
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			218,453
Total increase (decrease)			210,998
Net assets at beginning of period			—
Net assets at end of period		$	210,998
(1) Commenced operations May 17, 2014. (1) Commenced operations November 10, 2014. See accompanying notes.

70

American Funds Insurance Series Managed Risk Asset Allocation Fund Class P2 Division (2)		American Funds Insurance Series Managed Risk Growth Fund Class P2 Division (2)		American Funds Insurance Series Managed Risk International Fund Class P2 Division (2)
2014		2014		2014
$	—	$	(7)	$	(4)
	—		—		—
	—		(113)		(100)
	—		(120)		(104)
	—		—		—
	—		(120)		(104)
	—		30,019		18,000
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		30,019		18,000
	—		29,899		17,896
	—		—		—
$	—	$	29,899	$	17,896

71

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		American Funds Insurance Series New World Fund Class 2 Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	607
	Total realized gains (losses) on investments		3,731
	Change in net unrealized appreciation or depreciation of investments		(22,384)
	Net gains (losses) from investments		(18,046)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(18,046)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		176,734
	Administration charges		—
	Contingent sales charges		(4)
	Contract terminations		(3,547)
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		(2,780)
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			170,403
Total increase (decrease)			152,357
Net assets at beginning of period			—
Net assets at end of period		$	152,357
(1) Commenced operations May 17, 2014. (2) Commenced operations November 10, 2014. See accompanying notes.

72

American Funds Insurance Series New World Fund Class 4 Division (2)		Balanced Class 1 Division				Bond & Mortgage Securities Class 1 Division
2014		2014		2013		2014		2013
$	346	$	178,893	$	204,517	$	3,310,500	$	4,196,792
	(632)		1,285,488		840,371		(697,163)		(797,542)
	(437)		1,105,685		4,978,572		4,749,114		(8,309,052)
	(723)		2,570,066		6,023,460		7,362,451		(4,909,802)
	—		—		—		—		—
	(723)		2,570,066		6,023,460		7,362,451		(4,909,802)
	52,693		1,615,675		2,864,886		27,844,763		39,895,677
	(4)		(13,308)		(13,980)		(453,229)		(529,368)
	—		(3,904)		(8,253)		(135,527)		(157,531)
	—		(3,825,292)		(5,024,275)		(23,038,674)		(25,488,711)
	—		(328,687)		(709,236)		(975,504)		(1,190,731)
	—		(621,682)		(625,647)		(4,266,564)		(4,632,691)
	—		(945,275)		(1,867,013)		(27,083,716)		(37,560,967)
	—		—		—		—		—
	52,689		(4,122,473)		(5,383,518)		(28,108,451)		(29,664,322)
	51,966		(1,552,407)		639,942		(20,746,000)		(34,574,124)
	—		36,506,670		35,866,728		201,686,143		236,260,267
$	51,966	$	34,954,263	$	36,506,670	$	180,940,143	$	201,686,143

73

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Calvert EAFE International Index Class F Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	116
	Total realized gains (losses) on investments		(1)
	Change in net unrealized appreciation or depreciation of investments		(284)
	Net gains (losses) from investments		(169)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(169)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		5,650
	Administration charges		(1)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			5,649
Total increase (decrease)			5,480
Net assets at beginning of period			—
Net assets at end of period		$	5,480
(1) Commenced operations November 10, 2014. (2) Commenced operations May 20, 2013. See accompanying notes.

74

Calvert Russell 2000 Small Cap Index Class F Division (1)		Calvert S&P MidCap 400 Index Class F Division (1)		Delaware Small Cap Value Service Class Division (2)
2014		2014		2014		2013
$	51	$	178	$	(6,946)	$	(942)
	2,374		2,812		50,553		129
	(2,142)		(2,823)		(24,718)		18,467
	283		167		18,889		17,654
	—		—		—		—
	283		167		18,889		17,654
	21,184		35,556		805,377		254,157
	(1)		(3)		(7)		—
	—		—		(415)		(11)
	—		—		(44,694)		(763)
	—		—		(686)		—
	—		—		(2,147)		(94)
	—		—		(292,798)		(8,878)
	—		—		—		—
	21,183		35,553		464,630		244,411
	21,466		35,720		483,519		262,065
	—		—		262,065		—
$	21,466	$	35,720	$	745,584	$	262,065

75

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Diversified Balanced Class 2 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(5,103,248)	$	(7,452,555)
	Total realized gains (losses) on investments		17,226,049		13,272,702
	Change in net unrealized appreciation or depreciation of investments		41,256,299		71,783,424
	Net gains (losses) from investments		53,379,100		77,603,571
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			53,379,100		77,603,571
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		204,475,928		271,823,146
	Administration charges		(8,816,823)		(6,857,010)
	Contingent sales charges		(321,133)		(225,064)
	Contract terminations		(29,923,921)		(15,802,606)
	Death benefit payments		(4,446,014)		(1,817,652)
	Flexible withdrawal option payments		(11,235,966)		(7,121,027)
	Transfers to other contracts		(48,479,767)		(42,819,384)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			101,252,304		197,180,403
Total increase (decrease)			154,631,404		274,783,974
Net assets at beginning of period			856,503,597		581,719,623
Net assets at end of period		$	1,011,135,001	$	856,503,597
(1) Commenced operations December 2, 2013. See accompanying notes.

76

Diversified Balanced Managed Volatility Class 2 Division (1)				Diversified Growth Class 2 Division				Diversified Growth Managed Volatility Class 2 Division (1)
2014		2013		2014		2013		2014		2013
$	(571,146)	$	(442)	$	(11,978,249)	$	(15,136,825)	$	(1,091,587)	$	(1,624)
	69,141		2		40,149,285		17,790,727		166,250		1,546
	2,805,987		7,207		129,051,299		248,211,765		5,573,416		46,239
	2,303,982		6,767		157,222,335		250,865,667		4,648,079		46,161
	—		—		—		—		—		—
	2,303,982		6,767		157,222,335		250,865,667		4,648,079		46,161
	85,991,855		870,582		707,153,835		835,748,039		151,901,026		3,935,060
	(432,397)		(461)		(24,520,132)		(15,808,785)		(842,149)		(2,022)
	(3,771)		—		(663,488)		(503,201)		(11,131)		—
	(364,095)		—		(61,042,314)		(35,377,246)		(1,020,805)		—
	(83,506)		—		(7,369,365)		(3,080,922)		—		—
	(426,709)		—		(23,673,228)		(10,994,748)		(597,960)		—
	(3,317,816)		(15)		(67,768,174)		(37,206,902)		(6,430,729)		(249)
	—		—		—		—		—		—
	81,363,561		870,106		522,117,134		732,776,235		142,998,252		3,932,789
	83,667,543		876,873		679,339,469		983,641,902		147,646,331		3,978,950
	876,873		—		2,202,298,019		1,218,656,117		3,978,950		—
$	84,544,416	$	876,873	$	2,881,637,488	$	2,202,298,019	$	151,625,281	$	3,978,950

77

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Diversified Income Class 2 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(1,183,394)	$	(1,028,146)
	Total realized gains (losses) on investments		2,826,894		930,170
	Change in net unrealized appreciation or depreciation of investments		5,516,168		5,186,608
	Net gains (losses) from investments		7,159,668		5,088,632
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			7,159,668		5,088,632
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		88,489,565		81,818,875
	Administration charges		(1,327,401)		(773,702)
	Contingent sales charges		(66,865)		(48,957)
	Contract terminations		(5,030,610)		(3,446,527)
	Death benefit payments		(307,790)		(24,240)
	Flexible withdrawal option payments		(1,893,484)		(835,855)
	Transfers to other contracts		(30,584,567)		(24,488,064)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			49,278,848		52,201,530
Total increase (decrease)			56,438,516		57,290,162
Net assets at beginning of period			112,080,682		54,790,520
Net assets at end of period		$	168,519,198	$	112,080,682
(1) Commenced operations November 10, 2014. See accompanying notes.

78

Diversified International Class 1 Division				Diversified International Class 2 Division (1)		Dreyfus Investment Portfolio Technology Growth Service Shares Division
2014		2013		2014		2014		2013
$	1,403,412	$	2,740,914	$	(10)	$	(74,402)	$	(53,308)
	2,123,040		(3,372,412)		—		601,919		167,341
	(10,768,603)		29,465,643		(233)		(337,264)		901,028
	(7,242,151)		28,834,145		(243)		190,253		1,015,061
	—		—		—		—		—
	(7,242,151)		28,834,145		(243)		190,253		1,015,061
	18,781,531		16,841,519		26,250		2,026,813		1,364,853
	(131,204)		(152,518)		(1)		(458)		(294)
	(78,131)		(108,428)		—		(3,956)		(3,814)
	(21,015,046)		(22,904,761)		—		(381,970)		(268,507)
	(934,159)		(724,731)		—		(35,378)		—
	(1,745,516)		(1,814,928)		—		(33,686)		(31,369)
	(16,641,375)		(19,304,059)		—		(1,326,074)		(770,783)
	—		—		—		—		—
	(21,763,900)		(28,167,906)		26,249		245,291		290,086
	(29,006,051)		666,239		26,006		435,544		1,305,147
	183,014,987		182,348,748		—		4,605,048		3,299,901
$	154,008,936	$	183,014,987	$	26,006	$	5,040,592	$	4,605,048

79

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		DWS Alternative Asset Allocation Class B Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	—
	Total realized gains (losses) on investments		—
	Change in net unrealized appreciation or depreciation of investments		—
	Net gains (losses) from investments		—
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			—
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		—
	Administration charges		—
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			—
Total increase (decrease)			—
Net assets at beginning of period			—
Net assets at end of period		$	—
(1) Commenced operations November 10, 2014. (2) Commenced operations May 20, 2013. See accompanying notes.

80

DWS Equity 500 Index Class B2 Division (1)		DWS Small Mid Cap Value Class B Division (2)				Equity Income Class 1 Division
2014		2014		2013		2014		2013
$	(38)	$	(4,637)	$	(578)	$	2,471,246	$	4,900,116
	—		6,238		(5)		21,436,943		5,435,449
	776		18,717		13,077		5,170,721		56,391,519
	738		20,318		12,494		29,078,910		66,727,084
	—		—		—		—		—
	738		20,318		12,494		29,078,910		66,727,084
	58,505		469,603		147,241		31,779,340		34,160,205
	(4)		—		—		(998,503)		(1,205,871)
	—		(145)		—		(262,012)		(259,977)
	—		(13,984)		—		(32,445,348)		(25,890,673)
	—		—		—		(1,887,061)		(1,497,481)
	—		(535)		—		(6,229,853)		(6,334,731)
	—		(6,630)		(13,314)		(53,668,427)		(55,096,787)
	—		—		—		—		—
	58,501		448,309		133,927		(63,711,864)		(56,125,315)
	59,239		468,627		146,421		(34,632,954)		10,601,769
	—		146,421		—		293,599,834		282,998,065
$	59,239	$	615,048	$	146,421	$	258,966,880	$	293,599,834

81

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Equity Income Class 2 Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(56)
	Total realized gains (losses) on investments		—
	Change in net unrealized appreciation or depreciation of investments		1,334
	Net gains (losses) from investments		1,278
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			1,278
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		79,875
	Administration charges		(8)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			79,867
Total increase (decrease)			81,145
Net assets at beginning of period			—
Net assets at end of period		$	81,145
(1) Commenced operations November 10, 2014. See accompanying notes.

82

Fidelity VIP Contrafund Service Class Division				Fidelity VIP Contrafund Service Class 2 Division				Fidelity VIP Equity-Income Service Class 2 Division
2014		2013		2014		2013		2014		2013
$	(236,480)	$	(175,397)	$	(417,871)	$	(323,190)	$	457,675	$	330,337
	3,370,695		1,496,741		2,687,837		535,422		872,820		2,460,377
	1,670,519		11,345,847		2,939,300		13,331,309		1,250,674		6,221,646
	4,804,734		12,667,191		5,209,266		13,543,541		2,581,169		9,012,360
	—		—		—		—		—		—
	4,804,734		12,667,191		5,209,266		13,543,541		2,581,169		9,012,360
	2,487,812		3,900,598		9,210,767		6,028,034		3,512,477		5,669,130
	(10,159)		(10,810)		(128,019)		(145,409)		(6,690)		(7,870)
	(7,420)		(14,910)		(48,448)		(49,561)		(17,558)		(26,544)
	(6,018,328)		(7,600,179)		(4,677,758)		(3,489,034)		(4,752,614)		(6,216,860)
	(210,974)		(194,550)		(554,403)		(65,325)		(210,028)		(169,676)
	(537,444)		(527,386)		(768,536)		(782,597)		(397,723)		(407,039)
	(3,444,101)		(4,327,259)		(8,941,072)		(8,374,845)		(2,873,880)		(5,098,409)
	—		—		—		—		—		—
	(7,740,614)		(8,774,496)		(5,907,469)		(6,878,737)		(4,746,016)		(6,257,268)
	(2,935,880)		3,892,695		(698,203)		6,664,804		(2,164,847)		2,755,092
	51,075,598		47,182,903		55,839,729		49,174,925		39,708,357		36,953,265
$	48,139,718	$	51,075,598	$	55,141,526	$	55,839,729	$	37,543,510	$	39,708,357

83

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Fidelity VIP Growth Service Class Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(194,960)	$	(169,084)
	Total realized gains (losses) on investments		1,066,857		457,357
	Change in net unrealized appreciation or depreciation of investments		627,231		4,285,177
	Net gains (losses) from investments		1,499,128		4,573,450
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			1,499,128		4,573,450
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		754,685		1,182,465
	Administration charges		(4,015)		(3,137)
	Contingent sales charges		(2,434)		(4,095)
	Contract terminations		(1,973,920)		(2,087,351)
	Death benefit payments		(269,572)		(123,544)
	Flexible withdrawal option payments		(152,175)		(146,602)
	Transfers to other contracts		(1,304,407)		(1,301,322)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(2,951,838)		(2,483,586)
Total increase (decrease)			(1,452,710)		2,089,864
Net assets at beginning of period			16,637,391		14,547,527
Net assets at end of period		$	15,184,681	$	16,637,391
(1) Commenced operations May 17, 2014. See accompanying notes.

84

Fidelity VIP Growth Service Class 2 Division				Fidelity VIP Mid Cap Service Class Division (1)		Fidelity VIP Mid Cap Service Class 2 Division
2014		2013		2014		2014		2013
$	(136,449)	$	(108,034)	$	(167)	$	(242,325)	$	(141,028)
	653,557		307,658		541		921,737		2,206,907
	258,174		1,986,013		803		71,824		1,625,887
	775,282		2,185,637		1,177		751,236		3,691,766
	—		—		—		—		—
	775,282		2,185,637		1,177		751,236		3,691,766
	3,479,922		1,182,478		70,000		5,110,604		3,437,254
	(1,314)		(1,216)		—		(1,449)		(1,425)
	(11,418)		(10,047)		—		(16,516)		(11,827)
	(1,102,425)		(707,295)		—		(1,594,709)		(832,639)
	(3,814)		(28,359)		—		(20,631)		(7,359)
	(36,420)		(27,687)		—		(102,057)		(85,440)
	(2,004,111)		(913,419)		—		(1,494,401)		(1,721,737)
	—		—		—		—		—
	320,420		(505,545)		70,000		1,880,841		776,827
	1,095,702		1,680,092		71,177		2,632,077		4,468,593
	8,345,883		6,665,791		—		15,323,458		10,854,865
$	9,441,585	$	8,345,883	$	71,177	$	17,955,535	$	15,323,458

85

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Fidelity VIP Overseas Service Class 2 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(191,950)	$	(162,246)
	Total realized gains (losses) on investments		(196,348)		(1,000,217)
	Change in net unrealized appreciation or depreciation of investments		(3,762,189)		12,489,974
	Net gains (losses) from investments		(4,150,487)		11,327,511
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			(4,150,487)		11,327,511
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		10,194,179		4,762,307
	Administration charges		(160,352)		(195,191)
	Contingent sales charges		(49,635)		(50,954)
	Contract terminations		(4,792,388)		(3,587,130)
	Death benefit payments		(181,974)		(185,766)
	Flexible withdrawal option payments		(845,535)		(841,138)
	Transfers to other contracts		(8,034,475)		(9,527,285)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(3,870,180)		(9,625,157)
Total increase (decrease)			(8,020,667)		1,702,354
Net assets at beginning of period			45,762,035		44,059,681
Net assets at end of period		$	37,741,368	$	45,762,035
(1) Commenced operations November 10, 2014. (2) Represented the operations of Franklin Small Cap Value Securities Class 2 Division May 17, 2014. See accompanying notes.

86

Franklin Global Real Estate VIP Class 2 Division (1)		Franklin Rising Dividends VIP Class 4 Division (1)		Franklin Small Cap Value VIP Class 2 Division (2)
2014		2014		2014		2013
$	(23)	$	(46)	$	(29,743)	$	(4,820)
	—		502		529,980		239,390
	69		595		(547,683)		515,433
	46		1,051		(47,446)		750,003
	—		—		—		—
	46		1,051		(47,446)		750,003
	41,465		70,331		1,346,893		2,014,923
	(1)		(2)		(183)		(226)
	—		—		(2,891)		(1,820)
	—		—		(328,142)		(128,714)
	—		—		(23,159)		—
	—		—		(8,950)		(4,916)
	—		—		(853,228)		(1,125,032)
	—		—		—		—
	41,464		70,329		130,340		754,215
	41,510		71,380		82,894		1,504,218
	—		—		3,494,447		1,990,229
$	41,510	$	71,380	$	3,577,341	$	3,494,447

87

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Goldman Sachs VIT Mid Cap Value Institutional Shares Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(94,635)	$	(108,492)
	Total realized gains (losses) on investments		3,778,415		1,786,824
	Change in net unrealized appreciation or depreciation of investments		(1,635,687)		2,866,707
	Net gains (losses) from investments		2,048,093		4,545,039
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			2,048,093		4,545,039
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		5,232,222		2,340,951
	Administration charges		(1,732)		(1,727)
	Contingent sales charges		(22,162)		(22,397)
	Contract terminations		(2,147,707)		(1,577,057)
	Death benefit payments		(60,524)		(55,533)
	Flexible withdrawal option payments		(122,263)		(121,185)
	Transfers to other contracts		(4,398,344)		(2,810,600)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(1,520,510)		(2,247,548)
Total increase (decrease)			527,583		2,297,491
Net assets at beginning of period			18,015,044		15,717,553
Net assets at end of period		$	18,542,627	$	18,015,044
(1) Commenced operations November 10, 2014. (2) Represented the operations of Goldman Sachs VIT Structured Small Cap Equity Service Class I Division until May 17, 2014. See accompanying notes.

88

Goldman Sachs VIT Mid Cap Value Service Shares Division (1)		Goldman Sachs VIT Small Cap Equity Insights Institutional Shares Division (2)				Goldman Sachs VIT Small Cap Equity Insights Service Shares Division (1)
2014		2014		2013		2014
$	64	$	(49,658)	$	(30,338)	$	21
	363		1,388,802		1,376,492		733
	7		(984,276)		545,201		(554)
	434		354,868		1,891,355		200
	—		—		—		—
	434		354,868		1,891,355		200
	17,029		1,391,718		1,098,323		4,978
	(1)		(220)		(151)		—
	—		(5,518)		(8,533)		—
	—		(532,771)		(600,708)		—
	—		(132,235)		(11,729)		—
	—		(46,428)		(44,986)		—
	—		(1,215,324)		(1,027,668)		—
	—		—		—		—
	17,028		(540,778)		(595,452)		4,978
	17,462		(185,910)		1,295,903		5,178
	—		7,163,725		5,867,822		—
$	17,462	$	6,977,815	$	7,163,725	$	5,178

89

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Government & High Quality Bond Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	3,598,886	$	4,471,980
	Total realized gains (losses) on investments		(203,842)		304,154
	Change in net unrealized appreciation or depreciation of investments		2,078,450		(9,029,643)
	Net gains (losses) from investments		5,473,494		(4,253,509)
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			5,473,494		(4,253,509)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		18,915,882		27,222,387
	Administration charges		(222,428)		(254,016)
	Contingent sales charges		(72,910)		(91,407)
	Contract terminations		(18,735,952)		(20,550,032)
	Death benefit payments		(1,334,777)		(1,338,626)
	Flexible withdrawal option payments		(3,288,604)		(3,905,842)
	Transfers to other contracts		(19,320,034)		(33,050,827)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(24,058,823)		(31,968,363)
Total increase (decrease)			(18,585,329)		(36,221,872)
Net assets at beginning of period			159,943,979		196,165,851
Net assets at end of period		$	141,358,650	$	159,943,979
(1) Commenced operations November 10, 2014. See accompanying notes.

90

Government & High Quality Bond Class 2 Division (1)		Guggenheim Floating Rate Strategies Series F Division (1)		Guggenheim Global Management Futures Strategy Division (1)
2014		2014		2014
$	(14)	$	(14)	$	(6)
	(12)		—		—
	18		(75)		337
	(8)		(89)		331
	—		—		—
	(8)		(89)		331
	19,934		12,997		21,000
	(2)		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	—		—		—
	19,932		12,997		21,000
	19,924		12,908		21,331
	—		—		—
$	19,924	$	12,908	$	21,331

91

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Guggenheim Long Short Equity Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(15)
	Total realized gains (losses) on investments		—
	Change in net unrealized appreciation or depreciation of investments		—
	Net gains (losses) from investments		(15)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(15)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		42,874
	Administration charges		—
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			42,874
Total increase (decrease)			42,859
Net assets at beginning of period			—
Net assets at end of period		$	42,859
(1) Commenced operations November 10, 2014. See accompanying notes.

92

Guggenheim Investments Multi-Hedge Strategies Division (1)		Guggenheim Macro Opportunities Series M Division (1)		International Emerging Markets Class 1 Division
2014		2014		2014		2013
$	(6)	$	(1)	$	(353,629)	$	773,585
	—		(6)		(1,258,213)		(786,418)
	115		—		(1,840,421)		(4,916,429)
	109		(7)		(3,452,263)		(4,929,262)
	—		—		—		—
	109		(7)		(3,452,263)		(4,929,262)
	7,761		7		12,499,886		16,654,206
	(1)		—		(9,693)		(11,881)
	—		—		(45,835)		(62,021)
	—		—		(8,523,548)		(9,994,501)
	—		—		(344,250)		(241,483)
	—		—		(478,249)		(505,137)
	—		—		(10,379,824)		(12,234,290)
	—		—		—		—
	7,760		7		(7,281,513)		(6,395,107)
	7,869		—		(10,733,776)		(11,324,369)
	—		—		74,988,427		86,312,796
$	7,869	$	—	$	64,254,651	$	74,988,427

93

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Invesco American Franchise Series I Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(59,847)	$	(39,680)
	Total realized gains (losses) on investments		290,027		114,082
	Change in net unrealized appreciation or depreciation of investments		76,495		1,455,481
	Net gains (losses) from investments		306,675		1,529,883
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			306,675		1,529,883
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		221,988		299,690
	Administration charges		(1,074)		(1,069)
	Contingent sales charges		(627)		(1,233)
	Contract terminations		(508,232)		(628,479)
	Death benefit payments		(42,280)		(55,717)
	Flexible withdrawal option payments		(51,427)		(49,643)
	Transfers to other contracts		(478,140)		(365,709)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(859,792)		(802,160)
Total increase (decrease)			(553,117)		727,723
Net assets at beginning of period			5,160,121		4,432,398
Net assets at end of period		$	4,607,004	$	5,160,121
(1) Commenced operations November 10, 2014. See accompanying notes.

94

Invesco Balanced-Risk Allocation Series II Division (1)		Invesco Core Equity Series I Division				Invesco Global Health Care Series I Division
2014		2014		2013		2014		2013
$	—	$	(105,817)	$	14,885	$	(135,465)	$	(55,346)
	—		1,614,298		1,222,944		1,529,755		803,614
	—		(7,629)		4,405,622		294,532		2,224,613
	—		1,500,852		5,643,451		1,688,822		2,972,881
	—		—		—		—		—
	—		1,500,852		5,643,451		1,688,822		2,972,881
	—		1,230,692		969,204		1,709,369		3,331,626
	—		(4,519)		(5,476)		(2,385)		(2,339)
	—		(3,310)		(6,088)		(1,358)		(2,482)
	—		(2,685,101)		(3,103,624)		(1,101,342)		(1,265,387)
	—		(245,338)		(163,999)		(48,851)		(55,203)
	—		(313,019)		(322,660)		(149,142)		(132,761)
	—		(1,606,399)		(1,651,257)		(1,656,924)		(1,914,008)
	—		—		—		—		—
	—		(3,626,994)		(4,283,900)		(1,250,633)		(40,554)
	—		(2,126,142)		1,359,551		438,189		2,932,327
	—		23,622,775		22,263,224		10,479,072		7,546,745
$	—	$	21,496,633	$	23,622,775	$	10,917,261	$	10,479,072

95

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Invesco Global Health Care Series II Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(46)
	Total realized gains (losses) on investments		237
	Change in net unrealized appreciation or depreciation of investments		(397)
	Net gains (losses) from investments		(206)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(206)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		71,609
	Administration charges		(3)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			71,606
Total increase (decrease)			71,400
Net assets at beginning of period			—
Net assets at end of period		$	71,400
(1) Commenced operations November 10, 2014. See accompanying notes.

96

Invesco International Growth Series I Division				Invesco International Growth Series II Division (1)		Invesco Mid Cap Growth Series I Division
2014		2013		2014		2014		2013
$	23,783	$	(964)	$	(24)	$	(21,473)	$	(14,072)
	337,819		163,042		(220)		375,481		(120,251)
	(512,905)		1,131,331		(76)		(250,833)		589,044
	(151,303)		1,293,409		(320)		103,175		454,721
	—		—		—		—		—
	(151,303)		1,293,409		(320)		103,175		454,721
	3,896,646		2,695,801		32,552		235,114		372,542
	(23,486)		(24,600)		(2)		(252)		(330)
	(7,339)		(4,706)		—		(239)		(837)
	(708,622)		(331,272)		—		(193,773)		(426,668)
	(48,573)		(19,991)		—		(12,755)		(2,398)
	(60,613)		(55,607)		—		(17,669)		(14,499)
	(1,324,604)		(1,698,586)		—		(231,937)		(299,762)
	—		—		—		—		—
	1,723,409		561,039		32,550		(221,511)		(371,952)
	1,572,106		1,854,448		32,230		(118,336)		82,769
	8,853,384		6,998,936		—		1,672,057		1,589,288
$	10,425,490	$	8,853,384	$	32,230	$	1,553,721	$	1,672,057

97

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Invesco Small Cap Equity Series I Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(137,584)	$	(130,668)
	Total realized gains (losses) on investments		1,642,728		982,539
	Change in net unrealized appreciation or depreciation of investments		(1,438,151)		2,058,859
	Net gains (losses) from investments		66,993		2,910,730
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			66,993		2,910,730
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		1,691,034		2,023,949
	Administration charges		(10,869)		(11,817)
	Contingent sales charges		(5,584)		(6,105)
	Contract terminations		(925,774)		(974,488)
	Death benefit payments		(60,353)		(20,190)
	Flexible withdrawal option payments		(91,960)		(93,222)
	Transfers to other contracts		(1,958,863)		(1,707,831)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(1,362,369)		(789,704)
Total increase (decrease)			(1,295,376)		2,121,026
Net assets at beginning of period			10,622,696		8,501,670
Net assets at end of period		$	9,327,320	$	10,622,696
See accompanying notes.

98

Invesco Technology Series I Division				Invesco Value Opportunities Series I Division				Janus Aspen Enterprise Service Shares Division
2014		2013		2014		2013		2014		2013
$	(47,568)	$	(42,645)	$	(7,116)	$	2,014	$	(118,714)	$	(87,817)
	540,002		654,013		357,914		335,007		1,502,811		1,023,234
	(177,191)		82,670		(76,879)		1,099,438		(428,379)		1,599,808
	315,243		694,038		273,919		1,436,459		955,718		2,535,225
	—		—		—		—		—		—
	315,243		694,038		273,919		1,436,459		955,718		2,535,225
	816,865		679,213		636,415		931,326		312,129		1,097,137
	(352)		(354)		(19,404)		(20,514)		(2,494)		(2,697)
	(318)		(838)		(2,892)		(4,315)		(1,169)		(3,029)
	(258,213)		(427,236)		(279,217)		(303,766)		(948,308)		(1,544,086)
	(3,379)		(2,639)		(20,338)		(7,806)		(21,439)		(51,440)
	(41,124)		(27,379)		(63,939)		(63,298)		(54,608)		(58,803)
	(481,811)		(839,748)		(842,922)		(884,264)		(667,269)		(1,125,140)
	—		—		—		—		—		—
	31,668		(618,981)		(592,297)		(352,637)		(1,383,158)		(1,688,058)
	346,911		75,057		(318,378)		1,083,822		(427,440)		847,167
	3,425,535		3,350,478		5,665,937		4,582,115		9,930,569		9,083,402
$	3,772,446	$	3,425,535	$	5,347,559	$	5,665,937	$	9,503,129	$	9,930,569

99

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Janus Aspen Flexible Bond Service Shares Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	316
	Total realized gains (losses) on investments		(260)
	Change in net unrealized appreciation or depreciation of investments		(77)
	Net gains (losses) from investments		(21)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(21)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		72,683
	Administration charges		(4)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			72,679
Total increase (decrease)			72,658
Net assets at beginning of period			—
Net assets at end of period		$	72,658
(1) Commenced operations November 10, 2014. See accompanying notes.

100

LargeCap Blend II Class 1 Division				LargeCap Blend II Class 2 Division (1)		LargeCap Growth Class 1 Division
2014		2013		2014		2014		2013
$	(248,147)	$	9,129	$	—	$	(398,873)	$	101,618
	2,749,207		(1,917,902)		—		4,042,057		3,119,062
	9,029,903		37,257,959		—		1,327,791		11,305,021
	11,530,963		35,349,186		—		4,970,975		14,525,701
	—		—		—		—		—
	11,530,963		35,349,186		—		4,970,975		14,525,701
	12,209,412		10,616,163		—		6,099,882		5,967,596
	(361,951)		(436,445)		—		(40,340)		(41,114)
	(108,967)		(114,829)		—		(20,968)		(21,715)
	(15,565,521)		(13,896,972)		—		(8,451,196)		(8,453,832)
	(746,766)		(515,086)		—		(526,612)		(351,611)
	(2,493,690)		(2,543,032)		—		(666,129)		(663,757)
	(21,474,149)		(25,390,625)		—		(3,418,017)		(3,452,788)
	—		—		—		—		—
	(28,541,632)		(32,280,826)		—		(7,023,380)		(7,017,221)
	(17,010,669)		3,068,360		—		(2,052,405)		7,508,480
	135,701,373		132,633,013		—		55,521,900		48,013,420
$	118,690,704	$	135,701,373	$	—	$	53,469,495	$	55,521,900

101

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		LargeCap Growth Class 2 Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(8)
	Total realized gains (losses) on investments		(46)
	Change in net unrealized appreciation or depreciation of investments		(73)
	Net gains (losses) from investments		(127)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(127)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		6,102
	Administration charges		(1)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			6,101
Total increase (decrease)			5,974
Net assets at beginning of period			—
Net assets at end of period		$	5,974
(1) Commenced operations November 10, 2014. See accompanying notes.

102

LargeCap Growth I Class 1 Division				LargeCap S&P 500 Index Class 1 Division				LargeCap Value Class 1 Division
2014		2013		2014		2013		2014		2013
$	(1,315,545)	$	(958,234)	$	(87,857)	$	(69,089)	$	881,390	$	1,185,391
	27,667,480		9,638,907		8,026,434		4,518,457		16,211,853		1,162,324
	(18,840,451)		22,384,228		3,249,988		20,455,869		(8,506,475)		20,967,543
	7,511,484		31,064,901		11,188,565		24,905,237		8,586,768		23,315,258
	—		—		—		—		—		—
	7,511,484		31,064,901		11,188,565		24,905,237		8,586,768		23,315,258
	7,206,865		8,351,296		12,948,268		12,730,081		7,323,348		8,208,233
	(34,261)		(36,084)		(78,673)		(84,151)		(80,393)		(87,281)
	(25,671)		(37,032)		(41,253)		(50,840)		(24,385)		(31,891)
	(10,905,256)		(12,445,589)		(11,230,074)		(10,199,220)		(10,408,631)		(10,078,969)
	(584,928)		(621,243)		(309,060)		(409,167)		(985,462)		(777,249)
	(1,036,617)		(975,229)		(1,338,106)		(1,291,000)		(1,314,265)		(1,257,940)
	(7,423,740)		(7,967,738)		(9,965,557)		(10,239,324)		(7,136,991)		(8,094,644)
	—		—		—		—		—		—
	(12,803,608)		(13,731,619)		(10,014,455)		(9,543,621)		(12,626,779)		(12,119,741)
	(5,292,124)		17,333,282		1,174,110		15,361,616		(4,040,011)		11,195,517
	114,517,790		97,184,508		101,189,377		85,827,761		95,525,368		84,329,851
$	109,225,666	$	114,517,790	$	102,363,487	$	101,189,377	$	91,485,357	$	95,525,368

103

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		MFS VIT International Value Service Class Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(53)
	Total realized gains (losses) on investments		(233)
	Change in net unrealized appreciation or depreciation of investments		(582)
	Net gains (losses) from investments		(868)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(868)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		61,956
	Administration charges		(4)
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			61,952
Total increase (decrease)			61,084
Net assets at beginning of period			—
Net assets at end of period		$	61,084
(1) Commenced operations November 10, 2014. (2) Commenced operations May 20, 2013. See accompanying notes.

104

MFS VIT New Discovery Service Class Division (2)				MFS VIT Utilities Service Class Division				MFS VIT Value Service Class Division
2014		2013		2014		2013		2014		2013
$	(12,342)	$	(2,063)	$	62,535	$	46,295	$	(7,029)	$	(11,220)
	153,886		2,968		980,596		443,292		425,175		255,574
	(212,134)		42,211		(93,732)		632,778		(7,797)		755,665
	(70,590)		43,116		949,399		1,122,365		410,349		1,000,019
	—		—		—		—		—		—
	(70,590)		43,116		949,399		1,122,365		410,349		1,000,019
	743,637		647,917		6,322,669		5,465,498		1,423,174		2,942,627
	(17)		—		(665)		(828)		(60)		(60)
	(516)		(38)		(5,339)		(7,742)		(4,289)		(2,882)
	(97,304)		(2,642)		(515,510)		(545,050)		(414,160)		(202,882)
	(306)		(6,731)		(96,829)		(8,606)		(29,188)		—
	(5,371)		(1,398)		(73,552)		(63,208)		(33,796)		(39,250)
	(223,902)		(82,048)		(3,029,538)		(2,655,613)		(619,446)		(1,241,696)
	—		—		—		—		—		—
	416,221		555,060		2,601,236		2,184,451		322,235		1,455,857
	345,631		598,176		3,550,635		3,306,816		732,584		2,455,876
	598,176		—		8,630,767		5,323,951		4,442,463		1,986,587
$	943,807	$	598,176	$	12,181,402	$	8,630,767	$	5,175,047	$	4,442,463

105

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		MidCap Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(3,295,573)	$	525,502
	Total realized gains (losses) on investments		68,652,401		41,359,521
	Change in net unrealized appreciation or depreciation of investments		(22,942,508)		67,513,872
	Net gains (losses) from investments		42,414,320		109,398,895
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			42,414,320		109,398,895
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		25,177,450		40,410,092
	Administration charges		(472,341)		(561,585)
	Contingent sales charges		(182,089)		(214,158)
	Contract terminations		(42,965,965)		(42,382,256)
	Death benefit payments		(2,723,449)		(1,790,109)
	Flexible withdrawal option payments		(5,144,788)		(5,028,529)
	Transfers to other contracts		(39,131,074)		(50,370,748)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(65,442,256)		(59,937,293)
Total increase (decrease)			(23,027,936)		49,461,602
Net assets at beginning of period			412,319,056		362,857,454
Net assets at end of period		$	389,291,120	$	412,319,056
(1) Commenced operations November 10, 2014. See accompanying notes.

106

Money Market Class 1 Division				Money Market Class 2 Division (1)		Neuberger Berman AMT Large Cap Value I Class Division
2014		2013		2014		2014		2013
$	(755,402)	$	(898,986)	$	(268)	$	(40,048)	$	(18,316)
	—		—		—		396,207		368,928
	—		—		—		65,815		1,032,904
	(755,402)		(898,986)		(268)		421,974		1,383,516
	—		—		—		—		—
	(755,402)		(898,986)		(268)		421,974		1,383,516
	57,849,237		87,369,403		294,359		1,006,877		849,016
	(57,648)		(66,155)		(42)		(1,049)		(1,103)
	(78,725)		(106,511)		—		(6,694)		(12,382)
	(19,811,398)		(25,396,285)		—		(646,360)		(871,697)
	(1,073,801)		(719,282)		—		(104,705)		—
	(1,140,987)		(1,449,537)		—		(42,014)		(43,473)
	(45,340,272)		(74,100,192)		(76,739)		(830,038)		(1,177,530)
	—		—		—		—		—
	(9,653,594)		(14,468,559)		217,578		(623,983)		(1,257,169)
	(10,408,996)		(15,367,545)		217,310		(202,009)		126,347
	65,639,356		81,006,901		—		5,443,204		5,316,857
$	55,230,360	$	65,639,356	$	217,310	$	5,241,195	$	5,443,204

107

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Neuberger Berman AMT Small-Cap Growth S Class Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(49,189)	$	(51,137)
	Total realized gains (losses) on investments		660,600		402,088
	Change in net unrealized appreciation or depreciation of investments		(569,384)		890,343
	Net gains (losses) from investments		42,027		1,241,294
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			42,027		1,241,294
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		542,837		705,642
	Administration charges		(4,701)		(5,068)
	Contingent sales charges		(3,977)		(4,753)
	Contract terminations		(383,969)		(334,604)
	Death benefit payments		—		(18,490)
	Flexible withdrawal option payments		(29,067)		(30,102)
	Transfers to other contracts		(823,527)		(844,167)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(702,404)		(531,542)
Total increase (decrease)			(660,377)		709,752
Net assets at beginning of period			3,748,069		3,038,317
Net assets at end of period		$	3,087,692	$	3,748,069
(1) Commenced operations May 20, 2013. See accompanying notes.

108

Neuberger Berman AMT Socially Responsive I Class Division				Oppenheimer Main Street Small Cap Service Shares Division (1)				PIMCO All Asset Administrative Class Division
2014		2013		2014		2013		2014		2013
$	(74,782)	$	(53,322)	$	(3,783)	$	(1,223)	$	201,425	$	167,752
	1,076,131		902,466		93,385		2,201		(10,798)		66,220
	(496,844)		1,328,000		(27,039)		22,922		(271,826)		(354,729)
	504,505		2,177,144		62,563		23,900		(81,199)		(120,757)
	—		—		—		—		—		—
	504,505		2,177,144		62,563		23,900		(81,199)		(120,757)
	1,111,514		1,068,352		426,860		398,977		1,666,391		4,199,092
	(26,153)		(31,812)		(237)		(42)		(117)		(261)
	(7,665)		(4,298)		(14)		(2)		(5,294)		(6,720)
	(740,098)		(302,557)		(11,585)		(968)		(511,190)		(473,104)
	(11,223)		(2,113)		—		—		(33,270)		(22,206)
	(119,842)		(111,868)		(6,693)		(1,404)		(50,959)		(56,050)
	(2,072,490)		(1,872,530)		(190,287)		(42,855)		(731,550)		(3,229,006)
	—		—		—		—		—		—
	(1,865,957)		(1,256,826)		218,044		353,706		334,011		411,745
	(1,361,452)		920,318		280,607		377,606		252,812		290,988
	7,438,725		6,518,407		377,606		—		4,993,775		4,702,787
$	6,077,273	$	7,438,725	$	658,213	$	377,606	$	5,246,587	$	4,993,775

109

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		PIMCO High Yield Administrative Class Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	604,355	$	647,631
	Total realized gains (losses) on investments		79,195		390,539
	Change in net unrealized appreciation or depreciation of investments		(431,109)		(644,617)
	Net gains (losses) from investments		252,441		393,553
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			252,441		393,553
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		4,945,263		11,224,100
	Administration charges		(1,212)		(1,224)
	Contingent sales charges		(11,530)		(26,863)
	Contract terminations		(1,113,259)		(1,891,159)
	Death benefit payments		(195,708)		(84,033)
	Flexible withdrawal option payments		(176,766)		(252,547)
	Transfers to other contracts		(1,888,293)		(9,755,214)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			1,558,495		(786,940)
Total increase (decrease)			1,810,936		(393,387)
Net assets at beginning of period			14,203,857		14,597,244
Net assets at end of period		$	16,014,793	$	14,203,857
(1) Commenced operations November 10, 2014. See accompanying notes.

110

PIMCO Total Return Administrative Class Division				Principal Capital Appreciation Class 1 Division				Principal Capital Appreciation Class 2 Division (1)
2014		2013		2014		2013		2014
$	224,780	$	296,660	$	285,693	$	753,057	$	(192)
	(18,070)		238,300		3,166,147		2,547,961		1
	629,305		(1,931,417)		(1,656,566)		407,023		1,298
	836,015		(1,396,457)		1,795,274		3,708,041		1,107
	—		—		—		—		—
	836,015		(1,396,457)		1,795,274		3,708,041		1,107
	6,646,375		8,711,032		3,393,463		3,889,231		191,275
	(3,119)		(3,216)		(1,388)		(1,174)		(10)
	(27,784)		(26,046)		(12,775)		(7,354)		—
	(2,682,587)		(1,833,583)		(1,236,387)		(526,401)		—
	(474,172)		(179,535)		(226,076)		(51,804)		—
	(286,408)		(379,217)		(90,028)		(65,598)		—
	(5,965,401)		(19,267,125)		(1,933,969)		(1,545,635)		—
	—		—		—		—		—
	(2,793,096)		(12,977,690)		(107,160)		1,691,265		191,265
	(1,957,081)		(14,374,147)		1,688,114		5,399,306		192,372
	31,116,303		45,490,450		16,817,350		11,418,044		—
$	29,159,222	$	31,116,303	$	18,505,464	$	16,817,350	$	192,372

111

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Principal LifeTime Strategic Income Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	244,144	$	338,978
	Total realized gains (losses) on investments		593,959		(13,705)
	Change in net unrealized appreciation or depreciation of investments		(133,715)		558,681
	Net gains (losses) from investments		704,388		883,954
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			704,388		883,954
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		2,410,807		3,459,823
	Administration charges		(64,619)		(78,752)
	Contingent sales charges		(10,780)		(13,103)
	Contract terminations		(1,451,603)		(1,234,356)
	Death benefit payments		(389,106)		(100,283)
	Flexible withdrawal option payments		(913,567)		(1,023,662)
	Transfers to other contracts		(2,952,774)		(3,142,319)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(3,371,642)		(2,132,652)
Total increase (decrease)			(2,667,254)		(1,248,698)
Net assets at beginning of period			24,405,646		25,654,344
Net assets at end of period		$	21,738,392	$	24,405,646
See accompanying notes.

112

Principal LifeTime 2010 Class 1 Division				Principal LifeTime 2020 Class 1 Division				Principal LifeTime 2030 Class 1 Division
2014		2013		2014		2013		2014		2013
$	266,924	$	382,630	$	1,323,135	$	1,237,782	$	502,417	$	376,827
	310,635		4,592		7,170,238		719,851		13,481,878		1,263,194
	607,302		2,957,518		(1,951,174)		21,489,175		(10,747,978)		9,357,480
	1,184,861		3,344,740		6,542,199		23,446,808		3,236,317		10,997,501
	—		—		—		—		—		—
	1,184,861		3,344,740		6,542,199		23,446,808		3,236,317		10,997,501
	3,316,071		5,181,775		16,927,771		14,023,102		4,769,941		4,810,585
	(133,752)		(153,508)		(802,934)		(966,812)		(383,742)		(361,719)
	(20,977)		(30,565)		(163,496)		(124,072)		(37,413)		(57,959)
	(2,927,568)		(2,315,306)		(17,496,600)		(9,667,525)		(4,312,357)		(4,660,680)
	(286,246)		(244,129)		(776,485)		(2,289,224)		(22,361)		(47,718)
	(1,205,714)		(1,205,317)		(3,685,547)		(3,583,733)		(661,839)		(529,267)
	(3,177,576)		(5,617,217)		(32,943,639)		(16,417,861)		(1,588,524)		(1,841,125)
	—		—		—		—		—		—
	(4,435,762)		(4,384,267)		(38,940,930)		(19,026,125)		(2,236,295)		(2,687,883)
	(3,250,901)		(1,039,527)		(32,398,731)		4,420,683		1,000,022		8,309,618
	36,993,565		38,033,092		176,093,682		171,672,999		72,233,052		63,923,434
$	33,742,664	$	36,993,565	$	143,694,951	$	176,093,682	$	73,233,074	$	72,233,052

113

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Principal LifeTime 2040 Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	79,815	$	23,937
	Total realized gains (losses) on investments		1,145,128		158,490
	Change in net unrealized appreciation or depreciation of investments		(574,127)		2,183,099
	Net gains (losses) from investments		650,816		2,365,526
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			650,816		2,365,526
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		3,041,037		1,818,346
	Administration charges		(5,266)		(4,916)
	Contingent sales charges		(12,946)		(25,356)
	Contract terminations		(1,310,814)		(1,852,516)
	Death benefit payments		(77,304)		(15,089)
	Flexible withdrawal option payments		(42,760)		(25,298)
	Transfers to other contracts		(791,531)		(909,776)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			800,416		(1,014,605)
Total increase (decrease)			1,451,232		1,350,921
Net assets at beginning of period			13,052,660		11,701,739
Net assets at end of period		$	14,503,892	$	13,052,660
(1) Commenced operations November 10, 2014. See accompanying notes.

114

Principal LifeTime 2050 Class 1 Division				Real Estate Securities Class 1 Division				Real Estate Securities Class 2 Division (1)
2014		2013		2014		2013		2014
$	63,295	$	13,405	$	172,806	$	(56,764)	$	(150)
	921,620		44,470		2,192,506		1,306,500		585
	(587,998)		1,416,208		19,163,492		894,250		1,926
	396,917		1,474,083		21,528,804		2,143,986		2,361
	—		—		—		—		—
	396,917		1,474,083		21,528,804		2,143,986		2,361
	1,389,803		1,186,897		15,004,806		17,187,195		178,553
	(4,424)		(4,479)		(22,235)		(24,215)		(9)
	(7,056)		(7,144)		(36,790)		(46,765)		—
	(790,793)		(509,652)		(9,031,964)		(10,101,489)		—
	(26,773)		(7,679)		(679,382)		(198,450)		—
	(15,293)		(9,374)		(798,019)		(834,721)		—
	(678,352)		(386,635)		(10,430,931)		(12,634,209)		—
	—		—		—		—		—
	(132,888)		261,934		(5,994,515)		(6,652,654)		178,544
	264,029		1,736,017		15,534,289		(4,508,668)		180,905
	8,353,861		6,617,844		72,397,893		76,906,561		—
$	8,617,890	$	8,353,861	$	87,932,182	$	72,397,893	$	180,905

115

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Rydex Commodities Strategy Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(15)
	Total realized gains (losses) on investments		(1)
	Change in net unrealized appreciation or depreciation of investments		(2,208)
	Net gains (losses) from investments		(2,224)
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			(2,224)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		13,597
	Administration charges		—
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			13,597
Total increase (decrease)			11,373
Net assets at beginning of period			—
Net assets at end of period		$	11,373
(1) Commenced operations November 10, 2014. See accompanying notes.

116

Rydex NASDAQ 100 Division (1)		SAM Balanced Portfolio Class 1 Division				SAM Balanced Portfolio Class 2 Division (1)
2014		2014		2013		2014
$	(101)	$	8,811,345	$	8,032,875	$	(368)
	—		137,083,803		24,225,288		1
	(517)		(108,056,045)		79,238,189		(1,444)
	(618)		37,839,103		111,496,352		(1,811)
	—		—		—		—
	(618)		37,839,103		111,496,352		(1,811)
	97,933		41,302,687		94,742,603		636,008
	—		(4,206,262)		(4,526,460)		(24)
	—		(345,560)		(447,751)		—
	—		(41,025,690)		(40,040,639)		—
	—		(4,186,225)		(1,724,592)		—
	—		(13,722,382)		(12,438,174)		—
	—		(103,810,768)		(68,516,534)		—
	—		—		—		—
	97,933		(125,994,200)		(32,951,547)		635,984
	97,315		(88,155,097)		78,544,805		634,173
	—		775,902,638		697,357,833		—
$	97,315	$	687,747,541	$	775,902,638	$	634,173

117

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		SAM Conservative Balanced Portfolio Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	2,634,239	$	2,565,452
	Total realized gains (losses) on investments		22,680,728		7,725,343
	Change in net unrealized appreciation or depreciation of investments		(17,320,821)		6,022,942
	Net gains (losses) from investments		7,994,146		16,313,737
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			7,994,146		16,313,737
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		22,652,606		33,135,119
	Administration charges		(641,303)		(741,932)
	Contingent sales charges		(90,288)		(89,749)
	Contract terminations		(11,942,225)		(9,767,863)
	Death benefit payments		(567,833)		(446,800)
	Flexible withdrawal option payments		(3,692,453)		(3,493,013)
	Transfers to other contracts		(23,007,231)		(19,507,849)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(17,288,727)		(912,087)
Total increase (decrease)			(9,294,581)		15,401,650
Net assets at beginning of period			177,876,103		162,474,453
Net assets at end of period		$	168,581,522	$	177,876,103
(1) Commenced operations November 10, 2014. See accompanying notes.

118

SAM Conservative Balanced Portfolio Class 2 Division (1)		SAM Conservative Growth Portfolio Class 1 Division				SAM Conservative Growth Portfolio Class 2 Division (1)
2014		2014		2013		2014
$	(139)	$	334,889	$	330,267	$	(280)
	(1)		14,937,808		2,286,381		—
	(1,863)		(9,886,503)		12,434,806		(687)
	(2,003)		5,386,194		15,051,454		(967)
	—		—		—		—
	(2,003)		5,386,194		15,051,454		(967)
	555,186		19,065,877		17,364,595		459,694
	(24)		(15,131)		(14,179)		(46)
	—		(50,966)		(35,397)		—
	—		(6,746,140)		(4,597,380)		—
	—		(241,358)		(172,539)		—
	—		(668,476)		(591,953)		—
	—		(4,614,487)		(5,271,329)		(28,316)
	—		—		—		—
	555,162		6,729,319		6,681,818		431,332
	553,159		12,115,513		21,733,272		430,365
	—		89,641,980		67,908,708		—
$	553,159	$	101,757,493	$	89,641,980	$	430,365

119

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		SAM Flexible Income Portfolio Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	3,993,760	$	3,861,706
	Total realized gains (losses) on investments		15,166,292		10,243,140
	Change in net unrealized appreciation or depreciation of investments		(11,000,369)		(2,827,391)
	Net gains (losses) from investments		8,159,683		11,277,455
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			8,159,683		11,277,455
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		30,551,547		43,692,410
	Administration charges		(443,286)		(551,867)
	Contingent sales charges		(97,156)		(129,129)
	Contract terminations		(14,457,804)		(13,279,976)
	Death benefit payments		(2,027,725)		(2,333,983)
	Flexible withdrawal option payments		(3,936,033)		(3,927,719)
	Transfers to other contracts		(18,150,196)		(34,826,796)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(8,560,653)		(11,357,060)
Total increase (decrease)			(400,970)		(79,605)
Net assets at beginning of period			185,636,430		185,716,035
Net assets at end of period		$	185,235,460	$	185,636,430
(1) Commenced operations November 10, 2014. See accompanying notes.

120

SAM Flexible Income Portfolio Class 2 Division (1)		SAM Strategic Growth Portfolio Class 1 Division				SAM Strategic Growth Portfolio Class 2 Division (1)
2014		2014		2013		2014
$	(318)	$	13,463	$	3,000	$	(473)
	(1)		12,334,413		1,108,086		(3)
	1,281		(8,132,619)		10,293,258		(1,140)
	962		4,215,257		11,404,344		(1,616)
	—		—		—		—
	962		4,215,257		11,404,344		(1,616)
	417,182		12,760,354		10,568,485		654,126
	(15)		(11,823)		(11,591)		(31)
	—		(33,416)		(28,639)		—
	—		(4,951,685)		(2,857,543)		—
	—		(133,544)		(158,066)		—
	—		(298,078)		(244,854)		—
	—		(3,229,092)		(3,205,257)		(28,352)
	—		—		—		—
	417,167		4,102,716		4,062,535		625,743
	418,129		8,317,973		15,466,879		624,127
	—		57,654,411		42,187,532		—
$	418,129	$	65,972,384	$	57,654,411	$	624,127

121

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		Short-Term Income Class 1 Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	327,505	$	777,802
	Total realized gains (losses) on investments		997,364		1,251,473
	Change in net unrealized appreciation or depreciation of investments		(890,451)		(2,420,046)
	Net gains (losses) from investments		434,418		(390,771)
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			434,418		(390,771)
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		31,531,632		46,084,233
	Administration charges		(550,115)		(640,566)
	Contingent sales charges		(135,202)		(178,858)
	Contract terminations		(16,659,536)		(18,677,383)
	Death benefit payments		(957,367)		(586,473)
	Flexible withdrawal option payments		(4,059,124)		(4,400,320)
	Transfers to other contracts		(31,209,003)		(34,180,790)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			(22,038,715)		(12,580,157)
Total increase (decrease)			(21,604,297)		(12,970,928)
Net assets at beginning of period			153,215,845		166,186,773
Net assets at end of period		$	131,611,548	$	153,215,845
(1) Commenced operations November 10, 2014. See accompanying notes.

122

Short-Term Income Class 2 Division (1)		SmallCap Blend Class 1 Division				SmallCap Growth II Class 1 Division
2014		2014		2013		2014		2013
$	(51)	$	(313,244)	$	(280,255)	$	(416,904)	$	(391,877)
	—		3,178,158		1,474,158		2,433,205		1,265,464
	(77)		(1,699,886)		10,375,393		(598,320)		10,184,722
	(128)		1,165,028		11,569,296		1,417,981		11,058,309
	—		—		—		—		—
	(128)		1,165,028		11,569,296		1,417,981		11,058,309
	93,765		4,816,866		4,475,144		3,244,020		5,461,131
	(8)		(5,073)		(5,204)		(3,370)		(3,848)
	—		(4,823)		(7,963)		(14,794)		(17,970)
	—		(3,694,446)		(3,877,297)		(3,647,669)		(4,131,424)
	—		(191,768)		(129,266)		(142,423)		(90,042)
	—		(374,693)		(361,106)		(236,831)		(231,931)
	—		(2,827,031)		(3,693,408)		(4,069,277)		(3,880,766)
	—		—		—		—		—
	93,757		(2,280,968)		(3,599,100)		(4,870,344)		(2,894,850)
	93,629		(1,115,940)		7,970,196		(3,452,363)		8,163,459
	—		34,644,304		26,674,108		33,879,548		25,716,089
$	93,629	$	33,528,364	$	34,644,304	$	30,427,185	$	33,879,548

123

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		SmallCap Growth II Class 2 Division (1)
		2014
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(6)
	Total realized gains (losses) on investments		360
	Change in net unrealized appreciation or depreciation of investments		(36)
	Net gains (losses) from investments		318
Payment from affiliate			—
Net increase (decrease) in net assets resulting from operations			318
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		6,511
	Administration charges		—
	Contingent sales charges		—
	Contract terminations		—
	Death benefit payments		—
	Flexible withdrawal option payments		—
	Transfers to other contracts		—
	Annuity payments		—
Increase (decrease) in net assets from policy related transactions			6,511
Total increase (decrease)			6,829
Net assets at beginning of period			—
Net assets at end of period		$	6,829
(1) Commenced operations November 10, 2014. See accompanying notes.

124

SmallCap Value I Class 1 Division				SmallCap Value I Class 2 Division (1)		T. Rowe Price Blue Chip Growth Portfolio II Division
2014		2013		2014		2014		2013
$	(508,531)	$	(263,614)	$	(10)	$	(180,328)	$	(134,416)
	12,960,989		3,523,697		541		994,904		742,074
	(8,377,893)		22,658,070		199		49,729		2,585,049
	4,074,565		25,918,153		730		864,305		3,192,707
	—		—		—		—		—
	4,074,565		25,918,153		730		864,305		3,192,707
	8,848,717		9,468,049		29,379		3,421,556		2,794,710
	(169,185)		(206,429)		(3)		(26,832)		(28,933)
	(55,608)		(65,405)		—		(6,035)		(6,008)
	(8,980,704)		(8,697,592)		—		(582,701)		(422,992)
	(425,837)		(342,688)		—		(60,017)		(12,308)
	(1,212,331)		(1,226,100)		—		(129,539)		(116,236)
	(12,539,761)		(16,777,647)		—		(2,324,302)		(2,222,607)
	—		—		—		—		—
	(14,534,709)		(17,847,812)		29,376		292,130		(14,374)
	(10,460,144)		8,070,341		30,106		1,156,435		3,178,333
	83,431,804		75,361,463		—		11,456,244		8,277,911
$	72,971,660	$	83,431,804	$	30,106	$	12,612,679	$	11,456,244

125

Principal Life Insurance Company
Separate Account B
Statements of Changes in Net Assets (continued)
Years ended December 31, 2014 and 2013, except as noted
		T. Rowe Price Health Sciences Portfolio II Division
		2014		2013
Increase (decrease) in net assets
Operations:
	Net investment income (loss)	$	(379,627)	$	(246,216)
	Total realized gains (losses) on investments		4,632,533		2,440,684
	Change in net unrealized appreciation or depreciation of investments		2,222,956		4,258,517
	Net gains (losses) from investments		6,475,862		6,452,985
Payment from affiliate			—		—
Net increase (decrease) in net assets resulting from operations			6,475,862		6,452,985
Policy related transactions:
	Purchase payments, less sales charges, per payment fees and applicable premium taxes		11,371,091		9,276,923
	Administration charges		(16,773)		(18,303)
	Contingent sales charges		(14,216)		(8,397)
	Contract terminations		(1,372,608)		(591,159)
	Death benefit payments		(134,766)		(12,537)
	Flexible withdrawal option payments		(193,971)		(135,669)
	Transfers to other contracts		(7,400,018)		(5,313,948)
	Annuity payments		—		—
Increase (decrease) in net assets from policy related transactions			2,238,739		3,196,910
Total increase (decrease)			8,714,601		9,649,895
Net assets at beginning of period			21,392,561		11,742,666
Net assets at end of period		$	30,107,162	$	21,392,561
(1) Commenced operations November 10, 2014. (2) Represented the operations of Templeton Growth Securities Class 2 Division until May 17, 2014. See accompanying notes.

126

Templeton Global Bond VIP Class 4 Division (1)		Templeton Growth VIP Class 2 Division (2)				Van Eck Global Hard Assets Class S Division
2014		2014		2013		2014		2013
$	(70)	$	5,052	$	18,375	$	(126,962)	$	(72,252)
	(1)		21,912		17,674		(449,127)		(417,271)
	(788)		(61,483)		236,298		(1,185,645)		1,189,309
	(859)		(34,519)		272,347		(1,761,734)		699,786
	—		—		—		—		—
	(859)		(34,519)		272,347		(1,761,734)		699,786
	68,416		52,531		41,431		3,163,554		2,468,486
	(3)		—		—		(574)		(812)
	—		(142)		(376)		(4,814)		(5,184)
	—		(76,572)		(228,519)		(612,679)		(650,656)
	—		(31,267)		—		(39,541)		(27,310)
	—		(12,689)		(17,353)		(79,453)		(62,584)
	—		(8,405)		(28,164)		(2,462,866)		(1,439,033)
	—		—		—		—		—
	68,413		(76,544)		(232,981)		(36,373)		282,907
	67,554		(111,063)		39,366		(1,798,107)		982,693
	—		1,071,086		1,031,720		8,885,166		7,902,473
$	67,554	$	960,023	$	1,071,086	$	7,087,059	$	8,885,166

127

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

1. Nature of Operations and Significant Accounting Policies

Principal Life Insurance Company Separate Account B (“Separate Account B”) is a segregated investment account of Principal Life Insurance Company (“Principal Life”) and is registered under the Investment Company Act of 1940 as a unit investment trust, with no stated limitations on the number of authorized units. As directed by eligible contractholders, each division of Separate Account B invests exclusively in shares representing interests in a corresponding investment option. As of December 31, 2014, contractholder investment options include the following open-end management investment companies:

Principal Variable Contracts Funds, Inc. – Class 1 (1)

Balanced Account

Bond & Mortgage Securities Account

Diversified International Account

Equity Income Account

Government & High Quality Bond Account

International Emerging Markets Account

LargeCap Blend Account II

LargeCap Growth Account

LargeCap Growth Account I

LargeCap S&P 500 Index Account

LargeCap Value Account

MidCap Account

Money Market Account

Principal Capital Appreciation Account

Principal LifeTime Strategic Income Account

Principal LifeTime 2010 Account

Principal LifeTime 2020 Account

Principal LifeTime 2030 Account

Principal LifeTime 2040 Account

Principal LifeTime 2050 Account

Real Estate Securities Account

Short-Term Income Account

SmallCap Blend Account

SmallCap Growth Account II

SmallCap Value Account I

Strategic Asset Management (“SAM”) Balanced Portfolio

Strategic Asset Management (“SAM”) Conservative Balanced Portfolio

Strategic Asset Management (“SAM”) Conservative Growth Portfolio

Strategic Asset Management (“SAM”) Flexible Income Portfolio

Strategic Asset Management (“SAM”) Strategic Growth Portfolio

128

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Principal Variable Contracts Funds, Inc. – Class 2 (1)

Diversified Balanced Account (2)

Diversified Balanced Managed Volatility Account (7)

Diversified Growth Account (2)

Diversified Growth Managed Volatility Account (7)

Diversified Income Account (5)

Diversified International Account (10)

Equity Income Account (10)

Government & High Quality Bond Account (10)

LargeCap Blend II Account (10)

LargeCap Growth Account (10)

Money Market Account (10)

Principal Capital Appreciation Account (10)

Real Estate Securities Account (10)

SmallCap Growth Account II (10)

SmallCap Value Account I (10)

Strategic Asset Management (“SAM”) Balanced Portfolio (10)

Strategic Asset Management (“SAM”) Conservative Balanced Portfolio (10)

Strategic Asset Management (“SAM”) Conservative Growth Portfolio (10)

Strategic Asset Management (“SAM”) Flexible Income Portfolio (10)

Strategic Asset Management (“SAM”) Strategic Growth Portfolio (10)

Short-Term Income Account (10)

AllianceBernstein Variable Product Series Fund, Inc.:

Small Cap Growth Portfolio – Class A

Small/Mid Cap Value Portfolio – Class A (6)

American Century Investments®:

VP Capital Appreciation – Class I (8)

VP Income & Growth Fund – Class I

VP Inflation Protection Fund – Class II

VP MidCap Value Fund – Class II (3)

VP Ultra® Fund – Class I

VP Ultra® Fund – Class II

VP Value Fund – Class II

American Funds Insurance Series:

Blue Chip Income and Growth Fund – Class 4 (10)

Global Small Capitalization Fund – Class 2 (9)

Global Small Capitalization Fund – Class 4 (10)

High-Income Bond – Class 2 (9)

Managed Risk Asset Allocation Fund – Class P2 (10)

Managed Risk Growth Fund – Class P2 (10)

Managed Risk International Fund – Class P2 (10)

New World Fund – Class 2 (9)

New World Fund – Class 4 (10)

Calvert Investment:

VP EAFE International Index – Class F (10)

VP Russell 2000 Small Cap Index Portfolio – Class F (10)

VP S&P MidCap 400 Index Portfolio – Class F (10)

Delaware Small Cap Value – Service Shares (6)

Dreyfus Investment Portfolios:

Technology Growth Portfolio – Service Shares

129

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

DWS Funds:

Alternative Asset Allocation VIP – Class B (10)

Equity 500 Index VIP – Class B2 (10)

Small Mid Cap Value VIP – Class B (6)

Fidelity® Variable Insurance Products Fund:

Contrafund® Portfolio – Service Class

Contrafund® Portfolio – Service Class 2

Equity-Income Portfolio – Service Class 2

Growth Portfolio – Service Class

Growth Portfolio – Service Class 2

Mid Cap Portfolio – Service Class (9)

Mid Cap Portfolio – Service Class 2

Overseas Portfolio – Service Class 2

Franklin Templeton Variable Insurance Products Trust:

Global Real Estate VIP Fund – Class 2 (10)

Rising Dividends VIP Fund – Class 4 (10)

Small Cap Value VIP Fund – Class 2 (11)

Templeton Global Bond VIP Fund – Class 4 (10)

Templeton Growth VIP Fund – Class 2 (12)

Goldman Sachs Variable Insurance Trust:

Mid Cap Value Fund – Institutional Shares

Mid Cap Value Fund – Service Shares (10)

Small Cap Equity Insights Fund – Institutional Shares (13)

Small Cap Equity Insights Fund – Service Shares (10)

Guggenheim Investments:

Floating Rate Strategies – Series F (10)

Global Managed Futures Strategy (10)

Long Short Equity Fund (10)

Macro Opportunities – Series M (10)

Multi-Hedge Strategies (10)

Invesco Variable Insurance Fund:

American Franchise – Series I Shares (4)

Balanced-Risk Allocation – Series II Shares (10)

Core Equity Fund – Series I Shares

Global Health Care Fund – Series I Shares

Global Health Care Fund – Series II Shares (10)

International Growth Fund – Series I Shares

International Growth Fund – Series II Shares (10)

MidCap Growth – Series I Shares (4)

Small Cap Equity Fund – Series I Shares

Technology Fund – Series I Shares

Value Opportunities – Series I Shares

Janus Aspen Series:

Janus Aspen Series Enterprise Portfolio – Service Shares

Janus Aspen Series Flexible Bond Portfolio – Service Shares (10)

MFS® Variable Insurance Trust:

International Value – Service Class (10)

New Discovery – Service Class (6)

Utilities Series – Service Class

Value Series – Service Class

130

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Neuberger Berman Advisors Management Trust:

Large Cap Value Portfolio – I Class Shares

Small-Cap Growth Portfolio – S Class Shares

Socially Responsive Portfolio – I Class Shares

Oppenheimer Main Street Small Cap Fund®/VA - Service Shares (6)

PIMCO Variable Insurance Trust:

All Asset Portfolio Administrative Class

High Yield Portfolio Administrative Class (2)

Total Return Portfolio Administrative Class

Rydex Funds:

Commodities Strategy (10)

NASDAQ 100 (10)

T. Rowe Price Equity Series, Inc.

Blue Chip Growth Portfolio – II

Health Sciences Portfolio – II

Van Eck VIP Trust:

Global Hard Assets Fund –Class S Shares

(1)    Organized by Principal Life Insurance Company.

(2) Commencement of operations, January 4, 2010.

(3) Commencement of operations, May 24, 2010.

(4) Commencement of operations, April 27, 2012.

(5) Commencement of operations, May 21, 2012.

(6) Commencement of operations, May 20, 2013.

(7) Commencement of operations, December 2, 2013

(8) Commencement of operations, April 24, 2014.

(9) Commencement of operations, May 17, 2014.

(10) Commencement of operations, November 10, 2014.

(11) Represented the operations of Franklin Small Cap Value VIP Class 2 Division until May 17, 2014.

(12) Represented the operations of Templeton Growth VIP Class 2 Division until May 17, 2014.

(13) Represented the operations of Goldman Sachs VIT Structured Small Cap Equity Service Class I Division until May 17, 2014.

Commencement of operations date is the date that the division became available to contractholders.

The assets of Separate Account B are owned by Principal Life. The assets of Separate Account B support the following variable annuity contracts of Principal Life and may not be used to satisfy the liabilities arising from any other business of Principal Life: Bankers Flexible Annuity; Pension Builder Plus; Pension Builder Plus-Rollover IRA; Personal Variable; Premier Variable; Principal Freedom Variable Annuity; Principal Freedom Variable Annuity 2; The Principal Variable Annuity; The Principal Variable Annuity with Purchase Payment Credit Rider; Principal Investment Plus Variable Annuity; Principal Investment Plus Variable Annuity with Premium Payment Credit Rider; Principal Lifetime Income Solutions; The Principal Pivot Series Variable Annuity and The Principal Pivot Series Variable Annuity with Liquidity Max Rider. Principal Life no longer accepts contributions for Bankers Flexible Annuity contracts, Pension Builder Plus contracts and Pension Builder Plus-Rollover IRA contracts. Contractholders are given the option of withdrawing their funds or transferring to another contract. Contributions to the Personal Variable contracts are no longer accepted from new customers, only from existing customers beginning January 1998.

131

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements and accompanying notes of Separate Account B in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed. These estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the financial statements and accompanying notes.

Investments

Investments are stated at the closing net asset value (“NAV”) per share on December 31, 2014. Net realized gains and losses on sales of investments are determined on the basis of the first-in, first-out (“FIFO”) method. Dividends are taken into income on an accrual basis as of the ex-dividend date. Investment transactions are accounted for on a trade date basis.

Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels:

• Level 1 – Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities.

• Level 2 – Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

• Level 3 – Fair values are based on significant unobservable inputs for the asset or liability.

All investments of the open-end management investment companies listed above represent investments in mutual funds for which a daily NAV is calculated and published. Therefore, all investments are reflected in Level 1 of the fair value hierarchy.

2. Expenses and Related Party Transactions

Principal Life is compensated for the following expenses:

Bankers Flexible Annuity contracts – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 0.48% of the asset value of each contract. An annual administration charge of $7 for each participant’s account is deducted as compensation for administrative expenses. This charge is collected by redeeming units of the separate account.

Pension Builder Plus and Pension Builder Plus – Rollover IRA contracts – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 1.50% (1.0% for a Rollover Individual Retirement Annuity) of the asset value of each contract. A contingent sales charge of up to 7.0% may be deducted from withdrawals made during the first ten years of a contract, except for withdrawals related to death or permanent disability. An annual administration charge will be deducted ranging from a minimum of $25 to a maximum of $275 depending upon a participant’s investment account values and the number of participants under the retirement plan and their participant investment account value.

Personal Variable contracts – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 0.64% of the asset value of each contract. The contract provides for recordkeeping and other services and allows the contractholders, in their sole discretion, a customized plan-level service package and charges. An annual administration charge of $34 (increases to $37 if the benefit plan reports are distributed directly to the homes of plan participants) for each participant’s account plus 0.35% of the annual average balance of investment account values that correlate to a plan participant will be deducted on a quarterly basis.

132

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Premier Variable contracts – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 0.42% of the asset value of each contract. The contract provides for recordkeeping and other services and allows the contractholders, in their sole discretion, a customized plan-level service package and charges. The amount varies by plan document and account balance of contract. Recordkeeping charges are also paid by the contractholder. The annual charge ranges from $2,250 to $25,316 plus $10 per participant. The amount varies by total plan participants. There were no contingent sales charges provided for in these contracts.

Principal Freedom Variable Annuity – Mortality and expenses risk assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 0.85% of the asset value of each contract. Principal Life reserves the right to increase this charge but guarantees that it will not exceed 1.25% per year. A surrender charge up to 6.0% may be deducted from the withdrawals made during the first six years of a contract, except for withdrawals related to death, annuitization, permanent disability, confinement in a health facility, or terminal illness. Principal Life reserves the right to charge an additional administrative fee of up to 0.15% of the asset value of each division. This fee is currently being waived.

Principal Freedom Variable Annuity 2 – Mortality and expenses risk assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 0.95% of the asset value of each contract. Principal Life reserves the right to increase this charge but guarantees that it will not exceed 1.25% per year. A surrender charge up to 3.0% may be deducted from the withdrawals made during the first three years of a contract, except for death, annuitization, permanent disability, confinement in a health facility, or terminal illness. Principal Life reserves the right to charge an additional administrative fee of up to 0.15% of the asset value of each division. This fee is currently being waived.

The Principal Variable Annuity – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 1.25% of the asset value of each contract. A surrender charge of up to 6.0% may be deducted from the withdrawals made during the first six years of a contract, except for death, annuitization, permanent disability, confinement in a health care facility, or terminal illness. Principal Life reserves the right to charge an additional administrative fee of up to 0.15% of the asset value of each division. Currently, Principal Life is charging an annual rate of 0.05% of the asset value of each contract. This charge is deducted from the daily unit value. The product also contains an optional purchase payment credit rider, which charges an annual rate of 0.6%. For electing participants, the rider is deducted from the daily unit value. For contracts with the purchase payment credit rider, the maximum surrender charge is 8.0% from withdrawals made during the first eight years.

The Principal Investment Plus Variable Annuity - Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 1.25% of the asset value of each contract. A surrender charge of up to 6.0% may be deducted from the withdrawals made during the first six years of a contract, except for death, annuitization, permanent disability, confinement in a health care facility, or terminal illness. An annual administration charge of the lesser of 2.0% of the accumulated value or $30 is deducted at the end of the contract year. Principal Life reserves the right to charge an additional administrative fee of up to 0.15% of the asset value of each division. Currently, Principal Life is charging an annual rate of 0.15% of the asset value of each contract. This charge is deducted from the daily unit value. The product also contains an optional premium payment credit rider, which charges an annual rate of 0.6%. For electing participants, the rider is deducted from the daily unit value. For contracts with the premium payment credit rider, the maximum surrender charge is 8.0% from withdrawals made during the first eight years.

133

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Principal Lifetime Income Solutions^SM Variable Annuity – Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 1.25% of the asset value of each contract. A surrender charge of up to 6% may be deducted from the withdrawals made during the first six years of a contract, except for death, annuitization, permanent disability, confinement in a health care facility or terminal illness. Principal Life reserves the right to charge an additional administration fee of up to 0.15% of the average daily net asset value of each division. Currently, Principal Life is charging an annual rate of 0.15% of the asset value of each contract. This charge is deducted from the daily unit value.

The Principal Pivot Series Variable Annuity - Mortality and expense risks assumed by Principal Life are compensated for by a daily charge resulting in a reduction of the unit value equivalent to an annual rate of 1.00% of the asset value of each contract. A surrender charge of up to 6.0% may be deducted from the withdrawals made during the first six years of a contract, except for death, annuitization, permanent disability, confinement in a health care facility, or terminal illness. An annual administration charge of the lesser of 2.0% of the accumulated value or $30 is deducted at the end of the contract year. Principal Life reserves the right to charge an additional administrative fee of up to 0.30% of the asset value of each division. Currently, Principal Life is charging an annual rate of 0.15% of the asset value of each contract. This charge is deducted from the daily unit value. The product also contains an optional liquidity max rider, which charges an annual rate of 0.25%. For electing participants, the rider is deducted from the daily unit value.

During the year ended December 31, 2014, management fees were paid indirectly to Principal Management Corporation (“Manager”) (wholly owned by Principal Financial Services, Inc.), an affiliate of Principal Life, in its capacity as advisor to Principal Variable Contracts Funds, Inc. Investment advisory and management fees are computed on an annual rate of 0.03% of each of the Principal LifeTime Accounts’ average daily net assets. The annual rate paid by the SAM Portfolios is based upon the aggregate average daily net assets (“aggregate net assets”) of the SAM Portfolios. The investment advisory and management fee schedule for the SAM Portfolios is 0.25% of aggregate net assets up to the first $1 billion and 0.20% of aggregate net assets over $1 billion.

The annual rates used in this calculation for each of the other Accounts are as shown in the following tables.

		Net Assets of Accounts (in millions)
	First $100		Next $100		Next $100		Next $100		Over $400
Balanced Account		0.60%		0.55%		0.50%		0.45%		0.40%
Bond & Mortgage Securities Account		0.50		0.45		0.40		0.35		0.30
Equity Income Account		0.60		0.55		0.50		0.45		0.40
LargeCap Growth Account I		0.80		0.75		0.70		0.65		0.60
MidCap Account		0.65		0.60		0.55		0.50		0.45
Money Market Account		0.50		0.45		0.40		0.35		0.30
Real Estate Securities Account		0.90		0.85		0.80		0.75		0.70
SmallCap Blend Account		0.85		0.80		0.75		0.70		0.65
SmallCap Growth Account II		1.00		0.95		0.90		0.85		0.80
SmallCap Value Account I		1.10		1.05		1.00		0.95		0.90
		Net Assets of Accounts (in millions)
	First $250		Next $250		Next $250		Next $250		Over $1,000
Diversified International Account		0.85%		0.80%		0.75%		0.70%		0.65%
International Emerging Markets Account		1.25		1.20		1.15		1.10		1.05
LargeCap Blend Account II		0.75		0.70		0.65		0.60		0.55
LargeCap Value Account		0.60		0.55		0.50		0.45		0.40

134

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	Net Assets of Accounts						Net Assets of Accounts
	(in millions)						(in millions)
	First $500	Next $500	Next $1 billion	Next $1 billion	Over $3 billion		First $500	Over $500
LargeCap Growth Account	0.68%	0.63%	0.61%	0.56%	0.51%	Principal Capital Appreciation Account	0.625%	0.500%

	Net Assets of Accounts			Net Assets of Accounts
	First $2 billion	Over $2 billion		First $200	Next $300	Over $500
Government & High Quality Bond Account	0.50%	0.45%	Short-Term Income Account	0.50%	0.45%	0.40%

	All Net Assets
Diversified Balanced Account	0.05%
Diversified Balanced Managed Volatility Account	0.05
Diversified Growth Account	0.05
Diversified Growth Managed Volatility Account	0.05
Diversified Income Account	0.05
LargeCap S&P 500 Index Account	0.25

The Manager has contractually agreed to limit the Separate Account’s management and investment advisory fees for certain of the Separate Accounts through the period ended April 30, 2015. The expense limit will reduce the Separate Account’s management and investment advisory fees by the following amounts:

LargeCap Blend Account II	0.018%
LargeCap Growth Account I	0.016
SmallCap Value Account I	0.020

In addition, the Manager has contractually agreed to limit the management and investment advisory fees for SmallCap Growth Account II. The expense limit will reduce the Separate Account’s management fees by 0.100% through the period ended April 30, 2015.

The Manager has contractually agreed to limit the expenses (excluding interest the Separate Accounts incur in connection with investments they make) for certain classes of shares of certain of the Separate Accounts. The reductions and reimbursements are in amounts that maintain total operating expenses at or below certain limits. The limits are expressed as a percentage of average daily net assets attributable to each class of shares on an annualized basis during the reporting period. The operating expense limits are as follows:

	From January 1, 2014 through December 31, 2014
	Class 1	Class 2	Expiration
Diversified Balanced Managed Volatility Account	N/A	0.31%	April 30, 2015
Diversified Growth Managed Volatility Account	N/A	0.31	April 30, 2015
SmallCap Value Account I	0.99%	1.24	April 30, 2015

135

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

The Manager has contractually agreed to limit Short-Term Income Account’s expenses by 0.01% through the period ended April 30, 2015.

In addition, the Manager has voluntarily agreed to limit the expenses (excluding interest the Separate Accounts incur in connection with investments they make and acquired fund fees and expenses) attributable to Class 2 shares of certain of the Separate Accounts. The reductions and reimbursements are in amounts that maintain total operating expenses at or below certain limits. The limits are expressed as a percentage of average daily net assets on an annualized basis during the reporting period. The expense limit may be terminated at any time. The operating expense limits are as follows:

	Expense Limit
Diversified Balanced Account	0.31%
Diversified Growth Account	0.31
Diversified Income Account	0.31

In addition, the Manager has voluntarily agreed to limit the Money Market Account’s expenses to the extent necessary to maintain a 0% yield. The voluntary expense limit may be terminated at any time.

3. Federal Income Taxes

The operations of the Separate Account are a part of the operations of Principal Life. Under current practice, no federal income taxes are allocated by Principal Life to the operations of the Separate Account.

136

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

4. Purchases and Sales of Investments

The aggregate cost of purchases and proceeds from sales of investments were as follows for the period ended December 31, 2014:

Division		Purchases		Sales
AllianceBernstein Small Cap Growth Class A Division:
Principal Investment Plus Variable Annuity	$	1,270,863	$	1,270,248
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		69,682		728,773
AllianceBernstein Small/Mid Cap Value Class A Division:
The Principal Variable Annuity	$	162,425	$	86,128
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
Principal Investment Plus Variable Annuity		1,508,785		492,740
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		328,182		97,691
American Century VP Capital Appreciation Class I Division:
Principal Investment Plus Variable Annuity	$	2,275,815	$	338,104
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		739,438		345,604
American Century VP Income & Growth Class I Division:
Principal Freedom Variable Annuity	$	232,194	$	546,131
Principal Freedom Variable Annuity 2		65,177		8,394
The Principal Variable Annuity		617,472		2,199,836
The Principal Variable Annuity with Purchase Payment Credit Rider		2,006		111,997
American Century VP Inflation Protection Class II Division:
Principal Investment Plus Variable Annuity	$	14,862,758	$	20,344,875
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,228,577		9,266,766
Principal Pivot Series Variable Annuity		—		12
Principal Pivot Series Variable Annuity with Liquidity Max Rider		15,811		1
American Century VP MidCap Value Class II Division:
The Principal Variable Annuity	$	696,993	$	542,910
The Principal Variable Annuity with Purchase Payment Credit Rider		414		78,386
Principal Investment Plus Variable Annuity		1,677,506		703,279
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		423,722		326,994
American Century VP Ultra Class I Division:
The Principal Variable Annuity	$	228,124	$	900,234
The Principal Variable Annuity with Purchase Payment Credit Rider		—		67,983
American Century VP Ultra Class II Division:
Principal Investment Plus Variable Annuity	$	6,446,778	$	14,258,429
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		656,197		6,767,372
American Century VP Value Class II Division:
The Principal Variable Annuity	$	1,820,641	$	4,860,333
The Principal Variable Annuity with Purchase Payment Credit Rider		16,567		548,537
Principal Pivot Series Variable Annuity		20,865		21
Principal Pivot Series Variable Annuity with Liquidity Max Rider		13,807		—

137

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division		Purchases		Sales
American Funds Insurance Series Blue Chip Income & Growth Fund Class 4 Division:
Principal Pivot Series Variable Annuity	$	75,757	$	40
Principal Pivot Series Variable Annuity with Liquidity Max Rider		28,930		—
American Funds Insurance Series Global Small Capitalization Fund Class 2 Division:
The Principal Variable Annuity	$	113,973	$	17,890
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
American Funds Insurance Series Global Small Capitalization Fund Class 4 Division:
Principal Pivot Series Variable Annuity	$	7,842	$	2
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
American Funds Insurance Series High-Income Bond Class 2 Division:
The Principal Variable Annuity	$	329,483	$	100,972
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
American Funds Insurance Series Managed Risk Asset Allocation Fund Class P2 Division:
Principal Pivot Series Variable Annuity	$	—	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
American Funds Insurance Series Managed Risk Growth Fund Class P2 Division:
Principal Pivot Series Variable Annuity	$	30,020	$	8
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
American Funds Insurance Series Managed Risk International Fund Class P2 Division:
Principal Pivot Series Variable Annuity	$	18,000	$	4
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
American Funds Insurance Series New World Fund Class 2 Division:
The Principal Variable Annuity	$	183,238	$	7,267
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
American Funds Insurance Series New World Fund Class 4 Division:
Principal Pivot Series Variable Annuity	$	53,068	$	33
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Balanced Class 1 Division:
Personal Variable	$	47,008	$	106,629
Premier Variable		496,397		572,645
The Principal Variable Annuity		1,679,305		5,249,487
The Principal Variable Annuity with Purchase Payment Credit Rider		8,235		245,763

138

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Bond & Mortgage Securities Class 1 Division:
Personal Variable	$	33,250	$	78,893
Premier Variable		474,811		570,857
Principal Freedom Variable Annuity		915,227		1,120,187
Principal Freedom Variable Annuity 2		101,366		135,786
The Principal Variable Annuity		9,885,056		16,719,750
The Principal Variable Annuity with Purchase Payment Credit Rider		118,972		1,753,118
Principal Investment Plus Variable Annuity		20,171,250		26,041,940
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		2,097,200		12,174,551
Calvert EAFE International Index Class F Division:
Principal Pivot Series Variable Annuity	$	—	$	6
Principal Pivot Series Variable Annuity with Liquidity Max Rider		5,770		—
Calvert Russell 2000 Small Cap Index Class F Division:
Principal Pivot Series Variable Annuity	$	13,931	$	21
Principal Pivot Series Variable Annuity with Liquidity Max Rider		9,699		—
Calvert S&P MidCap 400 Index Class F Division:
Principal Pivot Series Variable Annuity	$	27,117	$	34
Principal Pivot Series Variable Annuity with Liquidity Max Rider		11,460		—
Delaware Small Cap Value Service Class Division:
The Principal Variable Annuity	$	42,601	$	20,224
The Principal Variable Annuity with Purchase Payment Credit Rider		2,080		5,290
Principal Investment Plus Variable Annuity		736,646		316,887
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		68,980		6,991
Diversified Balanced Class 2 Division:
Principal Investment Plus Variable Annuity	$	197,512,885	$	98,411,076
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		23,739,767		15,907,946
Principal Lifetime Income Solutions		1,753,763		2,438,750
Principal Pivot Series Variable Annuity		—		—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Diversified Balanced Managed Volatility Class 2 Division:
Principal Investment Plus Variable Annuity	$	66,311,252	$	3,961,584
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		4,577,937		589,516
Principal Lifetime Income Solutions		15,103,105		650,980
Principal Pivot Series Variable Annuity		7,500		6
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Diversified Growth Class 2 Division:
Principal Investment Plus Variable Annuity	$	707,121,970	$	198,924,613
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		55,688,974		19,646,969
Principal Lifetime Income Solutions		2,133,735		3,282,534
Principal Pivot Series Variable Annuity		—		—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—

139

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Diversified Growth Managed Volatility Class 2 Division:
Principal Investment Plus Variable Annuity	$	120,381,234	$	7,188,616
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		12,003,230		2,101,268
Principal Lifetime Income Solutions		19,533,726		719,680
Principal Pivot Series Variable Annuity		26,710		19
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Diversified Income Class 2 Division:
Principal Investment Plus Variable Annuity	$	84,853,497	$	38,114,226
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		2,951,292		2,119,243
Principal Lifetime Income Solutions		2,293,190		944,606
Diversified International Class 1 Division:
Personal Variable	$	44,327	$	100,109
Premier Variable		308,851		687,121
Principal Freedom Variable Annuity		124,636		388,745
Principal Freedom Variable Annuity 2		99,434		153,069
The Principal Variable Annuity		9,175,794		22,600,307
The Principal Variable Annuity with Purchase Payment Credit Rider		138,648		1,788,860
Principal Investment Plus Variable Annuity		11,250,647		10,617,597
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,330,873		6,497,891
Diversified International Class 2 Division:
Principal Pivot Series Variable Annuity	$	26,250	$	11
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Dreyfus Investment Portfolio Technology Growth Service Shares Division:
Principal Investment Plus Variable Annuity		1,777,004		1,410,569
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		512,424		445,355
DWS Alternative Asset Allocation Class B Division:
Principal Pivot Series Variable Annuity	$	—	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
DWS Equity 500 Index Class B2 Division:
Principal Pivot Series Variable Annuity		17,239		42
Principal Pivot Series Variable Annuity with Liquidity Max Rider		41,266		—
DWS Small Mid Cap Value Class B Division:
The Principal Variable Annuity	$	26,173	$	543
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
Principal Investment Plus Variable Annuity		372,810		16,766
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		74,344		10,427
Principal Pivot Series Variable Annuity		—		—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—

140

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Equity Income Class 1 Division:
Premier Variable	$	76,706	$	94,357
The Principal Variable Annuity		5,369,571		13,953,835
The Principal Variable Annuity with Purchase Payment Credit Rider		57,238		883,313
Principal Investment Plus Variable Annuity		30,216,547		58,670,999
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		2,502,573		25,860,748
Equity Income Class 2 Division:
Principal Pivot Series Variable Annuity	$	58,854	$	64
Principal Pivot Series Variable Annuity with Liquidity Max Rider		21,021		—
Fidelity VIP Contrafund Service Class Division:
The Principal Variable Annuity	$	3,789,588	$	10,386,815
The Principal Variable Annuity with Purchase Payment Credit Rider		45,244		481,315
Fidelity VIP Contrafund Service Class 2 Division:
Principal Investment Plus Variable Annuity	$	9,743,570	$	11,420,853
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		827,829		4,508,993
Principal Pivot Series Variable Annuity		102,813		89
Principal Pivot Series Variable Annuity with Liquidity Max Rider		26,953		—
Fidelity VIP Equity-Income Service Class 2 Division:
The Principal Variable Annuity	$	2,222,962	$	5,388,104
The Principal Variable Annuity with Purchase Payment Credit Rider		65,026		430,858
Principal Investment Plus Variable Annuity		2,348,419		1,976,568
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		394,753		989,033
Fidelity VIP Growth Service Class Division:
The Principal Variable Annuity	$	768,152	$	3,812,420
The Principal Variable Annuity with Purchase Payment Credit Rider		473		103,003
Fidelity VIP Growth Service Class 2 Division:
Principal Investment Plus Variable Annuity	$	2,818,222	$	1,954,680
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		661,701		1,341,272
Fidelity VIP Mid Cap Service Class Division:
Principal Freedom Variable Annuity 2	$	70,656	$	280
Fidelity VIP Mid Cap Service Class 2 Division:
Principal Investment Plus Variable Annuity	$	4,835,260	$	2,693,060
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		506,556		782,263
Principal Pivot Series Variable Annuity		143,067		141
Principal Pivot Series Variable Annuity with Liquidity Max Rider		13,754		—
Fidelity VIP Overseas Service Class 2 Division:
Principal Investment Plus Variable Annuity	$	9,498,533	$	9,358,342
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,127,821		5,323,653
Principal Pivot Series Variable Annuity		1,511		5
Principal Pivot Series Variable Annuity with Liquidity Max Rider		2,875		—

141

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Franklin Global Real Estate VIP Class 2 Division:
Principal Pivot Series Variable Annuity	$	15,979	$	25
Principal Pivot Series Variable Annuity with Liquidity Max Rider		25,487		—
Franklin Rising Dividends VIP Class 4 Division:
Principal Pivot Series Variable Annuity	$	10,073	$	48
Principal Pivot Series Variable Annuity with Liquidity Max Rider		60,257		—
Franklin Small Cap Value VIP Class 2 Division:
The Principal Variable Annuity	$	202,766	$	152,266
The Principal Variable Annuity with Purchase Payment Credit Rider		7,215		2,029
Principal Investment Plus Variable Annuity		1,225,157		888,946
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		194,397		224,700
Goldman Sachs VIT Mid Cap Value Institutional Shares Division:
The Principal Variable Annuity	$	161,346	$	39,349
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
Principal Investment Plus Variable Annuity		7,570,010		3,986,821
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		712,326		3,003,119
Goldman Sachs VIT Mid Cap Value Service Shares Division:
Principal Pivot Series Variable Annuity	$	10,713	$	10
Principal Pivot Series Variable Annuity with Liquidity Max Rider		7,991		—
Goldman Sachs VIT Small Cap Equity Insights Institutional Shares Division:
The Principal Variable Annuity	$	16,893	$	6,298
The Principal Variable Annuity with Purchase Payment Credit Rider		—		—
Principal Investment Plus Variable Annuity		2,240,586		847,538
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		170,461		1,180,713
Goldman Sachs VIT Small Cap Equity Insights Service Shares Division:
Principal Pivot Series Variable Annuity	$	5,737	$	5
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Government & High Quality Bond Class 1 Division:
Pension Builder Plus	$	4,370	$	41,332
Pension Builder Plus – Rollover IRA		1,226		465
Personal Variable		23,875		28,700
Premier Variable		501,019		582,780
Principal Freedom Variable Annuity		528,505		853,757
Principal Freedom Variable Annuity 2		68,765		119,331
The Principal Variable Annuity		9,777,947		19,826,360
The Principal Variable Annuity with Purchase Payment Credit Rider		111,643		1,373,475
Principal Investment Plus Variable Annuity		11,790,040		15,717,457
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,741,332		6,465,001
Government & High Quality Bond Class 2 Division:
Principal Pivot Series Variable Annuity	$	11,875	$	15
Principal Pivot Series Variable Annuity with Liquidity Max Rider		8,058		—

142

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Guggenheim Floating Rate Strategies Series F Division:
Principal Pivot Series Variable Annuity	$	2,259	$	14
Principal Pivot Series Variable Annuity with Liquidity Max Rider		10,738		—
Guggenheim Investments Global Managed Futures Strategy Division:
Principal Pivot Series Variable Annuity	$	21,000	$	7
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Guggenheim Investments Long Short Equity Division:
Principal Pivot Series Variable Annuity	$	37,400	$	16
Principal Pivot Series Variable Annuity with Liquidity Max Rider		5,474		—
Guggenheim Investments Multi-Hedge Strategies Division:
Principal Pivot Series Variable Annuity	$	4,138	$	7
Principal Pivot Series Variable Annuity with Liquidity Max Rider		3,623		—
Guggenheim Macro Opportunities Series M Division:
Principal Pivot Series Variable Annuity	$	7	$	1
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
International Emerging Markets Class 1 Division:
Premier Variable	$	60,755	$	69,549
The Principal Variable Annuity		3,933,268		8,468,927
The Principal Variable Annuity with Purchase Payment Credit Rider		114,042		1,036,229
Principal Investment Plus Variable Annuity		8,076,898		7,304,769
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		960,224		3,900,856
Invesco American Franchise Series I Division:
The Principal Variable Annuity	$	223,774	$	1,126,762
The Principal Variable Annuity with Purchase Payment Credit Rider		194		16,844
Invesco Balanced-Risk Allocation Series II Division:
Principal Pivot Series Variable Annuity	$	—	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Invesco Core Equity Series I Division:
The Principal Variable Annuity	$	1,523,537	$	5,138,470
The Principal Variable Annuity with Purchase Payment Credit Rider		1,510		13,926
Invesco Global Health Care Series I Division:
The Principal Variable Annuity	$	2,077,496	$	2,922,919
The Principal Variable Annuity with Purchase Payment Credit Rider		22,932		172,549
Invesco Global Health Care Series II Division:
Principal Pivot Series Variable Annuity	$	67,181	$	49
Principal Pivot Series Variable Annuity with Liquidity Max Rider		4,428		—
Invesco International Growth Series I Division:
Principal Investment Plus Variable Annuity	$	3,566,718	$	2,031,915
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		495,154		282,765

143

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Invesco International Growth Series II Division:
Principal Pivot Series Variable Annuity	$	26,846	$	26
Principal Pivot Series Variable Annuity with Liquidity Max Rider		5,707		—
Invesco Mid Cap Growth Series I Division:
The Principal Variable Annuity	$	233,609	$	400,809
The Principal Variable Annuity with Purchase Payment Credit Rider		1,506		77,289
Invesco Small Cap Equity Series I Division:
The Principal Variable Annuity	$	508,263	$	1,403,777
The Principal Variable Annuity with Purchase Payment Credit Rider		90		40,505
Principal Investment Plus Variable Annuity		1,635,576		1,208,301
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		378,235		538,405
Invesco Technology Series I Division:
The Principal Variable Annuity	$	1,123,666	$	746,655
The Principal Variable Annuity with Purchase Payment Credit Rider		3,318		86,111
Invesco Value Opportunities Series I Division:
Principal Investment Plus Variable Annuity	$	613,748	$	881,012
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		97,859		430,008
Janus Aspen Enterprise Service Shares Division:
The Principal Variable Annuity	$	952,285	$	1,771,121
The Principal Variable Annuity with Purchase Payment Credit Rider		25,380		46,051
Janus Aspen Flexible Bond Service Shares Division:
Principal Pivot Series Variable Annuity	$	24,325	$	72
Principal Pivot Series Variable Annuity with Liquidity Max Rider		48,742		—
LargeCap Blend II Class 1 Division:
The Principal Variable Annuity	$	2,336,710	$	9,256,771
The Principal Variable Annuity with Purchase Payment Credit Rider		42,776		1,201,820
Principal Investment Plus Variable Annuity		10,613,103		20,605,846
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		770,320		11,488,252
Principal Pivot Series Variable Annuity		—		—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
LargeCap Blend II Class 2 Division:
Principal Pivot Series Variable Annuity	$	—	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
LargeCap Growth Class 1 Division:
Personal Variable	$	74,885	$	148,145
Premier Variable		2,931,934		3,262,986
The Principal Variable Annuity		1,173,286		5,898,958
The Principal Variable Annuity with Purchase Payment Credit Rider		12,237		156,830
Principal Investment Plus Variable Annuity		1,892,768		3,102,209
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		307,436		1,245,670

144

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
LargeCap Growth Class 2 Division:
Principal Pivot Series Variable Annuity	$	—	$	10
Principal Pivot Series Variable Annuity with Liquidity Max Rider		6,102		—
LargeCap Growth I Class 1 Division:
Premier Variable	$	129,801	$	90,042
Principal Freedom Variable Annuity		371,018		323,697
Principal Freedom Variable Annuity 2		89,774		11,763
The Principal Variable Annuity		19,860,613		16,348,352
The Principal Variable Annuity with Purchase Payment Credit Rider		145,626		522,745
Principal Investment Plus Variable Annuity		6,373,798		2,399,719
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		753,772		1,760,490
LargeCap S&P 500 Index Class 1 Division:
Premier Variable	$	159,210	$	191,464
Principal Freedom Variable Annuity		524,936		1,099,258
Principal Freedom Variable Annuity 2		217,928		260,698
The Principal Variable Annuity		4,654,271		11,240,769
The Principal Variable Annuity with Purchase Payment Credit Rider		11,687		429,300
Principal Investment Plus Variable Annuity		9,671,055		7,393,877
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,202,572		3,688,766
LargeCap Value Class 1 Division:
Bankers Flexible Annuity	$	135,282	$	228,421
Pension Builder Plus		333,814		169,669
Pension Builder Plus – Rollover IRA		34,477		109,390
Personal Variable		95,259		126,897
Premier Variable		1,347,207		1,205,461
Principal Freedom Variable Annuity		718,161		777,841
Principal Freedom Variable Annuity 2		56,442		29,766
The Principal Variable Annuity		11,126,873		11,378,053
The Principal Variable Annuity with Purchase Payment Credit Rider		69,772		381,777
Principal Investment Plus Variable Annuity		6,955,077		4,295,144
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		874,213		2,412,499
MFS VIT International Value Service Class Division:
Principal Pivot Series Variable Annuity	$	58,426	$	57
Principal Pivot Series Variable Annuity with Liquidity Max Rider		3,531		—
MFS VIT New Discovery Service Class Division:
The Principal Variable Annuity	$	266,709	$	196,344
The Principal Variable Annuity with Purchase Payment Credit Rider		8,002		5,077
Principal Investment Plus Variable Annuity		615,562		98,836
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		52,321		39,500
MFS VIT Utilities Service Class Division:
Principal Investment Plus Variable Annuity	$	5,539,968	$	2,931,293
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,283,445		949,537
Principal Pivot Series Variable Annuity		112,042		112
Principal Pivot Series Variable Annuity with Liquidity Max Rider		37,248		—

145

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division		Purchases		Sales
MFS VIT Value Service Class Division:
Principal Investment Plus Variable Annuity	$	1,505,782	$	1,038,560
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		135,396		134,557
MidCap Class 1 Division:
Personal Variable	$	177,032	$	242,266
Premier Variable		997,664		1,239,998
Principal Freedom Variable Annuity		1,049,952		1,371,165
Principal Freedom Variable Annuity 2		179,555		202,431
The Principal Variable Annuity		28,796,539		43,504,663
The Principal Variable Annuity with Purchase Payment Credit Rider		546,907		2,354,348
Principal Investment Plus Variable Annuity		28,405,096		32,744,324
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,780,263		14,256,289
Money Market Class 1 Division:
Pension Builder Plus	$	—	$	2,864
Pension Builder Plus – Rollover IRA		—		1
Personal Variable		80,196		65,781
Premier Variable		4,685,048		3,806,702
Principal Freedom Variable Annuity		48,089		618,084
Principal Freedom Variable Annuity 2		3,015		46,692
The Principal Variable Annuity		10,220,782		15,117,489
The Principal Variable Annuity with Purchase Payment Credit Rider		(36,501)		673,928
Principal Investment Plus Variable Annuity		36,270,848		39,704,072
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		6,264,900		8,034,506
Principal Lifetime Income Solutions		312,877		188,133
Money Market Class 2 Division:
Principal Pivot Series Variable Annuity	$	294,359	$	77,049
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Neuberger Berman AMT Large Cap Value I Class Division:
Principal Investment Plus Variable Annuity	$	985,979	$	995,846
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		59,492		713,655
Neuberger Berman AMT Small-Cap Growth S Class Division:
Principal Investment Plus Variable Annuity	$	737,745	$	769,730
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		85,449		524,700
Neuberger Berman AMT Socially Responsive I Class Division:
Principal Investment Plus Variable Annuity	$	1,009,523	$	2,400,046
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		124,779		674,995
Oppenheimer Main Street Small Cap Service Shares Division:
The Principal Variable Annuity	$	521,936	$	210,962
The Principal Variable Annuity with Purchase Payment Credit Rider		2,828		5,857
PIMCO All Asset Administrative Class Division:
Principal Investment Plus Variable Annuity	$	1,861,685	$	1,084,910
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		84,712		326,052

146

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division		Purchases		Sales
PIMCO High Yield Administrative Class Division:
Principal Investment Plus Variable Annuity	$	5,066,572	$	2,879,008
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		694,264		739,056
Principal Pivot Series Variable Annuity		1,961		23
Principal Pivot Series Variable Annuity with Liquidity Max Rider		18,141		—
PIMCO Total Return Administrative Class Division:
Principal Investment Plus Variable Annuity	$	6,368,403	$	8,459,975
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		901,529		1,413,897
Principal Pivot Series Variable Annuity		—		37
Principal Pivot Series Variable Annuity with Liquidity Max Rider		35,663		1
Principal Capital Appreciation Class 1 Division:
Principal Freedom Variable Annuity 2	$	8,852	$	3,650
Principal Investment Plus Variable Annuity		5,597,528		3,029,417
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,112,253		729,992
Principal Capital Appreciation Class 2 Division:
Principal Pivot Series Variable Annuity	$	191,275	$	201
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
Principal LifeTime Strategic Income Class 1 Division:
Principal Freedom Variable Annuity 2	$	19,899	$	77,537
The Principal Variable Annuity		499,855		683,604
The Principal Variable Annuity with Purchase Payment Credit Rider		61,192		641
Principal Investment Plus Variable Annuity		2,047,315		4,076,349
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		352,380		1,270,008
Principal LifeTime 2010 Class 1 Division:
Principal Freedom Variable Annuity 2	$	42,689	$	863,465
The Principal Variable Annuity		217,083		255,146
The Principal Variable Annuity with Purchase Payment Credit Rider		—		686
Principal Investment Plus Variable Annuity		3,546,948		4,871,638
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		274,010		2,258,633
Principal LifeTime 2020 Class 1 Division:
Principal Freedom Variable Annuity 2	$	328,731	$	396,797
The Principal Variable Annuity		600,229		1,789,289
The Principal Variable Annuity with Purchase Payment Credit Rider		—		666
Principal Investment Plus Variable Annuity		21,867,808		37,495,861
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,046,282		18,543,665
Principal LifeTime 2030 Class 1 Division:
Principal Freedom Variable Annuity 2	$	943,787	$	545,596
The Principal Variable Annuity		584,858		443,774
The Principal Variable Annuity with Purchase Payment Credit Rider		—		709
Principal Investment Plus Variable Annuity		13,485,805		5,711,184
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		2,494,865		1,383,828

147

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
Principal LifeTime 2040 Class 1 Division:
Principal Freedom Variable Annuity 2	$	43,718	$	12,396
The Principal Variable Annuity		279,744		128,610
The Principal Variable Annuity with Purchase Payment Credit Rider		—		697
Principal Investment Plus Variable Annuity		3,658,603		1,413,079
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		292,794		889,560
Principal LifeTime 2050 Class 1 Division:
Principal Freedom Variable Annuity 2	$	18,937	$	37,640
The Principal Variable Annuity		69,534		329,206
The Principal Variable Annuity with Purchase Payment Credit Rider		—		15,016
Principal Investment Plus Variable Annuity		2,071,638		768,213
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		162,761		498,775
Real Estate Securities Class 1 Division:
Premier Variable	$	184,149	$	91,250
Principal Freedom Variable Annuity 2		60,407		80,607
The Principal Variable Annuity		5,286,407		10,693,205
The Principal Variable Annuity with Purchase Payment Credit Rider		65,104		1,010,136
Principal Investment Plus Variable Annuity		8,766,539		7,269,234
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,932,220		2,972,103
Real Estate Securities Class 2 Division:
Principal Pivot Series Variable Annuity	$	164,224	$	159
Principal Pivot Series Variable Annuity with Liquidity Max Rider		14,329		—
Rydex Commodities Strategy Division:
Principal Pivot Series Variable Annuity	$	8,139	$	15
Principal Pivot Series Variable Annuity with Liquidity Max Rider		5,458		—
Rydex NASDAQ 100 Division:
Principal Pivot Series Variable Annuity	$	97,933	$	101
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
SAM Balanced Portfolio Class 1 Division:
Premier Variable	$	244,807	$	222,291
Principal Freedom Variable Annuity		—		—
Principal Freedom Variable Annuity 2		500,995		344,676
The Principal Variable Annuity		18,032,042		13,361,023
The Principal Variable Annuity with Purchase Payment Credit Rider		313,771		1,485,638
Principal Investment Plus Variable Annuity		121,276,665		139,199,872
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		20,748,255		23,321,640
SAM Balanced Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	$	549,449	$	392
Principal Pivot Series Variable Annuity with Liquidity Max Rider		86,559		—

148

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division		Purchases		Sales
SAM Conservative Balanced Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	$	178,305	$	339,396
The Principal Variable Annuity		5,099,390		4,353,454
The Principal Variable Annuity with Purchase Payment Credit Rider		—		392,419
Principal Investment Plus Variable Annuity		31,456,707		32,389,008
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		5,789,949		5,005,460
SAM Conservative Balanced Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	$	245,464	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		309,723		163
SAM Conservative Growth Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	$	365,469	$	36,872
The Principal Variable Annuity		4,230,010		3,424,483
The Principal Variable Annuity with Purchase Payment Credit Rider		5,817		374,654
Principal Investment Plus Variable Annuity		23,535,762		7,365,465
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		4,295,411		2,537,266
SAM Conservative Growth Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	$	450,381	$	28,642
Principal Pivot Series Variable Annuity with Liquidity Max Rider		9,313		—
SAM Flexible Income Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	$	180,806	$	547,860
The Principal Variable Annuity		10,538,414		8,297,693
The Principal Variable Annuity with Purchase Payment Credit Rider		51,240		784,355
Principal Investment Plus Variable Annuity		33,784,939		25,734,709
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		3,043,545		6,449,116
SAM Flexible Income Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	$	20,337	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		396,846		334
SAM Strategic Growth Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2		210,696		202,535
The Principal Variable Annuity		2,264,402		2,460,537
The Principal Variable Annuity with Purchase Payment Credit Rider		—		33,298
Principal Investment Plus Variable Annuity		14,948,099		3,733,175
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		6,228,998		3,153,250
SAM Strategic Growth Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	$	638,808	$	28,857
Principal Pivot Series Variable Annuity with Liquidity Max Rider		15,319		—
Short-Term Income Class 1 Division:
Principal Freedom Variable Annuity	$	228,755	$	508,478
Principal Freedom Variable Annuity 2		3,963		13,060
The Principal Variable Annuity		4,624,609		7,777,443
The Principal Variable Annuity with Purchase Payment Credit Rider		18,718		564,934
Principal Investment Plus Variable Annuity		27,093,210		34,849,025
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,920,705		11,888,230

149

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division		Purchases		Sales
Short-Term Income Class 2 Division:
Principal Pivot Series Variable Annuity	$	14,470	$	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider		79,296		59
SmallCap Blend Class 1 Division:
Premier Variable	$	78,482	$	48,747
Principal Freedom Variable Annuity		210,511		456,841
Principal Freedom Variable Annuity 2		40,409		79,841
The Principal Variable Annuity		2,346,358		6,142,992
The Principal Variable Annuity with Purchase Payment Credit Rider		50,846		327,194
Principal Investment Plus Variable Annuity		2,853,007		315,933
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		347,349		158,556
SmallCap Growth II Class 1 Division:
Premier Variable	$	37,796	$	120,807
Principal Freedom Variable Annuity		28,453		76,978
Principal Freedom Variable Annuity 2		2,480		1,197
The Principal Variable Annuity		951,026		4,724,484
The Principal Variable Annuity with Purchase Payment Credit Rider		7,653		136,144
Principal Investment Plus Variable Annuity		1,995,935		2,512,886
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		220,677		958,772
SmallCap Growth II Class 2 Division:
Principal Pivot Series Variable Annuity	$	6,511	$	6
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
SmallCap Value I Class 1 Division:
Premier Variable	$	90,996	$	112,224
Principal Freedom Variable Annuity 2		24,531		21,199
The Principal Variable Annuity		4,636,012		6,595,406
The Principal Variable Annuity with Purchase Payment Credit Rider		45,152		357,480
Principal Investment Plus Variable Annuity		11,445,377		12,257,547
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		1,206,181		5,115,583
SmallCap Value I Class 2 Division:
Principal Pivot Series Variable Annuity	$	29,378	$	12
Principal Pivot Series Variable Annuity with Liquidity Max Rider		—		—
T. Rowe Price Blue Chip Growth Portfolio II Division:
Principal Investment Plus Variable Annuity	$	2,519,744	$	2,455,641
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		901,812		854,113
T. Rowe Price Health Sciences Portfolio II Division:
Principal Investment Plus Variable Annuity	$	10,534,270	$	6,143,590
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		3,009,753		3,368,389
Templeton Global Bond VIP Class 4 Division:
Principal Pivot Series Variable Annuity	$	15,002	$	74
Principal Pivot Series Variable Annuity with Liquidity Max Rider		53,414		—

150

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division		Purchases		Sales
Templeton Growth VIP Class 2 Division:
Principal Freedom Variable Annuity	$	66,409	$	137,901
Van Eck Global Hard Assets Class S Division:
The Principal Variable Annuity	$	686,509	$	1,099,713
The Principal Variable Annuity with Purchase Payment Credit Rider		728		17,603
Principal Investment Plus Variable Annuity		2,083,173		1,924,861
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider		283,391		284,680
Principal Pivot Series Variable Annuity		96,889		32
Principal Pivot Series Variable Annuity with Liquidity Max Rider		12,864		—

151

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

5. Changes in Units Outstanding

Transactions in units were as follows for each of the periods ended December 31:

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
AllianceBernstein Small Cap Growth Class A Division:
Principal Investment Plus Variable Annuity	31,807	47,758	46,073	36,011
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	1,744	27,400	14,481	16,029
AllianceBernstein Small/Mid Cap Value Class A Division:
The Principal Variable Annuity	11,477	7,185	17,834	417
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
Principal Investment Plus Variable Annuity	113,956	39,887	57,039	30
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	24,787	7,908	21,270	1,026
American Century VP Capital Appreciation Class I Division:
Principal Investment Plus Variable Annuity	230,626	31,775	—	—
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	74,933	32,480	—	—
American Century VP Income & Growth Class I Division:
Principal Freedom Variable Annuity	9,549	29,998	11,636	43,831
Principal Freedom Variable Annuity 2	3,953	478	499	275
The Principal Variable Annuity	24,011	126,769	141,847	189,862
The Principal Variable Annuity with Purchase Payment Credit Rider	78	6,454	960	57,836
American Century VP Inflation Protection Class II Division:
Principal Investment Plus Variable Annuity	933,410	1,508,391	1,590,495	1,479,340
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	77,157	687,048	324,114	572,917
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,583	—	—	—
American Century VP MidCap Value Class II Division:
The Principal Variable Annuity	33,670	30,094	44,860	37,733
The Principal Variable Annuity with Purchase Payment Credit Rider	20	4,345	4,006	3,832
Principal Investment Plus Variable Annuity	84,920	37,853	71,395	62,199
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	21,450	17,600	14,649	1,316
American Century VP Ultra Class I Division:
The Principal Variable Annuity	14,519	58,530	40,018	86,908
The Principal Variable Annuity with Purchase Payment Credit Rider	---	4,420	1,254	19,873
American Century VP Ultra Class II Division:
Principal Investment Plus Variable Annuity	369,714	804,296	321,488	1,094,339
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	37,632	381,737	17,808	462,250
American Century VP Value Class II Division:
The Principal Variable Annuity	79,127	233,617	159,697	294,539
The Principal Variable Annuity with Purchase Payment Credit Rider	720	26,366	2,559	126,260
Principal Pivot Series Variable Annuity	2,093	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,385	—	—	—

152

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
American Funds Insurance Series Blue Chip Income & Growth Fund Class 4 Division:
Principal Pivot Series Variable Annuity	7,327	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	2,798	—	—	—
American Funds Insurance Series Global Small Capitalization Fund Class 2 Division:
The Principal Variable Annuity	11,077	1,699	—	—
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
American Funds Insurance Series Global Small Capitalization Fund Class 4 Division:
Principal Pivot Series Variable Annuity	798	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
American Funds Insurance Series High-Income Bond Class 2 Division:
The Principal Variable Annuity	31,820	10,027	—	—
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
American Funds Insurance Series Managed Risk Asset Allocation Fund Class P2 Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
American Funds Insurance Series Managed Risk Growth Fund Class P2 Division:
Principal Pivot Series Variable Annuity	3,056	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
American Funds Insurance Series Managed Risk International Fund Class P2 Division:
Principal Pivot Series Variable Annuity	1,897	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
American Funds Insurance Series New World Fund Class 2 Division:
The Principal Variable Annuity	17,429	671	—	—
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
American Funds Insurance Series New World Fund Class 4 Division:
Principal Pivot Series Variable Annuity	5,772	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Balanced Class 1 Division:
Personal Variable	12,099	33,836	12,590	18,386
Premier Variable	143,248	178,933	239,363	280,348
The Principal Variable Annuity	41,599	177,907	87,048	268,554
The Principal Variable Annuity with Purchase Payment Credit Rider	204	8,329	1,517	36,917
Bond & Mortgage Securities Class 1 Division:
Personal Variable	9,341	28,745	7,845	3,415
Premier Variable	137,940	199,154	457,170	664,021
Principal Freedom Variable Annuity	40,860	60,236	26,341	71,009
Principal Freedom Variable Annuity 2	6,715	9,954	7,480	18,246
The Principal Variable Annuity	317,975	675,917	476,370	1,098,635
The Principal Variable Annuity with Purchase Payment Credit Rider	3,827	70,872	13,572	224,526
Principal Investment Plus Variable Annuity	739,215	1,089,990	985,508	1,120,891
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	76,856	509,568	190,388	480,547

153

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Calvert EAFE International Index Class F Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	593	—	—	—
Calvert Russell 2000 Small Cap Index Class F Division
Principal Pivot Series Variable Annuity	1,208	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	841	—	—	—
Calvert S&P MidCap 400 Index Class F Division:
Principal Pivot Series Variable Annuity	2,456	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,038	—	—	—
Delaware Small Cap Value Service Class Division:
The Principal Variable Annuity	3,420	1,690	1,258	—
The Principal Variable Annuity with Purchase Payment Credit Rider	167	442	421	—
Principal Investment Plus Variable Annuity	59,953	26,516	14,581	152
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	5,614	585	7,696	774
Diversified Balanced Class 2 Division:
Principal Investment Plus Variable Annuity	13,176,718	6,333,753	17,780,210	5,009,850
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	1,583,756	1,023,838	1,908,418	604,332
Principal Lifetime Income Solutions	82,089	142,995	1,589,704	151,583
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Diversified Balanced Managed Volatility Class 2 Division:
Principal Investment Plus Variable Annuity	6,414,941	342,414	64,506	34
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	442,869	50,954	—	—
Principal Lifetime Income Solutions	1,466,513	52,000	22,610	13
Principal Pivot Series Variable Annuity	743	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Diversified Growth Class 2 Division:
Principal Investment Plus Variable Annuity	44,630,770	11,290,992	55,597,020	6,793,866
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	3,514,870	1,115,165	4,758,787	803,317
Principal Lifetime Income Solutions	91,547	189,499	2,249,024	82,331
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Diversified Growth Managed Volatility Class 2 Division:
Principal Investment Plus Variable Annuity	11,620,242	619,952	309,245	180
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	1,158,656	181,215	25,639	20
Principal Lifetime Income Solutions	1,880,856	55,399	58,539	24
Principal Pivot Series Variable Annuity	2,641	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Diversified Income Class 2 Division:
Principal Investment Plus Variable Annuity	7,244,955	3,165,366	6,565,483	2,415,060
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	251,987	176,002	548,855	287,042
Principal Lifetime Income Solutions	192,860	73,862	400,339	20,057

154

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Diversified International Class 1 Division:
Personal Variable	11,312	30,733	10,167	7,999
Premier Variable	71,509	200,863	148,103	242,862
Principal Freedom Variable Annuity	3,984	20,971	7,073	53,408
Principal Freedom Variable Annuity 2	6,771	11,591	7,483	12,070
The Principal Variable Annuity	242,883	754,308	349,317	928,518
The Principal Variable Annuity with Purchase Payment Credit Rider	3,670	59,705	8,549	225,503
Principal Investment Plus Variable Annuity	363,166	367,243	237,102	390,104
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	42,960	224,750	31,477	146,592
Diversified International Class 2 Division:
Principal Pivot Series Variable Annuity	2,773	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Dreyfus Investment Portfolio Technology Growth Service Shares Division:
Principal Investment Plus Variable Annuity	71,968	63,463	63,566	52,654
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	20,753	20,037	9,381	6,355
DWS Alternative Asset Allocation Class B Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
DWS Equity 500 Index Class B2 Division:
Principal Pivot Series Variable Annuity	1,704	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	4,079	—	—	—
DWS Small Mid Cap Value Class B Division:
The Principal Variable Annuity	2,295	17	2,422	1,356
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
Principal Investment Plus Variable Annuity	32,430	1,124	7,832	26
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	6,467	699	4,006	—
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Equity Income Class 1 Division:
Premier Variable	39,296	50,758	40,003	13,628
The Principal Variable Annuity	283,778	944,386	612,812	1,214,354
The Principal Variable Annuity with Purchase Payment Credit Rider	3,025	59,782	5,403	301,254
Principal Investment Plus Variable Annuity	1,822,346	4,054,169	1,949,078	4,227,026
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	150,929	1,786,979	224,576	1,708,605
Equity Income Class 2 Division:
Principal Pivot Series Variable Annuity	5,846	1	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	2,088	—	—	—
Fidelity VIP Contrafund Service Class Division:
The Principal Variable Annuity	110,980	439,435	201,796	581,531
The Principal Variable Annuity with Purchase Payment Credit Rider	1,325	20,363	4,402	95,858
Fidelity VIP Contrafund Service Class 2 Division:
Principal Investment Plus Variable Annuity	389,788	511,310	297,205	552,961
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	33,117	201,867	33,206	152,070
Principal Pivot Series Variable Annuity	9,899	1	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	2,595	—	—	—

155

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Fidelity VIP Equity-Income Service Class 2 Division:
The Principal Variable Annuity	70,388	297,369	212,859	477,606
The Principal Variable Annuity with Purchase Payment Credit Rider	2,059	23,779	2,312	137,872
Principal Investment Plus Variable Annuity	113,925	110,826	134,061	131,180
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	19,150	55,455	26,611	54,665
Fidelity VIP Growth Service Class Division:
The Principal Variable Annuity	53,615	257,201	100,100	291,111
The Principal Variable Annuity with Purchase Payment Credit Rider	33	6,949	1,159	31,562
Fidelity VIP Growth Service Class 2 Division:
Principal Investment Plus Variable Annuity	148,377	100,317	64,369	67,557
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	34,838	68,836	10,392	41,103
Fidelity VIP Mid Cap Service Class Division:
Principal Freedom Variable Annuity 2	6,676	—	—	—
Fidelity VIP Mid Cap Service Class 2 Division:
Principal Investment Plus Variable Annuity	180,264	101,276	129,801	89,195
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	18,885	29,418	25,384	34,958
Principal Pivot Series Variable Annuity	14,188	1	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,364	—	—	—
Fidelity VIP Overseas Service Class 2 Division:
Principal Investment Plus Variable Annuity	543,810	539,423	275,223	647,101
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	64,570	306,860	32,774	281,333
Principal Pivot Series Variable Annuity	155	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	295	—	—	—
Franklin Global Real Estate VIP Class 2 Division:
Principal Pivot Series Variable Annuity	1,516	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	2,418	—	—	—
Franklin Rising Dividends VIP Class 4 Division:
Principal Pivot Series Variable Annuity	989	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	5,916	—	—	—
Franklin Small Cap Value VIP Class 2 Division:
The Principal Variable Annuity	9,921	8,029	8,482	80
The Principal Variable Annuity with Purchase Payment Credit Rider	353	107	69	—
Principal Investment Plus Variable Annuity	53,173	46,097	96,587	64,964
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	8,437	11,652	17,196	13,835
Goldman Sachs VIT Mid Cap Value Institutional Shares Division:
The Principal Variable Annuity	5,805	1,608	2,670	21
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
Principal Investment Plus Variable Annuity	205,487	172,073	106,295	166,496
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	19,336	129,616	10,347	74,614
Goldman Sachs VIT Mid Cap Value Service Shares Division:
Principal Pivot Series Variable Annuity	976	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	728	—	—	—

156

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Goldman Sachs VIT Small Cap Equity Insights Institutional Shares Division:
The Principal Variable Annuity	136	289	5,555	73
The Principal Variable Annuity with Purchase Payment Credit Rider	—	—	—	—
Principal Investment Plus Variable Annuity	74,699	47,951	51,562	81,915
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	5,683	66,801	14,454	29,452
Goldman Sachs VIT Small Cap Equity Insights Service Shares Division:
Principal Pivot Series Variable Annuity	488	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Government & High Quality Bond Class 1 Division:
Pension Builder Plus	—	12,053	6	3,520
Pension Builder Plus – Rollover IRA	—	39	—	42
Personal Variable	6,702	10,668	9,088	4,044
Premier Variable	143,540	208,680	340,833	423,903
Principal Freedom Variable Annuity	34,200	67,835	24,629	56,859
Principal Freedom Variable Annuity 2	4,662	9,544	5,115	5,573
The Principal Variable Annuity	571,823	1,585,012	787,654	2,481,389
The Principal Variable Annuity with Purchase Payment Credit Rider	6,529	109,802	15,180	304,855
Principal Investment Plus Variable Annuity	805,260	1,265,587	1,141,355	1,466,577
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	118,933	520,569	252,244	622,522
Government & High Quality Bond Class 2 Division:
Principal Pivot Series Variable Annuity	1,173	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	796	—	—	—
Guggenheim Floating Rate Strategies Series F Division:
Principal Pivot Series Variable Annuity	226	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,074	—	—	—
Guggenheim Investments Global Managed Futures Strategy Division:
Principal Pivot Series Variable Annuity	1,984	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Guggenheim Investments Long Short Equity Division:
Principal Pivot Series Variable Annuity	3,580	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	524	—	—	—
Guggenheim Investments Multi-Hedge Strategies Division:
Principal Pivot Series Variable Annuity	409	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	358	—	—	—
Guggenheim Macro Opportunities Series M Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
International Emerging Markets Class 1 Division:
Premier Variable	14,755	18,267	50,146	67,246
The Principal Variable Annuity	112,574	247,367	187,950	317,526
The Principal Variable Annuity with Purchase Payment Credit Rider	3,264	30,267	12,783	86,558
Principal Investment Plus Variable Annuity	237,683	215,155	243,804	206,059
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	28,257	114,896	48,464	73,008

157

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Invesco American Franchise Series I Division:
The Principal Variable Annuity	16,164	78,933	26,360	96,211
The Principal Variable Annuity with Purchase Payment Credit Rider	14	1,180	471	3,270
Invesco Balanced-Risk Allocation Series II Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Invesco Core Equity Series I Division:
The Principal Variable Annuity	80,693	316,964	73,745	377,704
The Principal Variable Annuity with Purchase Payment Credit Rider	80	859	25	23,323
Invesco Global Health Care Series I Division:
The Principal Variable Annuity	80,899	139,007	204,498	186,215
The Principal Variable Annuity with Purchase Payment Credit Rider	893	8,206	2,265	21,428
Invesco Global Health Care Series II Division:
Principal Pivot Series Variable Annuity	6,479	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	427	—	—	—
Invesco International Growth Series I Division:
Principal Investment Plus Variable Annuity	302,882	170,032	248,145	189,479
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	42,048	23,662	14,495	17,172
Invesco International Growth Series II Division:
Principal Pivot Series Variable Annuity	2,766	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	588	—	—	—
Invesco Mid Cap Growth Series I Division:
The Principal Variable Annuity	17,369	28,294	32,259	56,439
The Principal Variable Annuity with Purchase Payment Credit Rider	112	5,456	85	11,981
Invesco Small Cap Equity Series I Division:
The Principal Variable Annuity	11,239	61,481	47,661	60,192
The Principal Variable Annuity with Purchase Payment Credit Rider	2	1,774	579	17,677
Principal Investment Plus Variable Annuity	53,854	52,241	35,908	45,934
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	12,454	23,278	19,420	20,440
Invesco Technology Series I Division:
The Principal Variable Annuity	92,795	82,330	89,848	131,932
The Principal Variable Annuity with Purchase Payment Credit Rider	274	9,495	3,332	49,634
Invesco Value Opportunities Series I Division:
Principal Investment Plus Variable Annuity	38,007	57,523	51,698	78,589
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	6,060	28,076	22,913	22,407
Janus Aspen Enterprise Service Shares Division:
The Principal Variable Annuity	22,438	121,380	91,461	218,296
The Principal Variable Annuity with Purchase Payment Credit Rider	598	3,156	1,806	19,308
Janus Aspen Flexible Bond Service Shares Division:
Principal Pivot Series Variable Annuity	2,408	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	4,825	—	—	—

158

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
LargeCap Blend II Class 1 Division:
The Principal Variable Annuity	100,077	484,921	248,250	669,357
The Principal Variable Annuity with Purchase Payment Credit Rider	1,832	62,958	2,883	224,311
Principal Investment Plus Variable Annuity	531,606	1,107,870	392,786	1,289,754
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	38,585	617,664	29,798	586,944
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
LargeCap Blend II Class 2 Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
LargeCap Growth Class 1 Division:
Personal Variable	23,452	46,918	127,907	116,168
Premier Variable	933,973	1,047,935	1,029,535	1,090,870
The Principal Variable Annuity	36,529	198,939	56,530	280,709
The Principal Variable Annuity with Purchase Payment Credit Rider	381	5,289	2,016	11,560
Principal Investment Plus Variable Annuity	66,664	108,499	57,402	102,451
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	10,828	43,567	9,814	26,214
LargeCap Growth Class 2 Division:
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	591	—	—	—
LargeCap Growth I Class 1 Division:
Premier Variable	20,383	44,086	247,165	192,379
Principal Freedom Variable Annuity	2,907	18,504	6,848	18,401
Principal Freedom Variable Annuity 2	3,918	615	67	321
The Principal Variable Annuity	61,644	293,976	101,382	370,995
The Principal Variable Annuity with Purchase Payment Credit Rider	452	9,400	888	54,838
Principal Investment Plus Variable Annuity	66,683	44,835	70,277	51,441
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	7,886	32,892	6,784	19,750
LargeCap S&P 500 Index Class 1 Division:
Premier Variable	78,341	103,055	204,267	127,823
Principal Freedom Variable Annuity	13,646	64,426	16,901	92,203
Principal Freedom Variable Annuity 2	12,557	15,731	15,701	16,923
The Principal Variable Annuity	195,145	710,188	360,582	777,913
The Principal Variable Annuity with Purchase Payment Credit Rider	490	27,123	3,108	178,405
Principal Investment Plus Variable Annuity	561,507	475,443	508,457	494,943
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	69,822	237,196	72,238	184,415
LargeCap Value Class 1 Division:
Bankers Flexible Annuity	—	3,653	—	3,817
Pension Builder Plus	50	15,269	4	13,655
Pension Builder Plus – Rollover IRA	—	9,806	781	309
Personal Variable	7,142	25,816	5,586	10,708
Premier Variable	72,897	242,157	165,907	263,892
Principal Freedom Variable Annuity	13,770	46,330	41,456	37,633
Principal Freedom Variable Annuity 2	11	1,753	1,978	6,394
The Principal Variable Annuity	47,045	282,621	97,513	359,150
The Principal Variable Annuity with Purchase Payment Credit Rider	295	9,483	1,932	30,659
Principal Investment Plus Variable Annuity	117,046	112,256	90,309	123,637
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	14,712	63,052	24,193	52,228

159

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
MFS VIT International Value Service Class Division:
Principal Pivot Series Variable Annuity	5,858	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	354	—	—	—
MFS VIT New Discovery Service Class Division:
The Principal Variable Annuity	19,365	17,556	21,364	2,685
The Principal Variable Annuity with Purchase Payment Credit Rider	581	454	477	65
Principal Investment Plus Variable Annuity	43,307	8,570	25,674	4,380
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	3,681	3,425	11,490	1,299
MFS VIT Utilities Service Class Division:
Principal Investment Plus Variable Annuity	224,837	126,283	239,415	140,826
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	52,088	40,907	48,928	33,209
Principal Pivot Series Variable Annuity	11,274	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	3,748	—	—	—
MFS VIT Value Service Class Division:
Principal Investment Plus Variable Annuity	63,970	47,445	149,382	67,707
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	5,752	6,147	21,732	14,202
MidCap Class 1 Division:
Personal Variable	9,089	28,270	8,592	5,197
Premier Variable	43,072	141,811	122,806	156,888
Principal Freedom Variable Annuity	3,420	31,278	13,544	62,553
Principal Freedom Variable Annuity 2	5,029	8,615	7,784	10,434
The Principal Variable Annuity	106,360	540,716	253,072	699,996
The Principal Variable Annuity with Purchase Payment Credit Rider	2,020	29,262	3,649	131,896
Principal Investment Plus Variable Annuity	205,013	421,152	303,209	492,587
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	12,849	183,362	49,978	194,435
Money Market Class 1 Division:
Pension Builder Plus	—	657	6	8,358
Pension Builder Plus – Rollover IRA	—	—	—	—
Personal Variable	50,198	39,295	230,272	272,705
Premier Variable	2,793,612	2,260,325	2,445,022	2,595,321
Principal Freedom Variable Annuity	4,029	50,339	71,432	114,865
Principal Freedom Variable Annuity 2	290	4,280	360	12,500
The Principal Variable Annuity	755,485	1,096,247	1,198,478	1,979,507
The Principal Variable Annuity with Purchase Payment Credit Rider	(2,698)	48,870	14,747	192,450
Principal Investment Plus Variable Annuity	2,713,589	2,951,076	3,919,460	3,760,485
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	468,706	597,179	774,385	983,173
Principal Lifetime Income Solutions	23,121	13,826	128,316	128,316
Money Market Class 2 Division:
Principal Pivot Series Variable Annuity	29,505	7,703	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Neuberger Berman AMT Large Cap Value I Class Division:
Principal Investment Plus Variable Annuity	52,753	53,559	50,686	107,853
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	3,183	38,382	3,820	28,947

160

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Neuberger Berman AMT Small-Cap Growth S Class Division:
Principal Investment Plus Variable Annuity	34,440	52,624	40,460	64,174
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	3,989	35,872	14,958	33,792
Neuberger Berman AMT Socially Responsive I Class Division:
Principal Investment Plus Variable Annuity	51,342	120,597	44,908	103,743
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	6,346	33,917	18,583	32,859
Oppenheimer Main Street Small Cap Service Shares Division:
The Principal Variable Annuity	36,352	17,036	36,653	4,329
The Principal Variable Annuity with Purchase Payment Credit Rider	197	473	416	—
PIMCO All Asset Administrative Class Division:
Principal Investment Plus Variable Annuity	105,927	69,340	235,730	206,943
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	4,820	20,839	50,880	56,064
PIMCO High Yield Administrative Class Division:
Principal Investment Plus Variable Annuity	311,483	194,141	712,231	631,534
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	42,682	49,837	133,961	292,490
Principal Pivot Series Variable Annuity	197	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,823	—	—	—
PIMCO Total Return Administrative Class Division:
Principal Investment Plus Variable Annuity	467,065	653,099	636,408	1,405,014
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	66,119	109,151	58,080	351,484
Principal Pivot Series Variable Annuity	—	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	3,500	—	—	—
Principal Capital Appreciation Class 1 Division:
Principal Freedom Variable Annuity 2	---	202	45	921
Principal Investment Plus Variable Annuity	188,783	188,602	232,162	139,651
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	37,512	45,447	69,523	29,550
Principal Capital Appreciation Class 2 Division:
Principal Pivot Series Variable Annuity	18,647	1	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
Principal LifeTime Strategic Income Class 1 Division:
Principal Freedom Variable Annuity 2	—	5,534	—	4,971
The Principal Variable Annuity	30,044	45,858	75,979	59,675
The Principal Variable Annuity with Purchase Payment Credit Rider	3,678	43	53	13,516
Principal Investment Plus Variable Annuity	120,737	283,587	158,283	300,102
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	20,781	88,353	26,247	46,222
Principal LifeTime 2010 Class 1 Division:
Principal Freedom Variable Annuity 2	485	63,731	3,159	8,329
The Principal Variable Annuity	11,531	15,259	53,644	29,738
The Principal Variable Annuity with Purchase Payment Credit Rider	—	41	—	—
Principal Investment Plus Variable Annuity	193,043	306,577	301,419	456,139
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	14,913	142,138	9,096	193,399

161

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
Principal LifeTime 2020 Class 1 Division:
Principal Freedom Variable Annuity 2	8,309	24,697	3,875	37,695
The Principal Variable Annuity	22,058	104,753	119,487	68,041
The Principal Variable Annuity with Purchase Payment Credit Rider	—	39	172	19,058
Principal Investment Plus Variable Annuity	955,654	2,228,842	759,779	1,373,012
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	45,724	1,102,279	49,366	733,184
Principal LifeTime 2030 Class 1 Division:
Principal Freedom Variable Annuity 2	26,520	35,684	1	20,583
The Principal Variable Annuity	12,875	25,020	61,216	36,562
The Principal Variable Annuity with Purchase Payment Credit Rider	—	40	176	1,072
Principal Investment Plus Variable Annuity	215,217	298,170	215,285	354,717
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	39,815	72,247	49,070	91,173
Principal LifeTime 2040 Class 1 Division:
Principal Freedom Variable Annuity 2	892	630	5,432	2,950
The Principal Variable Annuity	13,635	7,199	8,039	5,258
The Principal Variable Annuity with Purchase Payment Credit Rider	—	39	—	—
Principal Investment Plus Variable Annuity	152,495	77,089	96,844	141,963
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	12,204	48,529	8,086	33,716
Principal LifeTime 2050 Class 1 Division:
Principal Freedom Variable Annuity 2	71	2,537	—	—
The Principal Variable Annuity	1,766	18,833	23,445	4,448
The Principal Variable Annuity with Purchase Payment Credit Rider	—	859	112	1,102
Principal Investment Plus Variable Annuity	73,861	41,245	44,696	31,575
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	5,803	26,779	8,688	24,415
Real Estate Securities Class 1 Division:
Premier Variable	41,489	21,416	64,242	62,431
Principal Freedom Variable Annuity 2	3,722	4,816	5,315	6,781
The Principal Variable Annuity	100,687	223,712	162,602	327,244
The Principal Variable Annuity with Purchase Payment Credit Rider	1,240	21,133	4,525	74,912
Principal Investment Plus Variable Annuity	181,581	153,534	206,555	135,243
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	40,022	62,774	40,309	48,096
Real Estate Securities Class 2 Division:
Principal Pivot Series Variable Annuity	14,613	1	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,275	—	—	—
Rydex Commodities Strategy Division:
Principal Pivot Series Variable Annuity	962	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	645	—	—	—
Rydex NASDAQ 100 Division:
Principal Pivot Series Variable Annuity	9,463	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—

162

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
SAM Balanced Portfolio Class 1 Division:
Premier Variable	96,495	112,375	290,270	123,762
Principal Freedom Variable Annuity 2	14,989	23,820	8,615	29,013
The Principal Variable Annuity	504,346	921,128	3,205,300	1,231,305
The Principal Variable Annuity with Purchase Payment Credit Rider	8,776	102,422	81,388	191,783
Principal Investment Plus Variable Annuity	2,124,034	9,622,213	3,389,717	7,485,582
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	363,384	1,612,112	963,049	1,290,592
SAM Balanced Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	54,571	2	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	8,597	—	—	—
SAM Conservative Balanced Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	365	23,916	9,760	6,713
The Principal Variable Annuity	218,060	305,326	410,178	480,936
The Principal Variable Annuity with Purchase Payment Credit Rider	—	27,522	4,567	107,816
Principal Investment Plus Variable Annuity	1,233,331	2,250,567	1,884,950	1,651,000
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	227,008	347,807	279,633	417,709
SAM Conservative Balanced Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	24,371	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	30,751	2	—	—
SAM Conservative Growth Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	9,398	1,575	17,281	5,377
The Principal Variable Annuity	147,622	244,524	362,470	309,796
The Principal Variable Annuity with Purchase Payment Credit Rider	203	26,752	12,138	85,772
Principal Investment Plus Variable Annuity	1,079,221	491,083	832,190	367,146
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	196,964	169,169	244,396	143,547
SAM Conservative Growth Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	44,683	2,796	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	924	—	—	—
SAM Flexible Income Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	881	37,816	6,146	7,561
The Principal Variable Annuity	545,432	576,852	837,618	901,167
The Principal Variable Annuity with Purchase Payment Credit Rider	2,652	54,528	79,931	394,026
Principal Investment Plus Variable Annuity	1,539,032	1,757,754	1,930,245	2,489,870
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	138,645	440,493	536,283	486,335
SAM Flexible Income Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	2,034	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	39,690	1	—	—
SAM Strategic Growth Portfolio Class 1 Division:
Principal Freedom Variable Annuity 2	1,737	14,277	17,318	9,517
The Principal Variable Annuity	41,999	176,823	178,974	148,216
The Principal Variable Annuity with Purchase Payment Credit Rider	---	2,390	303	25,200
Principal Investment Plus Variable Annuity	657,215	253,966	467,440	276,397
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	273,867	214,514	267,701	104,841

163

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
SAM Strategic Growth Portfolio Class 2 Division:
Principal Pivot Series Variable Annuity	63,135	2,782	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,514	—	—	—
Short-Term Income Class 1 Division:
Principal Freedom Variable Annuity	16,758	41,521	17,829	38,792
Principal Freedom Variable Annuity 2	208	1,034	563	11,504
The Principal Variable Annuity	366,408	647,792	597,147	1,015,451
The Principal Variable Annuity with Purchase Payment Credit Rider	1,483	47,054	8,089	108,200
Principal Investment Plus Variable Annuity	2,174,462	2,910,705	2,864,928	3,011,502
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	154,153	992,944	469,223	870,923
Short-Term Income Class 2 Division:
Principal Pivot Series Variable Annuity	1,445	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	7,919	1	—	—
SmallCap Blend Class 1 Division:
Premier Variable	35,154	23,062	31,464	12,533
Principal Freedom Variable Annuity	4,050	16,455	7,384	25,857
Principal Freedom Variable Annuity 2	2,320	4,941	3,158	4,103
The Principal Variable Annuity	74,942	291,929	156,136	350,001
The Principal Variable Annuity with Purchase Payment Credit Rider	1,624	15,549	4,250	71,432
Principal Investment Plus Variable Annuity	139,739	15,014	64,450	24,056
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	17,013	7,535	31,053	5,186
SmallCap Growth II Class 1 Division:
Premier Variable	27,709	93,312	113,958	49,795
Principal Freedom Variable Annuity	2,050	4,583	2,971	9,486
Principal Freedom Variable Annuity 2	162	49	7	1,367
The Principal Variable Annuity	57,906	274,668	158,225	359,165
The Principal Variable Annuity with Purchase Payment Credit Rider	466	7,915	573	52,429
Principal Investment Plus Variable Annuity	121,324	149,412	181,535	128,150
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	13,414	57,007	27,254	42,460
SmallCap Growth II Class 2 Division:
Principal Pivot Series Variable Annuity	633	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
SmallCap Value I Class 1 Division:
Premier Variable	18,049	37,968	101,743	59,235
Principal Freedom Variable Annuity 2	82	1,264	1,988	4,499
The Principal Variable Annuity	35,423	176,933	116,718	253,459
The Principal Variable Annuity with Purchase Payment Credit Rider	345	9,590	2,945	69,991
Principal Investment Plus Variable Annuity	196,421	340,237	161,618	422,458
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	20,700	141,995	24,796	157,951
SmallCap Value I Class 2 Division:
Principal Pivot Series Variable Annuity	2,840	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	—	—	—	—
T. Rowe Price Blue Chip Growth Portfolio II Division:
Principal Investment Plus Variable Annuity	124,080	113,695	128,910	138,317
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	44,408	39,545	30,008	22,221

164

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
	2014		2013
Division:	Purchases	Redemptions	Purchases	Redemptions
T. Rowe Price Health Sciences Portfolio II Division:
Principal Investment Plus Variable Annuity	233,425	158,823	235,820	133,971
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	66,692	87,079	95,654	80,797
Templeton Global Bond VIP Class 4 Division:
Principal Pivot Series Variable Annuity	1,520	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	5,412	—	—	—
Templeton Growth VIP Class 2 Division:
Principal Freedom Variable Annuity	2,480	5,891	2,002	14,236
Van Eck Global Hard Assets Class S Division:
The Principal Variable Annuity	45,291	72,470	29,404	61,413
The Principal Variable Annuity with Purchase Payment Credit Rider	48	1,160	166	5,288
Principal Investment Plus Variable Annuity	141,497	121,470	119,111	68,178
Principal Investment Plus Variable Annuity with Premium Payment Credit Rider	19,249	17,965	23,156	18,081
Principal Pivot Series Variable Annuity	12,646	—	—	—
Principal Pivot Series Variable Annuity with Liquidity Max Rider	1,679	—	—	—

165

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

6. Financial Highlights

Principal Life sells a number of variable life insurance products, which have unique combinations of features and fees that are charged against the contractholder’ s account balance. Differences in the fee structures results in a variety of unit values, expense ratios, and total returns.

The Separate Account has presented the following disclosures for 2014, 2013, 2012, 2011, and 2010 in accordance with the AICPA Audit and Accounting Guide for Investment Companies. The following table was developed by determining which products issued by Principal Life have the lowest and highest total return. Only product designs within each division that had units outstanding during the respective periods were considered when determining the lowest and highest total return. The summary may not reflect the minimum and maximum contract charges offered by Principal Life as the contractholder may not have selected all available and applicable contact options as discussed in Note 2.

						For the Year Ended December 31,
		December 31				Except as Noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)	Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
AllianceBernstein Small Cap   Growth Class A Division:
	2014	194	$25.78 to $24.22		$4,945	–%	1.40% to 2.00%	(3.16)% to (3.77)%
	2013	236	$26.62 to $25.17		$6,183	–%	1.40% to 2.00%	43.74% to 42.93%
	2012	227	$18.52 to $17.61		$4,148	–%	1.25% to 1.85%	13.62% to 12.88%
	2011	261	$16.30 to $15.60		$4,184	–%	1.25% to 1.85%	3.16% to 2.56%
	2010	234	$15.80 to $15.21		$3,666	–%	1.25% to 1.85%	35.16% to 34.36%

166

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ration
	Division
AllianceBernstein Small/Mid   Cap Value Class A Division:
	2014	190	$12.26 to $12.12		$2,320	0.76	%	1.30% to 2.00%	7.83% to 7.07%
	2013 (8)	95	$11.37 to $11.32		$1,075	0.35	%	1.30% to 2.00%	13.25% to 12.75%
American Century VP Capital    Appreciation Class I Division:
	2014 (10)	241.00	$10.80 to $10.75		$2,604	–%		1.40% to 2.00%	9.87% to 9.36%
American Century VP Income &   Growth Class I Division:
	2014	816	$18.42 to $16.14		$14,436	2.03	%	0.85% to 1.90%	11.50% to 10.40%
	2013	942	$16.52 to $14.62		$14,985	2.19	%	0.85% to 1.90%	34.75% to 33.27%
	2012	1,079	$12.26 to $10.97		$12,745	2.07	%	0.85% to 1.85%	13.73% to 12.63%
	2011	1,298	$10.78 to $9.74		$13,458	1.53	%	0.85% to 1.85%	2.28% to 1.25%
	2010	1,644	$10.54 to $9.62		$16,653	1.52	%	0.85% to 1.85%	13.09% to 12.12%
American Century VP Inflation   Protection Class II Division:
	2014	5,003	$9.94 to $12.32		$65,192	1.26	%	1.15% to 2.00%	(1.09)% to (1.23)%
	2013	6,186	$12.87 to $12.17		$78,840	1.62	%	1.40% to 2.00%	(9.68)% to (10.18)%
	2012	6,324	$14.25 to $13.55		$89,160	2.43	%	1.25% to 1.85%	6.03% to 5.37%
	2011	6,219	$13.44 to $12.86		$82,771	4.11	%	1.25% to 1.85%	10.44% to 9.73%
	2010	7,137	$12.17 to $11.72		$86,144	1.68	%	1.25% to 1.85%	3.75% to 3.17%
American Century VP Mid Cap   Value Class II Division:
	2014	280	$19.15 to $18.60		$5,329	1.02	%	1.30% to 2.00%	14.74% to 13.90%
	2013	229	$16.69 to $16.33		$3,815	1.05	%	1.30% to 2.00%	28.29% to 27.48%
	2012	200	$13.01 to $12.81		$2,592	1.87	%	1.25% to 1.85%	14.73% to 14.07%
	2011	157	$11.34 to $11.23		$1,776	1.30	%	1.25% to 1.85%	(2.07)% to (2.69)%
	2010 (5)	57	$11.58 to $11.54		$663	3.40	%	1.25% to 1.85%	17.33% to 16.92%
American Century VP Ultra   Class I Division:
	2014	236	$15.69 to $14.46		$3,696	0.39	%	1.30% to 1.90%	8.58% to 7.91%
	2013	284	$14.45 to $13.40		$4,100	0.56	%	1.30% to 1.90%	35.30% to 34.54%
	2012	350	$10.68 to $9.96		$3,716	–%		1.25% to 1.85%	12.54% to 11.78%
	2011	426	$9.49 to $8.91		$3,993	–%		1.25% to 1.85%	(0.21)% to (0.78)%
	2010	526	$9.51 to $8.98		$4,935	0.55	%	1.25% to 1.85%	14.58% to 13.96%

167

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
American Century VP Ultra   Class II Division:
	2014	2,449	$18.45 to $17.34			$44,865	0.24	%	1.40% to 2.00%	8.27% to 7.70%
	2013	3,228	$17.04 to $16.10			$54,398	0.43	%	1.40% to 2.00%	35.13% to 34.28%
	2012	4,445	$12.61 to $11.99			$55,372	–%		1.25% to 1.85%	12.39% to 11.74%
	2011	5,075	$11.22 to $10.73			$56,336	–%		1.25% to 1.85%	(0.36)% to (1.01)%
	2010	5,256	$11.26 to $10.84			$58,641	0.36	%	1.25% to 1.85%	14.31% to 13.75%
American Century VP Value   Class II Division:
	2014	859	$10.15 to $19.70			$18,211	1.39	%	1.15% to 1.90%	(0.39)% to 10.74%
	2013	1,035	$19.07 to $17.79			$19,713	1.49	%	1.30% to 1.90%	29.82% to 29.10%
	2012	1,294	$14.69 to $13.78			$18,873	1.75	%	1.25% to 1.85%	13.09% to 12.40%
	2011	1,634	$12.99 to $12.26			$20,924	1.86	%	1.25% to 1.85%	(0.38)% to (0.97)%
	2010	1,961	$13.04 to $12.38			$25,180	2.05	%	1.25% to 1.85%	11.64% to 11.03%
American Funds Insurance Series    Blue Chip Income & Growth    Fund Class 4 Division:
	2014 (12)	10	$10.23 to $10.22			$104	6.39	%	1.15% to 1.40%	(1.54)% to (1.64)%
American Funds Insurance Series    Global Small Capitalization    Fund Class 2 Division:
	2014 (11)	9	$10.23 to $10.20			$96	0.28	%	1.30% to 1.90%	1.39% to 1.09%
American Funds Insurance Series    Global Small Capitalization    Fund Class 4 Division:
	2014 (12)	1	$9.86 to $9.85			$8	0.15	%	1.15% to 1.40%	0.20% to 0.10%
American Funds Insurance Series    High-Income Bond Class 2    Division:
	2014 (11)	22	$9.69 to $9.65			$211	10.12	%	1.30% to 1.90%	(3.20)% to (3.60)%
American Funds Insurance Series    Managed Risk Asset Allocation    Fund Class P2 Division:
	2014 (12)	-	$9.91 to 9.90		$–		–%		1.15% to 1.40%	(1.10) to (1.20)%
American Funds Insurance Series    Managed Risk Growth Fund    Class P2 Division:
	2014 (12)	3		$9.78		$30	–%		1.15% to 1.40%	(1.61)% to (1.51)%

168

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
American Funds Insurance Series    Managed Risk International    Fund Class P2 Division:
	2014 (11)	2		$9.43		$18	–%		1.15% to 1.40%	(3.870	)%
American Funds Insurance Series    New World Fund Class 2    Division:
	2014 (12)	17	$9.09 to $9.06			$152	2.00	%	1.30% to 1.90%	(9.55)% to (9.85)%
American Funds Insurance Series    New World Fund Class 4    Division:
	2014 (12)	6		$9.00		$52	7.63	%	1.15% to 1.40%	(7.22)% to (7.12)%
Balanced Class 1 Division:
	2014	2,167	$3.30 to $26.20			$34,954	1.72	%	0.42% to 1.90%	8.36% to 6.76%
	2013	2,369	$3.05 to $24.54			$36,507	1.78	%	0.42% to 1.90%	18.98% to 17.30%
	2012	2,633	$2.46 to $20.92			$35,867	2.04	%	0.42% to 1.85%	12.33% to 10.92%
	2011	2,890	$2.27 to $18.86			$36,779	2.30	%	0.43% to 1.85%	3.62% to 2.17%
	2010	3,334	$2.19 to $18.46			$42,696	2.76	%	0.42% to 1.85%	13.15% to 11.54%
Bond & Mortgage Securities   Class 1 Division:
	2014	8,648	$2.83 to $21.83			$180,940	3.11	%	0.44% to 2.00%	4.79% to 3.17%
	2013	9,961	$2.70 to $21.16			$201,686	3.30	%	0.40% to 2.00%	(1.27)% to (2.76)%
	2012	11,477	$2.63 to $21.76			$236,260	3.77	%	0.41% to 1.85%	6.86% to 5.58%
	2011	12,019	$2.56 to $20.61			$235,718	0.10	%	0.40% to 1.85%	6.63% to 5.10%
	2010	13,628	$2.40 to $19.61			$253,669	5.27	%	0.43% to 1.85%	11.19% to 9.61%
Calvert EAFE International    Index Class F Division:
	2014 (12)	1		$9.25		$5	26.28	%	1.15% to 1.40%	(4.05)% to (3.95)%
Calvert Russell 2000 Small Cap    Index Class F Division:
	2014 (12)	2	$10.48 to $10.47			$21	2.65	%	1.15% to 1.40%	1.45% to 1.36%
Calvert S&P MidCap 400    Index Class F Division:
	2014 (12)	3	$10.23 to $10.22			$36	5.13	%	1.15% to 1.40%	(0.100	)%

169

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Delaware Small Cap Value    Service Class Division:
	2014	63	$11.88 to $11.75		$746	0.29	%	1.30% to 2.00%	4.21% to 3.52%
	2013 (8)	23	$11.40 to $11.35		$262	–%		1.30% to 2.00%	13.66% to 13.16%
Diversified Balanced Class 2    Division:
	2014	71,134	$14.25 to $13.83		$1,011,135	0.89	%	1.40% to 2.00%	5.95% to 5.33%
	2013	63,792	$13.45 to $13.13		$856,504	0.33	%	1.40% to 2.00%	11.43% to 10.80%
	2012	48,279	$12.07 to $11.85		$581,720	0.96	%	1.25% to 1.85%	8.35% to 7.73%
	2011	29,822	$11.14 to $11.00		$331,823	0.96	%	1.25% to 1.85%	(0.71)% to 1.66%
	2010 (4)	15,601	$10.88 to $10.82		$169,723	–%		1.25% to 1.85%	7.94% to 7.34%
Diversified Balanced Managed    Volatility Class 2 Division:
	2014	7,967	$10.16 to $10.54		$84,544	0.01	%	1.15% to 2.00%	(0.20)% to 4.77%
	2013 (9)	87	$10.07 to $10.06		$877	–%		1.40% to 2.00%	0.90% to 0.80%
Diversified Growth Class 2    Division:
	2014	189,924	$15.20 to $14.76		$2,881,637	0.96	%	1.40% to 2.00%	6.29% to 5.73%
	2013	154,283	$14.30 to $13.96		$2,202,298	0.45	%	1.40% to 2.00%	16.45% to 15.75%
	2012	99,357	$12.28 to $12.06		$1,218,656	0.85	%	1.25% to 1.85%	10.23% to 9.54%
	2011	67,150	$11.14 to $11.01		$747,474	0.75	%	1.25% to 1.85%	(2.45)% to 0.36%
	2010 (4)	29,374	$11.03 to $10.97		$323,912	–%		1.25% to 1.85%	9.10% to 8.51%
Diversified Growth Managed    Volatility Class 2 Division:
	2014	14,199	$10.14 to $10.61		$151,625	0.02	%	1.15% to 2.00%	(0.39)% to 4.95%
	2013 (9)	393	$10.12 to $10.11		$3,979	–%		1.40% to 2.00%	1.40% to 1.30%
Diversified Income Class 2    Division:
	2014	14,292	$11.80 to $11.62		$168,519	0.56	%	1.40% to 2.00%	5.36% to 4.78%
	2013	10,017	$11.20 to $11.09		$112,081	0.11	%	1.40% to 2.00%	6.77% to 6.12%
	2012 (7)	5,225	$10.49 to $10.45		$54,791	–%		1.25% to 1.85%	4.38% to 3.98%
Diversified International    Class 1 Division:
	2014	6,681	$3.20 to $24.92		$154,009	2.17	%	0.42% to 2.00%	(3.62)% to (5.14)%
	2013	7,605	$3.32 to $26.27		$183,015	2.83	%	0.42% to 2.00%	17.90% to 16.55%
	2012	8,812	$2.70 to $22.54		$182,349	2.10	%	0.38% to 1.85%	17.68% to 16.25%
	2011	10,327	$2.39 to $19.39		$182,722	0.44	%	0.44% to 1.85%	(10.58)% to (12.54)%
	2010	11,979	$2.67 to $22.17		$237,656	2.09	%	0.41% to 1.85%	13.25% to 11.63%

170

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Diversified International    Class 2 Division:
	2014 (12)	3	$9.38 to $9.37		$26	–%		1.15% to 1.40%	(3.89)% to (4.00)%
Dreyfus Investment Portfolio    Technology Growth Service    Shares Division:
	2014	226	$22.55 to $21.19		$5,041	–%		1.40% to 2.00%	5.13% to 4.49%
	2013	217	$21.45 to $20.28		$4,605	–%		1.40% to 2.00%	30.71% to 30.00%
	2012	203	$16.41 to $15.60		$3,300	–%		1.25% to 1.85%	13.96% to 13.21%
	2011	191	$14.40 to $13.78		$2,726	–%		1.25% to 1.85%	(9.21)% to (9.70)%
	2010	243	$15.86 to $15.26		$3,834	–%		1.25% to 1.85%	28.01% to 27.27%
DWS Alternative Asset    Allocation Class B Division:
	2014 (12)	-	$9.83 to $9.82	$–		–%		1.15% to 1.40%	(1.60)% to (1.70)%
DWS Equity 500 Index    Class B2 Division:
	2014 (12)	6	$10.25 to $10.24		$59	–%		1.15% to 1.40%	(0.490	)%
DWS Small Mid Cap    Value Class B Division:
	2014	52	$10.09 to $11.68		$615	0.40	%	1.15% to 2.00%	(0.69)% to 3.00%
	2013 (8)	13	$11.39 to $11.34		$146	–%		1.30% to 2.00%	13.56% to 13.06%
Equity Income Class 1    Division:
	2014	17,409	$1.97 to $14.25		$258,967	2.35	%	0.27% to 2.00%	12.33% to 10.55%
	2013	22,006	$1.75 to $12.89		$293,600	3.07	%	0.33% to 2.00%	26.77% to 24.90%
	2012	26,639	$1.38 to $10.32		$282,998	3.01	%	0.38% to 1.85%	12.54% to 10.97%
	2011	30,579	$1.23 to $9.30		$291,224	0.55	%	0.54% to 1.85%	5.00% to 3.45%
	2010	19,001	$1.17 to $8.99		$173,784	3.26	%	0.29% to 1.85%	15.69% to 14.09%
Equity Income Class 2    Division:
	2014 (12)	8	$10.23 to $10.22		$81	–%		1.15% to 1.40%	(0.970	)%

171

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest		Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Fidelity VIP Contrafund   Service Class Division:
	2014	2,024	$23.79 to $21.86			$48,140	0.82	%	1.30% to 1.90%		10.39% to 9.74%
	2013	2,372	$21.55 to $19.92			$51,076	0.93	%	1.30% to 1.90%		29.43% to 28.68%
	2012	2,843	$16.65 to $15.48			$47,183	1.16	%	1.25% to 1.85%		14.91% to 14.16%
	2011	3,527	$14.49 to $13.56			$50,818	0.85	%	1.25% to 1.85%		(3.85)% to (4.37)%
	2010	4,237	$15.07 to $14.18			$63,341	1.05	%	1.25% to 1.85%		15.66% to 14.91%
Fidelity VIP Contrafund   Service Class 2 Division:
	2014	2,435	$10.17 to $21.50			$55,142	0.72	%	1.15% to 2.00%		(0.78)% to 9.47%
	2013	2,712	$20.78 to $19.64			$55,840	0.81	%	1.40% to 2.00%		29.23% to 28.45%
	2012	3,087	$16.08 to $15.29			$49,175	1.10	%	1.25% to 1.85%		14.69% to 14.02%
	2011	3,365	$14.02 to $13.41			$46,781	0.80	%	1.25% to 1.85%		(3.97)% to (4.56)%
	2010	3,317	$14.60 to $14.05			$48,069	1.05	%	1.25% to 1.85%		15.51% to 14.79%
Fidelity VIP Equity-Income   Service Class 2 Division:
	2014	2,117	$17.81 to $16.49			$37,544	2.56	%	1.30% to 2.00%		7.03% to 6.32%
	2013	2,399	$16.64 to $15.51			$39,708	2.19	%	1.30% to 2.00%		26.25% to 25.38%
	2012	2,825	$13.18 to $12.37			$36,953	2.78	%	1.25% to 1.85%		15.61% to 14.96%
	2011	3,357	$11.40 to $10.76			$37,791	2.15	%	1.25% to 1.85%		(0.61)% to (1.19)%
	2010	3,931	$11.47 to $10.89			$44,413	1.59	%	1.25% to 1.85%		13.45% to 12.85%
Fidelity VIP Growth Service   Class Division:
	2014	1,037	$14.64 to $13.46			$15,185	0.09	%	1.30% to 1.90%		9.75% to 9.16%
	2013	1,248	$13.34 to $12.33			$16,637	0.18	%	1.30% to 1.90%		34.48% to 33.59%
	2012	1,469	$9.92 to $9.23			$14,548	0.47	%	1.25% to 1.85%		13.11% to 12.42%
	2011	1,711	$8.77 to $8.21			$14,924	0.24	%	1.25% to 1.85%		(1.13)% to (1.68)%
	2010	2,117	$8.87 to $8.35			$18,620	0.17	%	1.25% to 1.85%		22.51% to 21.90%
Fidelity VIP Growth Service   Class 2 Division:
	2014	481	$19.87 to $18.67			$9,442	–%		1.40% to 2.00%		9.48% to 8.80%
	2013	467	$18.15 to $17.16			$8,346	0.05	%	1.40% to 2.00%		34.25% to 33.44%
	2012	501	$13.52 to $12.86			$6,666	0.34	%	1.25% to 1.85%		12.95% to 12.31%
	2011	560	$11.97 to $11.45			$6,609	0.12	%	1.25% to 1.85%		(1.24)% to (1.89)%
	2010	666	$12.12 to $11.67			$7,988	0.03	%	1.25% to 1.85%		22.30% to 21.56%
Fidelity VIP Mid Cap Service   Class Division:
	2014 (11)	7		$10.66		$71	0.32	%	0.95	%	5.75	%

172

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Fidelity VIP Mid Cap Service   Class 2 Division:
	2014	707	$10.06 to $24.37			$17,956	0.02	%	1.15% to 2.00%	(0.20)% to 3.92%
	2013	623	$24.80 to $23.45			$15,323	0.29	%	1.40% to 2.00%	34.05% to 33.31%
	2012	592	$18.50 to $17.59			$10,855	0.38	%	1.25% to 1.85%	13.15% to 12.47%
	2011	644	$16.35 to $15.64			$10,432	0.02	%	1.25% to 1.85%	(11.95)% to (12.48)%
	2010	693	$18.57 to $17.87			$12,784	0.14	%	1.25% to 1.85%	26.93% to 26.20%
Fidelity VIP Overseas Service   Class 2 Division:
	2014	2,368	$9.43 to $15.11			$37,741	1.04	%	1.15% to 2.00%	(3.38)% to (10.11)%
	2013	2,605	$17.79 to $16.81			$45,762	1.10	%	1.40% to 2.00%	28.54% to 27.74%
	2012	3,226	$13.84 to $13.16			$44,060	1.80	%	1.25% to 1.85%	19.00% to 18.35%
	2011	3,580	$11.63 to $11.12			$41,148	1.29	%	1.25% to 1.85%	(18.27)% to (18.83)%
	2010	3,425	$14.23 to $13.70			$48,259	1.28	%	1.25% to 1.85%	11.52% to 10.84%
Franklin Global Real Estate    VIP Class 2 Division:
	2014 (12)	4	$10.56 to $10.55			$42	–%		1.15% to 1.40%	1.05% to 0.96%
Franklin Rising Dividends   VIP Class 4 Division:
	2014 (12)	7		$10.34		$71	–%		1.15% to 1.40%	(0.390	)%
Franklin Small Cap Value  VIP Class 2 Division:
	2014 (13)	191	$18.79 to $18.21			$3,577	0.62	%	1.30% to 2.00%	(0.74)% to (1.41)%
	2013	185	$18.93 to $18.47			$3,494	1.17	%	1.30% to 2.00%	17.65% to 33.65%
	2012	142	$14.07 to $13.82			$1,990	0.68	%	1.25% to 1.85%	16.86% to 16.23%
	2011	144	$12.04 to $11.89			$1,726	0.62	%	1.25% to 1.85%	(4.90)% to (5.56)%
	2010 (4)	35	$12.66 to $12.59			$447	0.42	%	1.25% to 1.85%	23.75% to 23.07%
Goldman Sachs VIT Mid Cap   Value Institutional Shares   Division:
	2014	770	$24.32 to $22.82			$18,543	0.99	%	1.30% to 2.00%	12.07% to 11.32%
	2013	842	$21.70 to $20.50			$18,015	0.83	%	1.30% to 2.00%	10.55% to 30.32%
	2012	964	$16.54 to $15.73			$15,718	1.12	%	1.25% to 1.85%	17.06% to 16.35%
	2011	1,108	$14.13 to $13.52			$15,462	0.75	%	1.25% to 1.85%	(7.59)% to (8.09)%
	2010	1,150	$15.29 to $14.71			$17,385	0.67	%	1.25% to 1.85%	23.51% to 22.69%

173

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Goldman Sachs VIT Mid Cap   Value Service Shares   Division:
	2014 (12)	2	$10.25 to $10.24			$17	5.08	%	1.15% to 1.40%	0.59% to 0.49%
Goldman Sachs VIT Small Cap    Equity Insights Institutional    Shares Division:
	2014 (14)	382	$18.38 to $17.25			$6,978	0.76	%	1.30% to 2.00%	5.57% to 4.86%
	2013	417	$17.41 to $16.45			$7,164	0.99	%	1.30% to 2.00%	14.16% to 32.98%
	2012	457	$13.00 to $12.37			$5,868	1.15	%	1.25% to 1.85%	11.40% to 10.74%
	2011	535	$11.67 to $11.17			$6,184	0.80	%	1.25% to 1.85%	(0.60)% to (1.15)%
	2010	516	$11.74 to $11.30			$6,007	0.57	%	1.25% to 1.85%	28.59% to 27.83%
Goldman Sachs VIT Small   Cap Equity Insights Service   Shares Division:
	2014 (12)	-	$10.62 to $10.61			$5	6.02	%	1.15% to 1.40%	1.63% to 1.53%
Government & High Quality   Bond Class 1 Division:
	2014	12,521	$2.79 to $11.65			$141,359	3.77	%	0.43% to 2.00%	4.64% to 2.92%
	2013	14,619	$2.66 to $11.32			$159,944	3.86	%	0.42% to 2.00%	(1.44)% to (2.83)%
	2012	17,413	$2.58 to $11.65			$196,166	3.99	%	0.40% to 1.85%	3.25% to 1.92%
	2011	18,006	$2.61 to $11.43			$197,866	0.18	%	0.39% to 1.85%	5.78% to 4.29%
	2010	20,724	$2.47 to $10.96			$216,707	5.00	%	0.44% to 1.85%	5.71% to 3.98%
Government & High Quality   Bond Class 2 Division:
	2014 (12)	2		$10.12		$20	–%		1.15% to 1.40%	0.00% to 0.10%
Guggenheim Floating    Rate Strategies    Series F Division
	2014 (12)	1	$9.94 to $9.93			$13	–%		1.15% to 1.40%	(0.80)% to (0.90)%
Guggenheim Investments    Global Managed Futures    Strategy Division:
	2014 (12)	2	$10.75 to $10.74			$21	–%		1.15% to 1.40%	5.50% to 5.40%
Guggenheim Investments Long    Short Equity Division:
	2014 (12)	4	$10.45 to $10.44			$43	–%		1.15% to 1.40%	2.96% to 2.86%

174

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Guggenheim Investments    Multi-Hedge Strategies    Division:
	2014 (12)	1	$10.26 to $10.25			$8	–%		1.15% to 1.40%	2.29% to 2.30%
Guggenheim Macro    Opportunities Series M    Division:
	2014 (12)	-	$10.06 to $10.05		$–		–%		1.15% to 1.40%	–%
International Emerging Markets    Class 1 Division:
	2014	2,140	$3.62 to $29.20			$64,255	0.91	%	0.41% to 2.00%	(4.15)% to (5.65)%
	2013	2,369	$3.77 to $30.95			$74,988	2.37	%	0.40% to 2.00%	(5.42)% to (6.47)%
	2012	2,577	$3.99 to $33.09			$86,313	1.30	%	0.37% to 1.85%	20.29% to 18.60%
	2011	2,866	$3.32 to $27.90			$80,663	0.26	%	0.44% to 1.85%	(17.77)% to (19.01)%
	2010	3,189	$4.03 to $34.45			$108,919	1.25	%	0.41% to 1.85%	18.76% to 17.10%
Invesco American Franchise     Series I Division:
	2014	321	$14.33 to $14.10			$4,607	0.04	%	1.30% to 1.90%	7.02% to 6.33%
	2013	385	$13.39 to $13.26			$5,160	0.43	%	1.30% to 1.90%	38.33% to 37.55%
	2012 (6)	458	$9.68 to $9.64			$4,432	–%		1.25% to 1.85%	(3.30)% to (3.70)%
Invesco Balanced-Risk    Allocation Series II Division:
	2014 (12)	-		$10.08	$–		–%		1.15% to 1.40%	(0.690	)%
Invesco Core Equity   Series I Division:
	2014	1,369	$15.70 to $14.42			$21,497	0.83	%	1.30% to 1.90%	6.73% to 6.11%
	2013	1,606	$14.71 to $13.59			$23,623	1.34	%	1.30% to 1.90%	27.69% to 26.77%
	2012	1,934	$11.52 to $10.72			$22,263	0.95	%	1.25% to 1.85%	12.39% to 11.78%
	2011	2,296	$10.25 to $9.59			$23,462	0.93	%	1.25% to 1.85%	(1.25)% to (1.84)%
	2010	2,686	$10.38 to $9.77			$27,717	0.95	%	1.25% to 1.85%	8.12% to 7.48%
Invesco Global Health Care   Series I Division:
	2014	485	$22.51 to $20.74			$10,917	–%		1.30% to 1.90%	18.10% to 17.37%
	2013	551	$19.06 to $17.67			$10,479	0.69	%	1.30% to 1.90%	38.82% to 37.94%
	2012	551	$13.73 to $12.81			$7,547	–%		1.25% to 1.85%	19.39% to 18.72%
	2011	592	$11.50 to $10.79			$6,751	–%		1.25% to 1.85%	2.68% to 1.98%
	2010	663	$11.20 to $10.58			$7,323	–%		1.25% to 1.85%	3.99% to 3.42%

175

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Invesco Global Health Care   Series II Division:
	2014 (12)	7	$10.34 to $10.33		$71	–%		1.15% to 1.40%	0.39	%
Invesco International Growth   Series I Division:
	2014	943	$11.10 to $10.67		$10,425	1.67	%	1.40% to 2.00%	(1.07)% to (1.66)%
	2013	791	$11.22 to $10.85		$8,853	1.35	%	1.40% to 2.00%	17.61% to 16.92%
	2012	735	$9.54 to $9.28		$6,999	1.65	%	1.25% to 1.85%	14.25% to 13.59%
	2011	700	$8.35 to $8.17		$5,831	1.58	%	1.25% to 1.85%	(7.73)% to (8.20)%
	2010	503	$9.05 to $8.90		$4,542	2.48	%	1.25% to 1.85%	11.45% to 10.70%
Invesco International Growth   Series II Division:
	2014 (12)	3	$9.61 to $9.60		$32	–%		1.15% to 1.40%	(3.12)% to (3.23)%
Invesco Mid Cap Growth   Series I Division:
	2014	110	$14.13 to $13.90		$1,554	–%		1.30% to 1.90%	6.64% to 5.95%
	2013	126	$13.25 to $13.12		$1,672	0.39	%	1.30% to 1.90%	35.34% to 34.56%
	2012 (6)	162	$9.79 to $9.75		$1,589	–%		1.25% to 1.85%	(2.59)% to (2.99)%
Invesco Small Cap Equity   Series I Division:
	2014	408	$23.03 to $21.61		$9,327	–%		1.30% to 2.00%	1.05% to 0.37%
	2013	469	$22.79 to $21.53		$10,623	0.01	%	1.30% to 2.00%	35.74% to 34.82%
	2012	510	$16.79 to $15.97		$8,502	–%		1.25% to 1.85%	12.46% to 11.83%
	2011	592	$14.93 to $14.28		$8,774	–%		1.25% to 1.85%	(1.97)% to (2.59)%
	2010	498	$15.23 to $14.66		$7,524	–%		1.25% to 1.85%	27.02% to 26.27%
Invesco Technology   Series I Division:
	2014	411	$9.18 to $8.46		$3,772	–%		1.30% to 1.90%	9.68% to 9.02%
	2013	410	$8.37 to $7.76		$3,426	–%		1.30% to 1.90%	23.45% to 22.78%
	2012	498	$6.78 to $6.32		$3,350	–%		1.25% to 1.85%	9.89% to 9.15%
	2011	591	$6.17 to $5.79		$3,591	0.17	%	1.25% to 1.85%	(6.23)% to (6.76)%
	2010	772	$6.58 to $6.21		$4,981	–%		1.25% to 1.85%	19.85% to 19.19%
Invesco Value Opportunities   Series I Division:
	2014	360	$15.00 to $14.09		$5,348	1.37	%	1.40% to 2.00%	5.19% to 4.53%
	2013	401	$14.26 to $13.48		$5,666	1.46	%	1.40% to 2.00%	32.04% to 31.13%
	2012	428	$10.80 to $10.28		$4,582	1.43	%	1.25% to 1.85%	16.13% to 15.64%

176

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Janus Aspen Enterprise   Service Shares Division:
	2014	643	$14.79 to $13.59		$9,503	0.03	%	1.30% to 1.90%	10.79% to 10.13%
	2013	744	$13.35 to $12.34		$9,931	0.36	%	1.30% to 1.90%	30.37% to 29.62%
	2012	889	$10.24 to $9.52		$9,083	–%		1.25% to 1.85%	15.45% to 14.84%
	2011	1,085	$8.87 to $8.29		$9,564	–%		1.25% to 1.85%	(2.85)% to (3.49)%
	2010	1,395	$9.13 to $8.59		$12,638	–%		1.25% to 1.85%	24.05% to 23.24%
Janus Aspen Flexible Bond   Service Shares Division:
	2014 (12)	7	$10.05 to $10.04		$73	4.49	%	1.15% to 1.40%	(0.10)% to (0.20)%
LargeCap Blend II Class 1   Division:
	2014	6,148	$19.43 to $17.99		$118,691	1.24	%	1.30% to 2.00%	9.84% to 9.10%
	2013	7,750	$17.69 to $16.49		$135,701	1.41	%	1.30% to 2.00%	29.79% to 28.93%
	2012	9,846	$13.63 to $12.79		$132,633	1.29	%	1.25% to 1.85%	13.77% to 13.09%
	2011	11,823	$11.98 to $11.31		$139,819	0.03	%	1.25% to 1.85%	(1.40)% to (1.99)%
	2010	13,116	$12.15 to $11.54		$157,179	2.47	%	1.25% to 1.85%	11.88% to 11.18%
LargeCap Blend II Class 2   Division:
	2014 (12)	-	$10.13 to $10.12	$–		–%		1.15% to 1.40%	(0.690	)%
LargeCap Growth Class 1   Division:
	2014	3,191	$3.31 to $26.85		$53,469	0.54	%	0.41% to 2.00%	10.65% to 8.92%
	2013	3,571	$2.99 to $24.65		$55,522	1.44	%	0.42% to 2.00%	33.35% to 31.40%
	2012	3,916	$2.16 to $18.76		$48,013	0.29	%	0.41% to 1.85%	16.10% to 14.67%
	2011	4,423	$1.93 to $16.36		$47,766	–%		0.44% to 1.85%	(4.63)% to (5.98)%
	2010	5,184	$2.02 to $17.40		$59,163	0.06	%	0.42% to 1.85%	17.88% to 16.23%
LargeCap Growth Class 2   Division:
	2014 (12)	1	$10.12 to $10.11		$6	–%		1.15% to 1.40%	(0.39)% to (0.49)%
LargeCap Growth I Class 1   Division:
	2014	2,292	$2.07 to $50.32		$109,226	0.12	%	0.41% to 2.00%	8.16% to 6.47%
	2013	2,572	$1.91 to $47.26		$114,518	0.38	%	0.40% to 2.00%	35.57% to 33.54%
	2012	2,847	$1.41 to $35.39		$97,185	0.07	%	0.44% to 1.85%	15.89% to 14.23%
	2011	3,256	$1.22 to $30.98		$97,585	–%		0.44% to 1.85%	(0.74)% to (2.15)%
	2010	3,814	$1.23 to $31.66		$116,970	0.13	%	0.53% to 1.85%	19.10% to 17.43%

177

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
LargeCap S&P 500 Index Class 1   Division:
	2014	6,500	$1.99 to $14.77			$102,363	1.24	%	0.37% to 2.00%	12.81% to 11.05%
	2013	7,202	$1.76 to $13.30			$101,189	1.22	%	0.40% to 2.00%	31.49% to 29.50%
	2012	7,893	$1.34 to $10.27			$85,828	1.07	%	0.41% to 1.85%	15.02% to 13.36%
	2011	9,228	$1.17 to $9.06			$88,077	0.05	%	0.50% to 1.85%	1.31% to (0.11)%
	2010	10,207	$1.15 to $9.07			$96,644	1.44	%	0.21% to 1.85%	14.19% to 12.67%
LargeCap Value Class 1   Division:
	2014	3,695	$61.32 to $36.55			$91,487	2.20	%	0.09% to 2.00%	10.64% to 8.97%
	2013	4,234	$4.78 to $33.54			$95,526	2.52	%	0.43% to 2.00%	30.28% to 28.36%
	2012	4,706	$3.51 to $26.13			$84,330	1.26	%	0.42% to 1.85%	17.82% to 16.39%
	2011	5,519	$36.07 to $22.45			$83,241	–%		0.31% to 1.85%	0.69% to (0.66)%
	2010	6,439	$35.82 to $22.60			$97,515	1.77	%	0.29% to 1.85%	13.54% to 11.99%
MFS VIT International   Value Service Class Division:
	2014 (12)	6		$9.83		$61	–%		1.15% to 1.40%	(2.090	)%
MFS VIT New Discovery   Service Class Division:
	2014	88	$10.81 to $10.69			$944	–%		1.30% to 2.00%	(8.70)% to (9.33)%
	2013 (8)	51	$11.84 to $11.79			$598	–%		1.30% to 2.00%	17.00% to 16.50%
MFS VIT Utilities Service Class   Division:
	2014	550	$9.80 to $21.85			$12,181	2.02	%	1.15% to 2.00%	(2.68)% to 10.24%
	2013	425	$20.38 to $19.82			$8,631	2.03	%	1.40% to 2.00%	18.70% to 17.98%
	2012	311	$17.17 to $16.80			$5,324	6.80	%	1.25% to 1.85%	11.78% to 11.11%
	2011	212	$15.36 to $15.12			$3,243	3.24	%	1.25% to 1.85%	5.21% to 4.56%
	2010	111	$14.60 to $14.46			$1,619	2.09	%	1.25% to 1.85%	12.05% to 11.40%
MFS VIT Value Service Class   Division:
	2014	238	$21.83 to $21.10			$5,175	1.34	%	1.40% to 2.00%	8.66% to 7.98%
	2013	222	$20.09 to $19.54			$4,442	1.11	%	1.40% to 2.00%	33.84% to 33.02%
	2012	133	$15.01 to $14.69			$1,987	1.32	%	1.25% to 1.85%	14.41% to 13.79%
	2011	114	$13.12 to $12.91			$1,498	1.29	%	1.25% to 1.85%	(1.65)% to (2.27)%
	2010	109	$13.34 to $13.21			$1,459	1.08	%	1.25% to 1.85%	9.79% to 9.17%

178

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
MidCap Class 1 Division:
	2014	5,671	$9.46 to 74.89		$389,291	0.51	%	0.40% to 2.00%	12.51% to 10.75%
	2013	6,669	$8.41 to $67.62		$412,319	1.44	%	0.43% to 2.00%	33.37% to 31.38%
	2012	7,660	$6.06 to $51.47		$362,857	0.87	%	0.42% to 1.85%	18.68% to 17.24%
	2011	8,881	$5.30 to $43.90		$355,563	–%		0.44% to 1.85%	7.84% to 6.32%
	2010	10,174	$4.92 to $41.29		$378,975	2.61	%	0.44% to 1.85%	23.58% to 21.84%
Money Market Class 1   Division:
	2014	6,700	$0.00 to $12.33		$55,230	–%		0.00% to 2.00%	(100.00)% to (1.99)%
	2013	6,956	$2.42 to $12.58		$65,639	–%		0.00% to 2.00%	(1.00)% to (1.87)%
	2012	8,221	$2.19 to $12.82		$81,007	–%		0.00% to 1.85%	(1.49)% to (1.84)%
	2011	9,682	$2.47 to $13.06		$101,686	–%		0.00% to 1.85%	(0.99)% to (1.88)%
	2010	10,709	$1.70 to $13.31		$115,064	–%		0.40% to 1.85%	(0.42)% to (1.84)%
Money Market Class 2   Division:
	2014 (12)	22	$9.97 to $9.96		$217	–%		1.15% to 1.40%	(0.100	)%
Neuberger Berman AMT Large   Cap Value I Class Division:
	2014	276	$19.13 to $17.98		$5,241	0.72	%	1.40% to 2.00%	8.32% to 7.66%
	2013	312	$17.66 to $16.70		$5,443	1.11	%	1.40% to 2.00%	29.38% to 28.66%
	2012	394	$13.65 to $12.98		$5,317	0.41	%	1.25% to 1.85%	15.19% to 14.46%
	2011	396	$11.85 to $11.34		$4,642	–%		1.25% to 1.85%	(12.48)% to (12.97)%
	2010	395	$13.54 to $13.03		$5,296	0.62	%	1.25% to 1.85%	14.26% to 13.50%
Neuberger Berman AMT Small   Cap Growth S Class Division:
	2014	206	$15.17 to $14.25		$3,088	–%		1.40% to 2.00%	2.02% to 1.42%
	2013	256	$14.87 to $14.05		$3,748	–%		1.40% to 2.00%	43.95% to 43.08%
	2012	299	$10.33 to $9.82		$3,038	–%		1.25% to 1.85%	7.49% to 6.74%
	2011	321	$9.61 to $9.20		$3,046	–%		1.25% to 1.85%	(2.34)% to (2.85)%
	2010	330	$9.84 to $9.47		$3,211	–%		1.25% to 1.85%	18.13% to 17.49%
Neuberger Berman AMT Socially   Responsive I Class Division:
	2014	290	$21.13 to $19.86		$6,077	0.35	%	1.40% to 2.00%	8.81% to 8.23%
	2013	387	$19.42 to $18.35		$7,439	0.68	%	1.40% to 2.00%	35.80% to 34.93%
	2012	460	$14.30 to $13.60		$6,518	0.23	%	1.25% to 1.85%	9.66% to 8.97%
	2011	495	$13.04 to $12.48		$6,401	0.35	%	1.25% to 1.85%	(4.33)% to (4.88)%
	2010	470	$13.63 to $13.12		$6,359	0.04	%	1.25% to 1.85%	21.37% to 20.59%

179

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Oppenheimer Main Street Small   Cap Service Shares Division:
	2014	52	$12.71 to $12.59		$658	0.67	%	1.30% to 1.90%	10.23% to 9.57%
	2013 (10)	33	$11.53 to $11.49		$378	0.06	%	1.30% to 1.90%	15.07% to 14.67%
PIMCO All Asset   Administrative Class Division:
	2014	366	$14.38 to $13.90		$5,247	5.21	%	1.40% to 2.00%	(0.90)% to (1.56)%
	2013	346	$14.51 to $14.12		$4,994	4.45	%	1.40% to 2.00%	(1.09)% to (1.60)%
	2012	322	$14.67 to $14.35		$4,703	5.79	%	1.25% to 1.85%	13.54% to 12.81%
	2011	201	$12.92 to $12.72		$2,597	6.77	%	1.25% to 1.85%	0.70% to 0.08%
	2010	234	$12.83 to $12.71		$2,994	9.57	%	1.25% to 1.85%	11.66% to 11.00%
PIMCO High Yield   Administrative Class Division:
	2014	1,160	$9.88 to $13.45		$16,015	5.25	%	1.15% to 2.00%	(1.20)% to 1.28%
	2013	1,048	$13.60 to $13.28		$14,204	5.56	%	1.40% to 2.00%	4.37% to 3.75%
	2012	1,126	$13.03 to $12.80		$14,597	5.82	%	1.25% to 1.85%	12.91% to 12.18%
	2011	1,338	$11.54 to $11.41		$15,396	6.67	%	1.25% to 1.85%	2.03% to 1.51%
	2010 (4)
PIMCO Total Return   Administrative Class Division:
	2014	2,330	$10.11 to $12.13		$29,159	2.19	%	1.15% to 2.00%	(0.30)% to 2.19%
	2013	2,556	$12.21 to $11.87		$31,116	2.20	%	1.40% to 2.00%	(3.17)% to (3.81)%
	2012	3,618	$12.61 to $12.34		$45,490	2.48	%	1.25% to 1.85%	8.24% to 7.59%
	2011	2,292	$11.65 to $11.47		$26,662	2.60	%	1.25% to 1.85%	2.28% to 1.68%
	2010	1,460	$11.39 to $11.28		$16,609	2.31	%	1.25% to 1.85%	6.75% to 6.11%
Principal Capital Appreciation   Class 1 Division:
	2014	1,161	$16.48 to $15.35		$18,505	3.13	%	0.95% to 2.00%	11.35% to 10.19%
	2013	1,169	$14.80 to $13.93		$16,817	6.72	%	0.95% to 2.00%	31.44% to 30.19%
	2012	1,038	$11.26 to $10.70		$11,418	1.13	%	0.95% to 1.85%	12.71% to 11.69%
	2011	936	$9.99 to $9.58		$9,164	–%		0.95% to 1.85%	(0.79)% to (1.64)%
	2010	754	$10.07 to $9.74		$7,466	1.80	%	0.95% to 1.85%	14.30% to 13.26%
Principal Capital Appreciation   Class 2 Division:
	2014 (12)	19	$10.32 to $10.31		$192	–%		1.15% to 1.40%	(0.290	)%

180

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Principal LifeTime Strategic   Income Class 1 Division:
	2014	1,565	$12.74 to $13.18		$21,738	2.51	%	0.95% to 2.00%	3.58% to 2.49%
	2013	1,813	$12.30 to $12.86		$24,406	2.72	%	0.95% to 2.00%	4.15% to 3.21%
	2012	1,977	$11.81 to $12.46		$25,654	1.77	%	0.95% to 1.85%	8.65% to 7.60%
	2011	2,070	$10.87 to $11.58		$24,819	3.13	%	0.95% to 1.85%	2.45% to 1.58%
	2010	2,070	$10.61 to $11.40		$24,280	4.80	%	0.95% to 1.85%	10.29% to 9.20%
Principal LifeTime 2010 Class 1   Division:
	2014	2,223	$13.54 to $14.39		$33,743	2.17	%	0.95% to 2.00%	3.83% to 2.71%
	2013	2,531	$13.04 to $14.01		$36,994	2.38	%	0.95% to 2.00%	9.76% to 8.77%
	2012	2,851	$11.88 to $12.88		$38,033	1.90	%	0.95% to 1.85%	10.82% to 9.71%
	2011	3,124	$10.72 to $11.74		$37,726	2.71	%	0.95% to 1.85%	0.47% to (0.42)%
	2010	3,413	$10.67 to $11.79		$41,055	4.30	%	0.95% to 1.85%	12.79% to 11.86%
Principal LifeTime 2020 Class 1   Division:
	2014	8,649	$14.43 to $15.81		$143,695	2.31	%	0.95% to 2.00%	4.72% to 3.60%
	2013	11,078	$13.78 to $15.26		$176,094	2.14	%	0.95% to 2.00%	14.93% to 13.88%
	2012	12,377	$11.99 to $13.40		$171,673	1.71	%	0.95% to 1.85%	13.65% to 12.61%
	2011	13,310	$10.55 to $11.90		$163,065	2.49	%	0.95% to 1.85%	(1.95)% to (2.86)%
	2010	14,045	$10.76 to $12.25		$176,256	3.85	%	0.95% to 1.85%	13.86% to 12.90%
Principal LifeTime 2030 Class 1   Division:
	2014	4,403	$14.51 to $15.89		$73,233	2.15	%	0.95% to 2.00%	5.07% to 3.99%
	2013	4,540	$13.81 to $15.28		$72,233	1.94	%	0.95% to 2.00%	17.93% to 16.73%
	2012	4,718	$11.71 to $13.09		$63,923	1.60	%	0.95% to 1.85%	14.47% to 13.43%
	2011	4,956	$10.23 to $11.54		$58,812	1.96	%	0.95% to 1.85%	(3.12)% to (3.99)%
	2010	5,131	$10.56 to $12.02		$63,026	2.32	%	0.95% to 1.85%	14.29% to 13.29%
Principal LifeTime 2040 Class 1   Division:
	2014	833	$14.83 to $16.53		$14,504	2.00	%	0.95% to 2.00%	5.25% to 4.09%
	2013	787	$14.09 to $15.88		$13,053	1.57	%	0.95% to 2.00%	21.26% to 20.21%
	2012	852	$11.62 to $13.21		$11,702	1.57	%	0.95% to 1.85%	15.62% to 14.57%
	2011	874	$10.05 to $11.53		$10,412	1.61	%	0.95% to 1.85%	(4.10)% to (5.02)%
	2010	869	$10.48 to $12.14		$10,823	2.23	%	0.95% to 1.85%	14.79% to 13.78%

181

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
Principal LifeTime 2050 Class 1   Division:
	2014	493	$14.83 to $16.61			$8,618	2.19	%	0.95% to 2.00%	5.18% to 4.07%
	2013	501	$14.10 to $15.96			$8,354	1.58	%	0.95% to 2.00%	22.61% to 21.46%
	2012	486	$11.50 to $13.14			$6,618	1.45	%	0.95% to 1.85%	16.04% to 14.96%
	2011	470	$9.91 to $11.43			$5,533	1.50	%	0.95% to 1.85%	(4.89)% to (5.69)%
	2010	469	$10.42 to $12.12			$5,830	2.13	%	0.95% to 1.85%	15.14% to 14.02%
Real Estate Securities Class 1   Division:
	2014	1,761	$4.86 to $47.70			$87,932	1.59	%	0.38% to 2.00%	32.26% to 30.19%
	2013	1,880	$3.67 to $36.64			$72,398	1.29	%	0.49% to 2.00%	3.66% to 2.15%
	2012	2,051	$3.54 to $35.87			$76,907	1.40	%	0.48% to 1.85%	16.68% to 15.00%
	2011	2,278	$3.04 to $31.19			$73,765	–%		0.66% to 1.85%	8.48% to 6.92%
	2010	2,507	$2.80 to $29.17			$75,755	2.99	%	0.67% to 1.85%	25.17% to 23.44%
Real Estate Securities Class 2   Division:
	2014 (12)	16	$11.39 to $11.38			$181	–%		1.15% to 1.40%	3.45% to 3.36%
Rydex Commodities Strategy    Division:
	2014 (12)	2	$7.08 to $7.07			$11	–%		1.15% to 1.40%	(20.00)% to (20.11)%
Rydex NASDAQ 100 Division:
	2014 (12)	9		$10.28		$97	–%		1.15% to 1.40%	(1.340	)%
SAM Balanced Portfolio   Class 1 Division:
	2014	49,402	$2.02 to $13.39			$687,748	2.66	%	0.48% to 2.00%	6.37% to 4.69%
	2013	58,685	$1.90 to $12.79			$775,903	2.43	%	0.57% to 2.00%	15.50% to 15.54%
	2012	61,098	$11.65 to $11.07			$697,358	0.69	%	0.95% to 1.85%	11.70% to 10.70%
	2011	64,434	$10.43 to $10.00			$660,873	2.77	%	0.95% to 1.85%	0.00% to (0.89)%
	2010	66,480	$10.43 to $10.09			$684,067	3.60	%	0.95% to 1.85%	12.51% to 11.49%
SAM Balanced Portfolio   Class 2 Division:
	2014 (12)	63	$10.04 to $10.03			$634	–%		1.15% to 1.40%	(0.69)% to (0.79)%

182

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
SAM Conservative Balanced   Portfolio Class 1 Division:
	2014	12,217	$14.22 to $13.25			$168,582	2.97	%	0.95% to 2.00%	5.18% to 4.17%
	2013	13,493	$13.52 to $12.72			$177,876	2.87	%	0.95% to 2.00%	10.46% to 9.37%
	2012	13,568	$12.24 to $11.63			$162,474	0.82	%	0.95% to 1.85%	10.17% to 9.20%
	2011	14,050	$11.11 to $10.65			$153,302	3.19	%	0.95% to 1.85%	1.37% to 0.38%
	2010	14,635	$10.96 to $10.61			$158,220	4.32	%	0.95% to 1.85%	10.71% to 9.83%
SAM Conservative Balanced   Portfolio Class 2 Division:
	2014 (12)	55	$10.04 to $10.03			$553	–%		1.15% to 1.40%	(0.50)% to (0.59)%
SAM Conservative Growth   Portfolio Class 1Division:
	2014	7,463	$14.08 to $13.11			$101,757	1.82	%	0.95% to 2.00%	6.42% to 5.30%
	2013	6,963	$13.23 to $12.45			$89,642	1.82	%	0.95% to 2.00%	21.94% to 20.76%
	2012	6,406	$10.85 to $10.31			$67,909	0.44	%	0.95% to 1.85%	13.14% to 12.07%
	2011	6,161	$9.59 to $9.20			$57,954	2.01	%	0.95% to 1.85%	(1.44)% to (2.23)%
	2010	5,760	$9.73 to $9.41			$55,154	3.12	%	0.95% to 1.85%	14.07% to 13.10%
SAM Conservative Growth   Portfolio Class 2 Division:
	2014 (12)	43		$10.05		$430	–%		1.15% to 1.40%	-0.79	%
SAM Flexible Income Portfolio   Class 1 Division:
	2014	13,335	$14.32 to $13.33			$185,235	3.60	%	0.95% to 2.00%	5.06% to 3.90%
	2013	13,976	$13.63 to $12.83			$185,636	3.43	%	0.95% to 2.00%	6.73% to 5.68%
	2012	14,864	$12.77 to $12.14			$185,716	1.13	%	0.95% to 1.85%	9.52% to 8.59%
	2011	14,070	$11.66 to $11.18			$160,984	3.86	%	0.95% to 1.85%	2.46% to 1.54%
	2010	14,055	$11.38 to $11.01			$157,635	5.26	%	0.95% to 1.85%	9.42% to 8.47%
SAM Flexible Income Portfolio   Class 2 Division:
	2014 (12)	42	$10.03 to $10.02			$418	–%		1.15% to 1.40%	(0.500	)%
SAM Strategic Growth Portfolio   Class 1 Division:
	2014	4,851	$14.08 to $13.12			$65,972	1.52	%	0.95% to 2.00%	7.65% to 6.58%
	2013	4,539	$13.08 to $12.31			$57,654	1.43	%	0.95% to 2.00%	26.25% to 24.97%
	2012	4,171	$10.36 to $9.85			$42,188	0.24	%	0.95% to 1.85%	14.35% to 13.48%
	2011	4,626	$9.06 to $8.68			$41,082	1.50	%	0.95% to 1.85%	(2.79)% to (3.77)%
	2010	4,212	$9.32 to $9.02			$38,641	2.50	%	0.95% to 1.85%	15.35% to 14.32%

183

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

						For the Year Ended December 31,
		December 31				except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio	Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest	Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
SAM Strategic Growth Portfolio   Class 2 Division:
	2014 (12)	62	$10.09 to $10.08		$624	–%		1.15% to 1.40%	(0.69)% to (0.79)%
Short-Term Income Class 1   Division:
	2014	11,376	$11.91 to $11.18		$131,612	1.68	%	0.85% to 2.00%	0.85% to -0.27%
	2013	13,303	$11.81 to $11.21		$153,216	1.87	%	0.85% to 2.00%	0.34% to (0.80)%
	2012	14,402	$11.77 to $11.30		$166,187	2.09	%	0.85% to 1.85%	4.07% to 3.10%
	2011	14,110	$11.31 to $10.96		$157,122	0.15	%	0.85% to 1.85%	0.53% to (0.54)%
	2010	14,544	$11.25 to $11.02		$161,858	2.79	%	0.85% to 1.85%	3.31% to 2.32%
Short-Term Income Class 2   Division:
	2014 (12)	9	$10.01 to $10.00		$94	–%		1.15% to 1.40%	(0.100	)%
SmallCap Blend Class 1   Division:
	2014	1,636	$2.17 to $19.02		$33,528	0.35	%	0.45% to 2.00%	4.45% to 2.81%
	2013	1,736	$2.08 to $18.50		$34,644	0.33	%	0.38% to 2.00%	47.19% to 21.95%
	2012	1,931	$1.41 to $12.76		$26,674	–%		0.32% to 1.85%	14.22% to 12.62%
	2011	2,287	$1.24 to $11.33		$27,780	0.35	%	0.34% to 1.85%	(1.89)% to (3.25)%
	2010	2,886	$1.26 to $11.71		$33,079	0.50	%	0.20% to 1.85%	23.74% to 21.98%
SmallCap Growth II Class 1   Division:
	2014	1,794	$1.39 to $16.14		$30,427	–%		0.45% to 2.00%	6.32% to 4.67%
	2013	2,157	$1.31 to $15.42		$33,880	–%		0.42% to 2.00%	46.81% to 44.65%
	2012	2,316	$0.89 to $10.66		$25,716	–%		0.37% to 1.85%	15.80% to 14.13%
	2011	2,639	$0.77 to $9.34		$25,540	–%		0.46% to 1.85%	(4.79)% to (6.13)%
	2010	3,144	$0.81 to $9.95		$31,722	–%		0.23% to 1.85%	26.40% to 24.69%
SmallCap Growth II Class 2   Division:
	2014 (12)	1	$10.80 to $10.79		$7	–%		1.15% to 1.40%	3.25% to 3.15%
SmallCap Value I Class 1   Division:
	2014	2,071	$3.08 to $34.22		$72,972	0.74	%	0.43% to 2.00%	6.72% to 5.03%
	2013	2,508	$2.89 to $32.58		$83,432	1.05	%	0.42% to 2.00%	39.18% to 37.12%
	2012	3,065	$2.08 to $23.76		$75,361	0.81	%	0.37% to 1.85%	21.21% to 19.52%
	2011	3,704	$1.71 to $19.88		$76,201	0.04	%	0.51% to 1.85%	(4.06)% to (5.42)%
	2010	4,063	$1.79 to $21.02		$86,698	0.84 %		0.36% to 1.85%	25.53% to 23.72%

184

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

							For the Year Ended December 31,
		December 31					except as noted
		Units (000's)	Unit Fair Value Corresponding to Lowest to Highest Expense Ratio		Net Assets (000's)		Investment Income Ratio (1)		Expense Ratio (2) Lowest to Highest		Total Return (3) Corresponding to Lowest to Highest Expense Ratio
	Division
SmallCap Value I Class 2   Division:
	2014 (12)	3	$10.60 to $10.59			$30	–%		1.15% to 1.40%		2.12% to 2.02%
T. Rowe Price Blue Chip   Growth Portfolio II Division:
	2014	581	$21.93 to $20.61			$12,613	–%		1.40% to 2.00%		7.34% to 6.73%
	2013	566	$20.43 to $19.31			$11,456	–%		1.40% to 2.00%		38.98% to 38.13%
	2012	567	$14.70 to $13.98			$8,278	–%		1.25% to 1.85%		16.48% to 15.73%
	2011	562	$12.62 to $12.08			$7,052	–%		1.25% to 1.85%		0.08% to (0.49)%
	2010	535	$12.61 to $12.14			$6,703	–%		1.25% to 1.85%		14.53% to 13.88%
T. Rowe Price Health Sciences   Portfolio II Division:
	2014	686	$44.36 to $41.68			$30,107	–%		1.40% to 2.00%		29.40% to 28.64%
	2013	631	$34.28 to $32.40			$21,393	–%		1.40% to 2.00%		48.59% to 47.68%
	2012	515	$23.07 to $21.94			$11,743	–%		1.25% to 1.85%		29.32% to 28.53%
	2011	439	$17.84 to $17.07			$7,738	–%		1.25% to 1.85%		9.05% to 8.38%
	2010	396	$16.36 to $15.75			$6,429	–%		1.25% to 1.85%		13.85% to 13.23%
Templeton Global Bond VIP   Class 4 Division:
	2014 (12)	7	$9.75 to $9.74			$68	–%		1.15% to 1.40%		(2.30)% to (2.31)%
Templeton Growth VIP   Class 2 Division:
	2014 (15)	45		$21.14		$960	1.34	%	0.85	%	(3.650	)%
	2013	49		$21.94		$1,071	2.65	%	0.85	%	29.82	%
	2012	61		$16.90		$1,032	2.23	%	0.85	%	20.28	%
	2011	69		$14.05		$964	1.35	%	0.85	%	(7.750	)%
	2010	79		$15.23		$1,200	1.41	%	0.85	%	6.43	%
Van Eck Global Hard Assets   Class S Division:
	2014	591	$7.61 to $11.74			$7,087	–%		1.15% to 2.00%		(13.82)% to (20.94)%
	2013	584	$15.27 to $14.85			$8,885	0.49	%	1.30% to 2.00%		8.92% to 8.24%
	2012	565	$14.02 to $13.72			$7,902	0.68	%	1.25% to 1.85%		1.82% to 1.18%
	2011	559	$13.77 to $13.56			$7,688	0.73	%	1.25% to 1.85%		(17.74)% to (18.21)%
	2010	323	$16.74 to $16.58			$5,397	0.14	%	1.25% to 1.85%		27.11% to 41.23%

185

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

(1)	These amounts represent the dividends, excluding distributions of capital gains, received by the division from the underlying mutual fund, net of management fees assessed by the fund manager, divided by the average net assets. These ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the division is affected by the timing of the declaration of dividends by the underlying fund in which the division invests. These ratios are annualized for periods less than one year.
(2)	These ratios represent the annualized contract expenses of the separate account, consisting primarily of mortality and expense charges, for each period indicated. The ratios include only those expenses that result in a direct reduction to unit values. Charges made directly to contract owner accounts through the redemption of units and expenses of the underlying fund are excluded.
(3)	These amounts represent the total return for the periods indicated, including changes in the value of the underlying fund, and reflect deductions for all items included in the expense ratio. The total return does not include any expenses assessed through the redemption of units; inclusion of these expenses in the calculation would result in a reduction in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the variable account. For purposes of the total return calculation the beginning unit value is typically equal to an investment option with a similar expense structure and if no such similar investment option exists then a beginning unit value of ten would typically be used. The total return is calculated for the period indicated or from the effective date through the end of the reporting period. Total returns have not been annualized for periods less than one year. These percentages represent the range of total returns available as of the report date and correspond with the expense ratio lowest to highest.
(4)	Commencement of operations, January 4, 2010.Investment income ratios have been annualized for the period ended December 31, 2010.
(5)	Commencement of operations, May 24, 2010. Investment income ratios have been annualized for the period ended December 31, 2010.
(6)	Commencement of operations, April 27, 2012. Investment income ratios have been annualized for the period ended December 31, 2012.
(7)	Commencement of operations, May 21, 2012. Investment income ratios have been annualized for the period ended December 31, 2012.
(8)	Commencement of operations, May 20, 2013. Investment income ratios have been annualized for the period ended December 31, 2013.
(9)	Commencement of operations, December 2, 2013. Investment income ratios have been annualized for the period December 31, 2013.
(10)	Commencement of operations, April 24, 2014. Investment income ratios have been annualized for the period December 31, 2014.
(11)	Commencement of operations, May 17, 2014. Investment income ratios have been annualized for the period December 31, 2014.
(12)	Commencement of operations, November 10, 2014. Investment income ratios have been annualized for the period December 31, 2014.
(13)	Represented the operations of Franklin Small Cap Value Securities Class 2 Division until May 17, 2014.
(14)	Represented the operations of Goldman Sachs VIT Structured Small Cap Equity Service Class I Division until May 17, 2014.
(15)	Represented the operations of Templeton Growth Securities Class 2 Division until May 17, 2014.

186

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
There are divisions that have total return outside of the ranges indicated above. The following is a list of the divisions and corresponding unit values and total return.
Division	2014 Unit Value ($)	2014 Total Return (%)
American Century VP Inflation Protection Class II Division	9.93 and 13.11	(1.10) and 1.86
American Century VP Value Class II Division	10.14 and 21.26	11.48
Division	2014 Unit Value ($)	2014 Total Return (%)
Balanced Class 1 Division	3.16 and 28.15	–
Bond & Mortgage Securities Class 1 Division	2.71, 21.86, 23.76 and 23.79	–
Diversified Balanced Managed Volatility Class 2 Division	10.62	5.46
Diversified Growth Managed Volatility Class 2 Division	10.68	5.53
Diversified International Class 1 Division	3.06, 24.96, 27.13 and 27.16	–
DWS Small Mid Cap Value Class B Division	10.08, 11.70, 11.80 and 11.81	3.08 and 3.69
Equity Income Class 1 Division	14.27, 14.95 and 14.97	–
Fidelity VIP Contrafund Service Class 2 Division	10.16 and 22.88	10.11
Fidelity VIP Mid Cap Service Class 2 Division	10.05 and 25.94	4.60
Fidelity VIP Overseas Service Class 2 Division	16.08	–
Government & High Quality Bond Class 1 Division	2.65, 11.67, 12.09, 12.11, 12.34 and 12.42	–
International Emerging Markets Class 1 Division	29.24, 31.78 and 31.82	–
LargeCap Growth Class 1 Division	3.17, 26.88, 29.22 and 29.26	–
LargeCap Growth I Class 1 Division	50.39, 54.76 and 54.84	–
LargeCap S&P 500 Index Class 1 Division	14.79, 16.07, 16.10, 17.15 and 17.30	–
LargeCap Value Class 1 Division	5.03, 5.29, 9.73, 11.67, 15.70 and 17.16	10.70
MFS VIT Utilities Service Class Division	22.60	10.89
MidCap Class 1 Division	9.05, 75.00, 81.51 and 81.62	–
Money Market Class 1 Division	12.35, 13.42 and 13.44	(1.91), (1.49), (1.40), (1.32), (0.92), (0.86), (0.64) and (0.42)
PIMCO High Yield Administrative Class Division	13.86	1.91
PIMCO Total Return Administrative Class Division	12.55	2.78
Principal LifeTime Strategic Income Class 1 Division	13.20, 14.02 and 14.04	–
Principal LifeTime 2010 Class 1 Division	14.41, 15.31 and 15.33	–
Principal LifeTime 2020 Class 1 Division	15.84, 16.82 and 16.85	–
Principal LifeTime 2030 Class 1 Division	15.91, 16.91 and 16.93	–

187

Principal Life Insurance Company Separate Account B Notes to Financial Statements December 31, 2014
Division	2014 Unit Value ($)	2014 Total Return (%)
Principal LifeTime 2040 Class 1 Division	16.55, 17.59 and 17.61	–
Principal LifeTime 2050 Class 1 Division	16.63, 17.67 and 17.70	–
Real Estate Securities Class 1 Division	47.76, 51.91 and 51.98	–
SAM Balanced Portfolio Class 1 Division	13.41, 14.02, 14.04 and 14.38	–
SAM Strategic Growth Portfolio Class 1 Division	–	6.57
SmallCap Blend Class 1 Division	19.05, 20.70, 20.73 and 27.02	–
SmallCap Growth II Class 1 Division	16.16, 16.32, 16.68, 17.56 and 17.59	–
SmallCap Value I Class 1 Division	34.27, 37.24 and 37.30	–
Van Eck Global Hard Assets Service Class Division	11.75, 12.14 and 12.16	(13.720)
Division	2013 Unit Value ($)	2013 Total Return (%)
Balanced Class 1 Division	2.92 and 26.55	–
Bond & Mortgage Securities Class 1 Division	2.59, 21.17, 22.89 and 22.90	–
Diversified International Class 1 Division	3.18, 26.28, 28.42 and 28.43	–
Equity Income Class 1 Division	13.44 and 13.45	–
Franklin Small Cap Value Securities Class 2 Division	–	17.18 and 34.47
Goldman Sachs VIT Mid Cap Value Service Class I Division	–	10.09 and 31.14
Goldman Sachs VIT Structured Small Cap Equity Service Class I Division	–	13.75 and 33.92
Government & High Quality Bond Class 1 Division	11.67, 11.86, 11.92 and 2.54	–
International Emerging Markets Class 1 Division	30.96, 33.48 and 33.50	–
LargeCap Growth Class 1 Division	2.87, 24.66, 26.67 and 26.68	–
LargeCap Growth I Class 1 Division	47.28, 51.13 and 51.15	–
LargeCap S&P 500 Index Class 1 Division	13.31, 14.39, 15.27 and 15.42	–
LargeCap Value Class 1 Division	4.56, 33.55, 36.29, 36.30 and 55.42	–
MidCap Class 1 Division	8.06, 67.65, 73.16 and 73.19	–

188

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division	2013 Unit Value ($)	2013 Total Return (%)
Money Market Class 1 Division	1.60, 1.68, 2.16, 12.59, 13.61 and 13.62	–
Principal LifeTime Strategic Income Class 1 Division	13.60	–
Principal LifeTime 2010 Class 1 Division	14.81 and 14.82	–
Principal LifeTime 2020 Class 1 Division	16.14	–
Principal LifeTime 2030 Class 1 Division	15.29, 16.16 and 16.17	–
Principal LifeTime 2040 Class 1 Division	15.89, 16.79 and 16.80	–
Principal LifeTime 2050 Class 1 Division	16.88	–
Real Estate Securities Class 1 Division	36.65, 39.63 and 39.65	–
SAM Balanced Portfolio Class 1 Division	13.31, 13.32 and 13.59	16.14, 16.23 and 16.65
SmallCap Blend Class 1 Division	18.51, 20.01, 20.02 and 25.98	–
SmallCap Growth II Class 1 Division	15.43, 15.78, 16.68 and 16.69	–
SmallCap Value I Class 1 Division	32.59, 35.24 and 35.26	–
Division	2012 Unit Value ($)	2012 Total Return (%)
Asset Allocation Class 1 Division	28.28	–
Balanced Class 1 Division	22.50	12.58
Bond & Mortgage Securities Class 1 Division	23.40	7.09
Diversified International Class 1 Division	24.24	17.94
Equity Income Class 1 Division	10.70	–
Government & High Quality Bond Class 1 Division	11.94, 12.09 and 12.14	3.48
International Emerging Markets Class 1 Division	35.58	–
LargeCap Growth Class 1 Division	20.18	16.36
LargeCap Growth I Class 1 Division	38.05	–
LargeCap S&P 500 Index Class 1 Division	11.04, 11.66 and 11.79	–
LargeCap Value Class 1 Division	28.10 and 42.56	18.01 and 18.08
MidCap Blend Class 1 Division	55.35	18.94
Money Market Class 1 Division	13.79	(1.22), (1.00), (0.94), (0.82), (0.64) and (0.42)
Principal LifeTime Strategic Income Class 1 Division	13.10	–
Principal LifeTime 2010 Class 1 Division	13.54	–
Principal LifeTime 2020 Class 1 Division	14.09	–

189

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division	2012 Unit Value ($)	2012 Total Return (%)
Principal LifeTime 2030 Class 1 Division	13.76	–
Principal LifeTime 2040 Class 1 Division	13.89	–
Principal LifeTime 2050 Class 1 Division	13.81	–
Real Estate Securities Class 1 Division	38.58	–
Short-Term Income Class 1 Division	–	4.08
SmallCap Blend Class 1 Division	13.72 and 17.72	–
SmallCap Growth II Class 1 Division	10.80 and 11.46	–
SmallCap Value I Class 1 Division	25.55	–
Division	2011 Unit Value ($)	2011 Total Return (%)
Asset Allocation Class 1 Division	25.22	–
Balanced Class 1 Division	2.19 and 20.16	–
Bond & Mortgage Securities Class 1 Division	2.46 and 22.03	–
Diversified Balanced Class 2 Division	–	2.39
Diversified Growth Class 2 Division	–	1.00
Diversified International Class 1 Division	2.30 and 20.73	–
Equity Income Class 1 Division	9.59	–
Government & High Quality Bond Class 1 Division	2.50, 11.64, 11.75 and 11.79	–
International Emerging Markets Class 1 Division	29.83	–
LargeCap Growth Class 1 Division	1.86 and 17.49	–
LargeCap Growth I Class 1 Division	33.11	–
LargeCap S&P 500 Index Class 1 Division	9.68, 10.18 and 10.30	–
LargeCap Value Class 1 Division	2.97, 3.10, 5.90, 6.97, 9.37 and 10.21	0.75
MidCap Blend Class 1 Division	5.11 and 46.92	–
Money Market Class 1 Division	1.62, 1.70, 2.23 and 13.96	(0.89), (0.78), (0.64) and (0.42)
Principal LifeTime Strategic Income Class 1 Division	12.10	–
Principal LifeTime 2010 Class 1 Division	12.27	–
Principal LifeTime 2020 Class 1 Division	12.43	–
Principal LifeTime 2030 Class 1 Division	12.06	–
Principal LifeTime 2040 Class 1 Division	12.05	–
Principal LifeTime 2050 Class 1 Division	11.95	–
Real Estate Securities Class 1 Division	33.34	–
SmallCap Blend Class 1 Division	12.11 and 15.58	–
SmallCap Growth II Class 1 Division	9.38 and 9.98	–
SmallCap Value I Class 1 Division	21.25	–

190

Principal Life Insurance Company

Separate Account B

Notes to Financial Statements

December 31, 2014

Division	2010 Unit Value ($)	2010 Total Return (%)
American Century VP Income & Growth Class I Division	9.55	13.15
Asset Allocation Division	25.00	–
Balanced Class Division	2.12 and 19.61	–
Bond & Mortgage Securities Division	2.31 and 20.83	–
Diversified International Division	2.58 and 23.55	–
Equity Income Division	9.21	–
Government & High Quality Bond Division	2.37, 11.10, 11.17 and 11.19	–
International Emerging Markets Division	36.60	–
LargeCap Growth Division	1.95 and 18.49	–
LargeCap Growth I Division	33.64	–
LargeCap S&P 500 Index Division	9.63, 10.09 and 10.22	–
LargeCap Value Division	2.96, 3.08, 5.92, 6.96, 9.35 and 10.17	13.60
MidCap Blend Division	4.74 and 43.87	–
Money Market Division	1.63 and 14.14	–
Principal LifeTime Strategic Income Division	11.84	–
Principal LifeTime 2010 Division	12.24	–
Principal LifeTime 2020 Division	12.73	–
Principal LifeTime 2030 Division	12.49	–
Principal LifeTime 2040 Division	12.61	–
Principal LifeTime 2050 Division	12.59	–
Real Estate Securities Division	30.99	–
SmallCap Blend Division	12.45 and 15.95	–
SmallCap Growth II Division	10.57	–
SmallCap Value I Division	22.34	–
Van Eck VIP Global Hard Assets Class Division	–	26.37 and 41.74

191

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192

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholder

Principal Life Insurance Company

We have audited the accompanying consolidated statements of financial position of Principal Life Insurance Company (the Company) as of December 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive income, stockholder’s equity and cash flows for each of the three years in the period ended December 31, 2014. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Principal Life Insurance Company at December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles.

	/s/ Ernst & Young LLP
Des Moines, Iowa March 25, 2015

193

Principal Life Insurance Company
Consolidated Statements of Financial Position
		December 31, 2014		December 31, 2013
		(in millions)
Assets
Fixed maturities, available-for-sale (2014 and 2013 include $278.2 million and $272.0 million related to
	consolidated variable interest entities)	$	46,549.4	$	45,524.1
Fixed maturities, trading (2014 and 2013 include $100.4 million and $110.4 million related to consolidated
	variable interest entities)		400.3		358.5
Equity securities, available-for-sale			108.9		102.6
Equity securities, trading			191.6		169.7
Mortgage loans			11,164.4		10,819.2
Real estate (2014 and 2013 include $284.9 million and $266.3 million related to consolidated variable
	interest entities)		1,340.4		1,266.4
Policy loans			799.0		830.1
Other investments (2014 and 2013 include $40.6 million and $68.1 million related to consolidated variable
	interest entities and $127.2 million and $142.9 million measured at fair value under the fair value option)		1,428.4		1,354.1
	Total investments		61,982.4		60,424.7
Cash and cash equivalents			1,274.0		2,071.6
Accrued investment income			497.3		523.2
Premiums due and other receivables			1,134.7		1,170.5
Deferred acquisition costs			2,754.6		2,848.8
Property and equipment			544.8		454.1
Goodwill			295.8		299.7
Other intangibles			144.3		151.9
Separate account assets			94,328.4		83,790.3
Other assets			958.5		1,045.7
	Total assets	$	163,914.8	$	152,780.5
Liabilities
Contractholder funds		$	33,428.3	$	34,627.7
Future policy benefits and claims			19,691.6		18,245.0
Other policyholder funds			744.2		706.4
Short-term debt			154.5		292.4
Long-term debt (2014 and 2013 include $82.3 million and $47.7 million related to consolidated variable
	interest entities)		82.3		152.4
Income taxes currently payable			5.3		5.2
Deferred income taxes			1,082.8		552.7
Separate account liabilities			94,328.4		83,790.3
Other liabilities (2014 and 2013 include $344.0 million and $362.4 million related to consolidated variable
	interest entities, of which $71.0 million and $104.9 million are measured at fair value under the fair
	value option)		6,151.7		6,420.2
Total liabilities			155,669.1		144,792.3
Redeemable noncontrolling interest			21.1		208.7
Stockholder's equity
Common stock, par value $1.00 per share - 5.0 million shares authorized, 2.5 million shares issued
	and outstanding (wholly owned indirectly by Principal Financial Group, Inc.)		2.5		2.5
Additional paid-in capital			5,275.0		5,505.0
Retained earnings			1,817.2		1,738.1
Accumulated other comprehensive income			1,086.7		495.7
	Total stockholder's equity attributable to Principal Life Insurance Company		8,181.4		7,741.3
Noncontrolling interest			43.2		38.2
	Total stockholder's equity		8,224.6		7,779.5
	Total liabilities and stockholder's equity	$	163,914.8	$	152,780.5
See accompanying notes.

194

Principal Life Insurance Company
Consolidated Statements of Operations
		For the year ended December 31,
		2014		2013		2012
		(in millions)
Revenues
Premiums and other considerations		$	3,497.2	$	2,862.4	$	2,934.9
Fees and other revenues			2,392.7		2,234.6		1,934.8
Net investment income			2,663.5		2,681.5		2,811.8
Net realized capital gains (losses), excluding impairment losses on
	available-for-sale securities		136.4		(99.5)		190.7
Net other-than-temporary impairment (losses) recoveries on available-
	for-sale securities		28.5		(89.8)		(135.9)
Other-than-temporary impairment losses on fixed maturities,
	available-for-sale reclassified to (from) other comprehensive
	income		(102.2)		(22.0)		17.3
Net impairment losses on available-for-sale securities			(73.7)		(111.8)		(118.6)
Net realized capital gains (losses)			62.7		(211.3)		72.1
	Total revenues		8,616.1		7,567.2		7,753.6
Expenses
Benefits, claims and settlement expenses			4,610.0		4,114.5		4,556.6
Dividends to policyholders			177.4		189.0		197.7
Operating expenses			2,603.2		2,376.3		2,154.5
	Total expenses		7,390.6		6,679.8		6,908.8
Income before income taxes			1,225.5		887.4		844.8
Income taxes			243.0		173.2		151.5
Net income			982.5		714.2		693.3
Net income attributable to noncontrolling interest			30.0		17.6		18.4
Net income attributable to Principal Life Insurance Company		$	952.5	$	696.6	$	674.9
See accompanying notes.

195

Principal Life Insurance Company
Consolidated Statements of Comprehensive Income
		For the year ended December 31,
		2014		2013		2012
		(in millions)
Net income		$	982.5	$	714.2	$	693.3
Other comprehensive income (loss), net:
	Net unrealized gains (losses) on available-for-sale securities		261.2		(477.7)		505.3
	Noncredit component of impairment losses on fixed maturities, available-for-sale		61.9		5.1		(6.7)
	Net unrealized gains (losses) on derivative instruments		56.6		(6.5)		(47.0)
	Foreign currency translation adjustment		(3.7)		—		(9.0)
	Net unrecognized postretirement benefit obligation		(8.0)		332.6		(127.4)
Other comprehensive income (loss)			368.0		(146.5)		315.2
Comprehensive income			1,350.5		567.7		1,008.5
Comprehensive income attributable to noncontrolling interest			28.7		18.0		19.6
Comprehensive income attributable to Principal Life Insurance Company		$	1,321.8	$	549.7	$	988.9
See accompanying notes.

196

Principal Life Insurance Company
Consolidated Statements of Stockholder's Equity
								Accumulated
				Additional				other				Total
		Common		paid-in		Retained		comprehensive		Noncontrolling		stockholder's
		stock		capital		earnings		income		interest		equity
		(in millions)
Balances at January 1, 2012		$	2.5	$	5,718.1	$	1,195.0	$	328.6	$	350.8	$	7,595.0
Distribution to parent			—		(14.4)		—		—		—		(14.4)
Stock-based compensation and
	additional related tax benefits		—		43.9		(2.2)		—		—		41.7
Dividends to parent			—		—		(700.0)		—		—		(700.0)
Distributions to noncontrolling interest			—		—		—		—		(10.7)		(10.7)
Deconsolidation of certain variable interest entities			—		—		—		—		(353.2)		(353.2)
Contributions from noncontrolling
	interest		—		—		—		—		12.6		12.6
Net income (excludes $1.0 million attributable to
	redeemable noncontrolling interests)		—		—		674.9		—		17.4		692.3
Other comprehensive income (excludes $1.2 million
	attributable to redeemable noncontrolling interest)		—		—		—		314.0		—		314.0
Balances at December 31, 2012			2.5		5,747.6		1,167.7		642.6		16.9		7,577.3
Distribution to parent			—		(163.8)		—		—		—		(163.8)
Stock-based compensation and additional related
	tax benefits		—		47.4		(2.9)		—		—		44.5
Dividends to parent			—		—		(80.0)		—		—		(80.0)
Distributions to noncontrolling interest			—		—		—		—		(2.0)		(2.0)
Contributions from noncontrolling interest			—		—		—		—		2.5		2.5
Sale of subsidiary shares to noncontrolling interest			—		11.5		—		—		20.3		31.8
Adjustments to redemption amount of redeemable
	noncontrolling interest		—		(137.7)		(43.3)		—		(3.5)		(184.5)
Net income (excludes $13.6 million attributable to
	redeemable noncontrolling interest)		—		—		696.6		—		4.0		700.6
Other comprehensive loss (excludes $0.4 million
	attributable to redeemable noncontrolling interest)		—		—		—		(146.9)		—		(146.9)
Balances at December 31, 2013			2.5		5,505.0		1,738.1		495.7		38.2		7,779.5
Distribution to parent			—		(17.7)		—		—		—		(17.7)
Stock-based compensation and additional related
	tax benefits		—		50.3		(3.7)		—		—		46.6
Dividends to parent			—		—		(850.0)		—		—		(850.0)
Distributions to noncontrolling interest			—		—		—		—		(22.7)		(22.7)
Contributions from noncontrolling interest			—		—		—		—		7.4		7.4
Adjustments to redemption amount of redeemable
	noncontrolling interest		—		(14.9)		(19.7)		—		—		(34.6)
Pension plan transfer due to change in sponsorship			—		(247.7)		—		221.7		—		(26.0)
Net income (excludes $9.7 million attributable to
	redeemable noncontrolling interest)		—		—		952.5		—		20.3		972.8
Other comprehensive income (excludes $(1.3) million
	attributable to redeemable noncontrolling interest)		—		—		—		369.3		—		369.3
Balances at December 31, 2014		$	2.5	$	5,275.0	$	1,817.2	$	1,086.7	$	43.2	$	8,224.6
See accompanying notes.

197

Principal Life Insurance Company
Consolidated Statements of Cash Flows
		For the year ended December 31,
		2014		2013		2012
		(in millions)
Operating activities
Net income		$	982.5	$	714.2	$	693.3
Adjustments to reconcile net income to net cash provided by operating activities:
	Amortization of deferred acquisition costs		348.5		170.6		82.3
	Additions to deferred acquisition costs		(347.4)		(393.0)		(393.6)
	Accrued investment income		25.9		52.8		28.4
	Net cash flows for trading securities		14.4		18.5		88.9
	Premiums due and other receivables		34.5		(152.7)		75.8
	Contractholder and policyholder liabilities and dividends		1,488.2		1,296.8		1,814.5
	Current and deferred income taxes		239.3		187.6		2.7
	Net realized capital (gains) losses		(62.7)		211.3		(72.1)
	Depreciation and amortization expense		107.1		96.8		103.1
	Mortgage loans held for sale, sold or repaid, net of gain		43.3		0.2		74.9
	Real estate acquired through operating activities		(49.4)		(107.2)		(46.4)
	Real estate sold through operating activities		158.0		20.1		41.2
	Stock-based compensation		47.5		45.1		41.9
	Other		172.3		324.1		663.0
Net adjustments			2,219.5		1,771.0		2,504.6
Net cash provided by operating activities			3,202.0		2,485.2		3,197.9
Investing activities
Available-for-sale securities:
	Purchases		(8,598.2)		(8,554.0)		(7,986.7)
	Sales		2,100.1		1,521.4		1,193.3
	Maturities		6,047.1		7,142.4		6,383.8
Mortgage loans acquired or originated			(2,081.6)		(2,049.5)		(2,442.9)
Mortgage loans sold or repaid			1,671.6		1,989.0		1,545.4
Real estate acquired			(281.7)		(85.6)		(151.8)
Net purchases of property and equipment			(117.9)		(51.2)		(29.6)
Net change in other investments			266.2		213.0		(31.0)
Net cash provided by (used in) investing activities			(994.4)		125.5		(1,519.5)
Financing activities
Proceeds from financing element derivatives			15.1		47.0		51.8
Payments for financing element derivatives			(58.0)		(48.0)		(49.9)
Excess tax benefits from share-based payment arrangements			6.8		7.4		7.9
Purchase of subsidiary shares from noncontrolling interest			(179.9)		—		—
Sale of subsidiary shares to noncontrolling interest			—		31.8		—
Dividends paid to parent			(850.0)		(80.0)		(700.0)
Capital distributions to parent			(17.7)		(163.8)		(14.8)
Issuance of long-term debt			38.5		38.2		9.4
Principal repayments of long-term debt			(100.1)		(14.6)		(0.4)
Net proceeds from (repayments of) short-term borrowings			(137.9)		5.7		23.0
Investment contract deposits			5,349.1		6,355.1		6,401.2
Investment contract withdrawals			(7,088.8)		(8,846.6)		(7,519.8)
Net increase (decrease) in banking operation deposits			30.7		(225.7)		32.0
Other			(13.0)		(4.7)		(14.6)
Net cash used in financing activities			(3,005.2)		(2,898.2)		(1,774.2)
Net decrease in cash and cash equivalents			(797.6)		(287.5)		(95.8)
Cash and cash equivalents at beginning of period			2,071.6		2,359.1		2,454.9
Cash and cash equivalents at end of period		$	1,274.0	$	2,071.6	$	2,359.1
Supplemental Information:
Cash paid for interest		$	5.3	$	9.2	$	10.1
Cash paid for income taxes		$	9.0	$	19.6	$	117.5
Supplemental disclosure of non-cash investing and financing activities:
Assets transferred to parent due to change in pension plan sponsorship		$	308.2	$	—	$	—
Liabilities assumed by parent due to change in pension plan sponsorship		$	(282.2)	$	—	$	—
See accompanying notes.

198

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

1. Nature of Operations and Significant Accounting Policies

Description of Business

Principal Life Insurance Company (“Principal Life”) along with its consolidated subsidiaries is a diversified financial services organization offering retirement services, insurance solutions and asset management in the U.S. We are a direct wholly owned subsidiary of Principal Financial Services, Inc. (“PFSI”), which in turn is a direct wholly owned subsidiary of Principal Financial Group, Inc. (“PFG”).

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Principal Life and all other entities in which we directly or indirectly have a controlling financial interest as well as those variable interest entities (“VIEs”) in which we are the primary beneficiary. Entities in which we have significant management influence over the operating and financing decisions but are not required to consolidate, other than investments accounted for at fair value under the fair value option, are reported using the equity method. The consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). All significant intercompany accounts and transactions have been eliminated.

We have evaluated subsequent events through March 25, 2015, which was the date our consolidated financial statements were issued.

Recent Accounting Pronouncements
		Effect on our consolidated
	Date of	financial statements or
Description	adoption	other significant matters
Standards not yet adopted:
Revenue recognition	January 1,	We are currently evaluating
This authoritative guidance replaces all general and most industry specific	2017	the impact this guidance
revenue recognition guidance currently prescribed by U.S. GAAP. The core		will have on our
principle is that an entity recognizes revenue to reflect the transfer of a		consolidated financial
promised good or service to customers in an amount that reflects the		statements.
consideration to which the entity expects to be entitled to in exchange for
that good or service.
Discontinued operations	January 1,	This guidance will be
This authoritative guidance amends the definition of discontinued	2015	applied prospectively and
operations and requires entities to provide additional disclosures associated		is not expected to have a
with discontinued operations, as well as disposal transactions that do not		material impact on our
meet the discontinued operations criteria. The guidance requires discontinued		consolidated financial
operations treatment for disposals of a component or group of components		statements.
that represents a strategic shift that has or will have a major impact on an
entity’s operations or financial results. The guidance also expands the scope
to disposals of equity method investments and businesses that, upon initial
acquisition, qualify as held for sale.
Standards adopted:
Foreign currency cumulative translation adjustment	January 1,	The guidance was adopted
This authoritative guidance clarifies how the cumulative translation	2014	prospectively and did not
adjustment related to a parent’s investment in a foreign entity should be		have a material impact on
released when certain transactions related to the foreign entity occur.		our consolidated
		financial statements.

199

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		Effect on our consolidated
	Date of	financial statements or
Description	adoption	other significant matters
Accumulated other comprehensive income	January 1,	See Note 14, Stockholder's
This authoritative guidance requires entities to disclose additional	2013	Equity, for further details.
information about items reclassified out of accumulated other comprehensive
income (“AOCI”). Entities are required to disclose information regarding		The guidance did not have a
changes in AOCI balances by component and significant items reclassified		material impact on our
out of AOCI by component either on the face of the income statement or as		consolidated financial
a separate footnote to the financial statements.		statements.
Balance sheet offsetting	January 1,	See Note 5, Investments, for
This authoritative guidance requires disclosures about assets and liabilities	2013	further details.
that are offset or have the potential to be offset. These disclosures are
intended to address differences in the asset and liability offsetting		The guidance did not have a
requirements under U.S. GAAP and International Financial Reporting		material impact on our
Standards. The guidance further clarifies that the disclosure requirements		consolidated financial
apply to derivative instruments, including bifurcated embedded derivatives,		statements.
repurchase and reverse repurchase agreements and securities borrowing and
securities lending arrangements that are either offset on the balance sheet or
subject to an enforceable master netting arrangement or similar agreement.
Retrospective application was required.
Presentation of comprehensive income	January 1,	See Consolidated
This authoritative guidance changes the presentation of comprehensive	2012	Statements of
income in the financial statements. The guidance eliminates the presentation		Comprehensive Income and
options contained in previous guidance and instead requires entities to report		Note 14, Stockholder's
components of comprehensive income in either a continuous statement		Equity, for further details.
of comprehensive income or two separate but consecutive statements that
show the components of net income and other comprehensive income		The guidance did not have a
("OCI"), including adjustments for items that are reclassified from OCI to		material impact on our
net income. The guidance does not change the items that must be reported		consolidated financial
in OCI or when an item of OCI must be reclassified to net income.		statements.
Fair value measurement and disclosure requirements	January 1,	See Note 15, Fair Value
This authoritative guidance clarifies and changes fair value measurement	2012	Measurements, for further
and disclosure requirements. This guidance expands existing disclosure		details.
requirements for fair value measurements and makes other amendments but
does not require additional fair value measurements.		The guidance did not have a
		material impact on our
		consolidated financial
		statements.
Capitalized costs incurred by insurance companies	January 1,	We adopted the guidance
This authoritative guidance modifies the definition of the types of costs	2012	retrospectively.
incurred by insurance entities that can be capitalized in the successful
acquisition of new or renewal insurance contracts. Capitalized costs should
include incremental direct costs of contract acquisition, as well as certain
costs related directly to acquisition activities such as underwriting, policy
issuance and processing, medical and inspection and sales force contract
selling.

200

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Use of Estimates in the Preparation of Financial Statements

The preparation of our consolidated financial statements and accompanying notes requires management to make estimates and assumptions that affect the amounts reported and disclosed. These estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed in the consolidated financial statements and accompanying notes. The most critical estimates include those used in determining: 

• the fair value of investments in the absence of quoted market values;

• investment impairments and valuation allowances;

• the fair value of and accounting for derivatives;

• the deferred acquisition costs (“DAC”) and other actuarial balances where the amortization is based on estimated gross profits;

• the measurement of goodwill, indefinite lived intangible assets, finite lived intangible assets and related impairments or amortization, if any;

• the liability for future policy benefits and claims;

• the value of our pension and other postretirement benefit obligations and

• accounting for income taxes and the valuation of deferred tax assets.

A description of such critical estimates is incorporated within the discussion of the related accounting policies that follow. In applying these policies, management makes subjective and complex judgments that frequently require estimates about matters that are inherently uncertain. Many of these policies, estimates and related judgments are common in the insurance and financial services industries; others are specific to our businesses and operations. Actual results could differ from these estimates.

Closed Block

We operate a closed block (“Closed Block”) for the benefit of individual participating dividend‑paying policies in force at the time of the 1998 mutual insurance holding company (“MIHC”) formation. See Note 7, Closed Block, for further details.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, money market instruments and other debt issues with a maturity date of three months or less when purchased.

Investments

Fixed maturities include bonds, asset-backed securities (“ABS”), redeemable preferred stock and certain nonredeemable preferred securities. Equity securities include mutual funds, common stock and nonredeemable preferred stock. We classify fixed maturities and equity securities as either available-for-sale or trading at the time of the purchase and, accordingly, carry them at fair value. See Note 15, Fair Value Measurements, for methodologies related to the determination of fair value. Unrealized gains and losses related to available-for-sale securities, excluding those in fair value hedging relationships, are reflected in stockholder’s equity, net of adjustments associated with DAC and related actuarial balances, derivatives in cash flow hedge relationships and applicable income taxes. Unrealized gains and losses related to hedged portions of available-for-sale securities in fair value hedging relationships and mark-to-market adjustments on certain trading securities are reflected in net realized capital gains (losses). Mark-to-market adjustments related to certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reflected in net investment income.

The cost of fixed maturities is adjusted for amortization of premiums and accrual of discounts, both computed using the interest method. The cost of fixed maturities and equity securities classified as available-for-sale is adjusted for declines in value that are other than temporary. Impairments in value deemed to be other than temporary are primarily reported in net income as a component of net realized capital gains (losses), with noncredit impairment losses for certain fixed maturities, available-for-sale reported in OCI. Interest income, as well as prepayment fees and the amortization of the related premium or discount, is reported in net investment income.For loan-backed and structured securities, we recognize income using a constant effective yield based on currently anticipated cash flows.

Real estate investments are reported at cost less accumulated depreciation. The initial cost basis of properties acquired through loan foreclosures are the lower of the fair market values of the properties at the time of foreclosure or the outstanding loan balance. Buildings and land improvements are generally depreciated on the straight-line method over the estimated useful life of

201

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

improvements and tenant improvement costs are depreciated on the straight-line method over the term of the related lease. We recognize impairment losses for properties when indicators of impairment are present and a property's expected undiscounted cash flows are not sufficient to recover the property's carrying value. In such cases, the cost basis of the properties are reduced to fair value. Real estate expected to be disposed is carried at the lower of cost or fair value, less cost to sell, with valuation allowances established accordingly and depreciation no longer recognized. The carrying amount of real estate held for sale was $171.8 million and $179.5 million as of December 31, 2014 and 2013, respectively. Any impairment losses and any changes in valuation allowances are reported in net income.

Commercial and residential mortgage loans are generally reported at cost adjusted for amortization of premiums and accrual of discounts, computed using the interest method, net of valuation allowances. Interest income is accrued on the principal amount of the loan based on the loan’s contractual interest rate. Interest income, as well as prepayment of fees and the amortization of the related premium or discount, is reported in net investment income.Any changes in the valuation allowances are reported in net income as net realized capital gains (losses). We measure impairment based upon the difference between carrying value and estimated value less cost to sell. Estimated value is based on either the present value of expected cash flows discounted at the loan's effective interest rate, the loan's observable market price or the fair value of the collateral. If foreclosure is probable, the measurement of any valuation allowance is based upon the fair value of the collateral.

Net realized capital gains and losses on sales of investments are determined on the basis of specific identification. In general, in addition to realized capital gains and losses on investment sales and periodic settlements on derivatives not designated as hedges, we report gains and losses related to the following in net realized capital gains (losses): other-than-temporary impairments of securities and subsequent realized recoveries, mark-to-market adjustments on certain trading securities, mark-to-market adjustments on certain seed money investments, fair value hedge and cash flow hedge ineffectiveness, mark-to-market adjustments on derivatives not designated as hedges, changes in the mortgage loan valuation allowance provision, impairments of real estate held for investment and impairments on equity method investments. Investment gains and losses on sales of certain real estate held for sale that do not meet the criteria for classification as a discontinued operation and mark-to-market adjustments on certain securities carried at fair value with an investment objective to realize economic value through mark-to-market changes are reported as net investment income and are excluded from net realized capital gains (losses).

Policy loans and other investments are primarily reported at cost, excluding seed money investments, other investment funds, derivative assets, commercial mortgage loans of consolidated VIEs for which the fair value option was elected and equity method real estate investments for which the fair value option was elected.

Derivatives

Overview. Derivatives are financial instruments whose values are derived from interest rates, foreign exchange rates, financial indices or the values of securities. Derivatives generally used by us include interest rate swaps, interest rate options, swaptions, futures, currency swaps, equity options, credit default swaps and total return swaps. Derivatives may be exchange traded, cleared through centralized clearinghouses or contracted in the over-the-counter market without being cleared. Derivative positions are either assets or liabilities in the consolidated statements of financial position and are measured at fair value, generally by obtaining quoted market prices or through the use of pricing models. See Note 15, Fair Value Measurements, for policies related to the determination of fair value. Fair values can be affected by changes in interest rates, foreign exchange rates, financial indices, values of securities, credit spreads, and market volatility and liquidity.

Accounting and Financial Statement Presentation. We designate derivatives as either:

(a) a hedge of the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment, including those denominated in a foreign currency (“fair value hedge”);

(b) a hedge of a forecasted transaction or the exposure to variability of cash flows to be received or paid related to a recognized asset or liability, including those denominated in a foreign currency (“cash flow hedge”) or

(c) a derivative not designated as a hedging instrument.

Our accounting for the ongoing changes in fair value of a derivative depends on the intended use of the derivative and the designation, as described above, and is determined when the derivative contract is entered into or at the time of redesignation. Hedge accounting is used for derivatives that are specifically designated in advance as hedges and that reduce our exposure to an indicated risk by having a high correlation between changes in the value of the derivatives and the items being hedged at both the inception of the hedge and throughout the hedge period.

202

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Fair Value Hedges. When a derivative is designated as a fair value hedge and is determined to be highly effective, changes in its fair value, along with changes in the fair value of the hedged asset, liability or firm commitment attributable to the hedged risk, are reported in net realized capital gains (losses). Any difference between the net change in fair value of the derivative and the hedged item represents hedge ineffectiveness.

Cash Flow Hedges. When a derivative is designated as a cash flow hedge and is determined to be highly effective, changes in its fair value are recorded as a component of OCI. Any hedge ineffectiveness is recorded immediately in net income. At the time the variability of cash flows being hedged impacts net income, the related portion of deferred gains or losses on the derivative instrument is reclassified and reported in net income.

Non-Hedge Derivatives. If a derivative does not qualify or is not designated for hedge accounting, all changes in fair value are reported in net income without considering the changes in the fair value of the economically associated assets or liabilities.

Hedge Documentation and Effectiveness Testing. At inception, we formally document all relationships between hedging instruments and hedged items, as well as our risk management objective and strategy for undertaking various hedge transactions. This process includes associating all derivatives designated as fair value or cash flow hedges with specific assets or liabilities on the statement of financial position or with specific firm commitments or forecasted transactions. Effectiveness of the hedge is formally assessed at inception and throughout the life of the hedging relationship. Even if a derivative is highly effective and qualifies for hedge accounting treatment, the hedge might have some ineffectiveness.

We use qualitative and quantitative methods to assess hedge effectiveness. Qualitative methods may include monitoring changes to terms and conditions and counterparty credit ratings. Quantitative methods may include statistical tests including regression analysis and minimum variance and dollar offset techniques.

Termination of Hedge Accounting. We prospectively discontinue hedge accounting when (1) the criteria to qualify for hedge accounting is no longer met, e.g., a derivative is determined to no longer be highly effective in offsetting the change in fair value or cash flows of a hedged item; (2) the derivative expires, is sold, terminated or exercised or (3) we remove the designation of the derivative being the hedging instrument for a fair value or cash flow hedge.

If it is determined that a derivative no longer qualifies as an effective hedge, the derivative will continue to be carried on the consolidated statements of financial position at its fair value, with changes in fair value recognized prospectively in net realized capital gains (losses). The asset or liability under a fair value hedge will no longer be adjusted for changes in fair value pursuant to hedging rules and the existing basis adjustment is amortized to the consolidated statements of operations line associated with the asset or liability. The component of OCI related to discontinued cash flow hedges that are no longer highly effective is amortized to the consolidated statements of operations consistent with the net income impacts of the original hedged cash flows. If a cash flow hedge is discontinued because it is probable the hedged forecasted transaction will not occur, the deferred gain or loss is immediately reclassified from OCI into net income.

Embedded Derivatives. We purchase and issue certain financial instruments and products that contain a derivative that is embedded in the financial instrument or product. We assess whether this embedded derivative is clearly and closely related to the asset or liability that serves as its host contract. If we deem that the embedded derivative's terms are not clearly and closely related to the host contract, and a separate instrument with the same terms would qualify as a derivative instrument, the derivative is bifurcated from that contract and held at fair value on the consolidated statements of financial position, with changes in fair value reported in net income.

Contractholder and Policyholder Liabilities

Contractholder and policyholder liabilities (contractholder funds, future policy benefits and claims and other policyholder funds) include reserves for investment contracts and reserves for universal life, term life insurance, participating traditional individual life insurance, group life insurance, health insurance and disability income policies, as well as a provision for dividends on participating policies.

Investment contracts are contractholders' funds on deposit with us and generally include reserves for pension and annuity contracts. Reserves on investment contracts are equal to the cumulative deposits less any applicable charges and withdrawals plus credited interest. Reserves for universal life insurance contracts are equal to cumulative deposits less charges plus credited interest, which represents the account balances that accrue to the benefit of the policyholders.

203

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

We hold additional reserves on certain long duration contracts where benefit features result in gains in early years followed by losses in later years, universal life/variable universal life contracts that contain no lapse guarantee features, or annuities with guaranteed minimum death benefits.

Reserves for nonparticipating term life insurance and disability income contracts are computed on a basis of assumed investment yield, mortality, morbidity and expenses, including a provision for adverse deviation, which generally varies by plan, year of issue and policy duration. Investment yield is based on our experience. Mortality, morbidity and withdrawal rate assumptions are based on our experience and are periodically reviewed against both industry standards and experience.

Reserves for participating life insurance contracts are based on the net level premium reserve for death and endowment policy benefits. This net level premium reserve is calculated based on dividend fund interest rates and mortality rates guaranteed in calculating the cash surrender values described in the contract.

Participating business represented approximately 11%, 12% and 13% of our life insurance in force and 40%, 43% and 47% of the number of life insurance policies in force at December 31, 2014, 2013 and 2012, respectively. Participating business represented approximately 53%, 58% and 61% of life insurance premiums for the years ended December 31, 2014, 2013 and 2012, respectively. The amount of dividends to policyholders is declared annually by our Board of Directors. The amount of dividends to be paid to policyholders is determined after consideration of several factors including interest, mortality, morbidity and other expense experience for the year and judgment as to the appropriate level of statutory surplus to be retained by us. At the end of the reporting period, we established a dividend liability for the pro rata portion of the dividends expected to be paid on or before the next policy anniversary date.

Some of our policies and contracts require payment of fees or other policyholder assessments in advance for services that will be rendered over the estimated lives of the policies and contracts. These payments are established as unearned revenue liabilities upon receipt and included in other policyholder funds in the consolidated statements of financial position. These unearned revenue reserves are amortized to operations over the estimated lives of these policies and contracts in relation to the emergence of estimated gross profits.

The liability for unpaid disability and health claims is an estimate of the ultimate net cost of reported and unreported losses not yet settled. This liability is estimated using actuarial analyses and case basis evaluations. Although considerable variability is inherent in such estimates, we believe that the liability for unpaid claims is adequate. These estimates are continually reviewed and, as adjustments to this liability become necessary, such adjustments are reflected in net income.

Recognition of Premiums and Other Considerations, Fees and Other Revenues and Benefits

Traditional individual life insurance products include those products with fixed and guaranteed premiums and benefits and consist principally of whole life and term life insurance policies. Premiums from these products are recognized as premium revenue when due. Related policy benefits and expenses for individual life products are associated with earned premiums and result in the recognition of profits over the expected term of the policies and contracts.

Immediate annuities with life contingencies include products with fixed and guaranteed annuity considerations and benefits and consist principally of group and individual single premium annuities with life contingencies. Annuity considerations from these products are recognized as premium revenue. However, the collection of these annuity considerations does not represent the completion of the earnings process, as we establish annuity reserves, using estimates for mortality and investment assumptions, which include provision for adverse deviation as required by U.S. GAAP. We anticipate profits to emerge over the life of the annuity products as we earn investment income, pay benefits and release reserves.

Group life and health insurance premiums are generally recorded as premium revenue over the term of the coverage. Certain group contracts contain experience premium refund provisions based on a pre-defined formula that reflects their claim experience. Experience premium refunds reduce revenue over the term of the coverage and are adjusted to reflect current experience. Related policy benefits and expenses for group life and health insurance products are associated with earned premiums and result in the recognition of profits over the term of the policies and contracts. Fees for contracts providing claim processing or other administrative services are recorded as revenue over the period the service is provided.

Universal life-type policies are insurance contracts with terms that are not fixed. Amounts received as payments for such contracts are not reported as premium revenues. Revenues for universal life-type insurance contracts consist of policy charges for the cost of insurance, policy initiation and administration, surrender charges and other fees that have been assessed against policy account values and investment income. Policy benefits and claims that are charged to expense include interest credited to contracts and benefit claims incurred in the period in excess of related policy account balances.

204

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Investment contracts do not subject us to significant risks arising from policyholder mortality or morbidity and consist primarily of guaranteed investment contracts (“GICs”), funding agreements and certain deferred annuities. Amounts received as payments for investment contracts are established as investment contract liability balances and are not reported as premium revenues. Revenues for investment contracts consist of investment income and policy administration charges. Investment contract benefits that are charged to expense include benefit claims incurred in the period in excess of related investment contract liability balances and interest credited to investment contract liability balances.

Fees and other revenues are earned for asset management services provided to retail and institutional clients based largely upon contractual rates applied to the market value of the client's portfolio. Additionally, fees and other revenues are earned for administrative services performed including recordkeeping and reporting services for retirement savings plans. Fees and other revenues received for performance of asset management and administrative services are recognized as revenue when earned, typically when the service is performed.

Deferred Acquisition Costs

Incremental direct costs of contract acquisition as well as certain costs directly related to acquisition activities (underwriting, policy issuance and processing, medical and inspection and sales force contract selling) for the successful acquisition of new and renewal insurance policies and investment contract business are capitalized to the extent recoverable. Commissions and other incremental direct costs of contract acquisition for the acquisition of long-term service contracts are also capitalized to the extent recoverable. Maintenance costs and acquisition costs that are not deferrable are charged to operations as incurred.

DAC for universal life-type insurance contracts, participating life insurance policies and certain investment contracts are being amortized over the lives of the policies and contracts in relation to the emergence of estimated gross profits (“EGPs”) or, in certain circumstances, estimated gross revenues. This amortization is adjusted in the current period when EGPs or estimated gross revenues are revised. For individual variable life insurance, individual variable annuities and group annuities that have separate account U.S. equity investment options, we utilize a mean reversion method (reversion to the mean assumption), a common industry practice, to determine the future domestic equity market growth assumption used for the amortization of DAC. The DAC of nonparticipating term life insurance and individual disability policies are being amortized over the premium-paying period of the related policies using assumptions consistent with those used in computing policyholder liabilities.

DAC on insurance policies and investment contracts are subject to recoverability testing at the time of policy issue and loss recognition testing on an annual basis, or when an event occurs that may warrant loss recognition. If loss recognition is necessary, DAC would be written off to the extent that it is determined that future policy premiums and investment income or gross profits are not adequate to cover related losses and expenses.

Deferred Acquisition Costs on Internal Replacements

All insurance and investment contract modifications and replacements are reviewed to determine if the internal replacement results in a substantially changed contract. If so, the acquisition costs, sales inducements and unearned revenue associated with the new contract are deferred and amortized over the lifetime of the new contract. In addition, the existing DAC, sales inducement costs and unearned revenue balances associated with the replaced contract are written off. If an internal replacement results in a substantially unchanged contract, the acquisition costs, sales inducements and unearned revenue associated with the new contract are immediately recognized in the period incurred. In addition, the existing DAC, sales inducement costs or unearned revenue balance associated with the replaced contract is not written off, but instead is carried over to the new contract.

Long-Term Debt

Long-term debt includes notes payable, nonrecourse mortgages and other debt with a maturity date greater than one year at the date of issuance. Current maturities of long-term debt are classified as long-term debt in our statement of financial position.

Reinsurance

We enter into reinsurance agreements with other companies in the normal course of business in order to limit losses and minimize exposure to significant risks. We may assume reinsurance from or cede reinsurance to other companies. Assets and liabilities related to reinsurance ceded are reported on a gross basis. Premiums and expenses are reported net of reinsurance ceded. The cost of reinsurance related to long-duration contracts is accounted for over the life of the underlying reinsured policies using assumptions

205

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

consistent with those used to account for the underlying policies. We are contingently liable with respect to reinsurance ceded to other companies in the event the reinsurer is unable to meet the obligations it has assumed. At December 31, 2014 and 2013, we had $337.7 million and $282.0 million of net ceded reinsurance recoverables related to claims that have been received, respectively. At December 31, 2014 and 2013, our largest exposures to a single third party reinsurer was in our life insurance business, which totaled $38.9 billion and $35.9 billion of life insurance in force, representing 16% and 17% of total net life insurance in force, respectively. The reinsurance recoverable relating to claims received that are associated to this single third party reinsurer recorded in our consolidated statements of financial position was $48.1 million and $31.3 million at December 31, 2014 and 2013, respectively.

The effects of reinsurance on premiums and other considerations and policy and contract benefits were as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Premiums and other considerations:
	Direct	$	3,755.4	$	3,132.8	$	3,212.1
	Assumed		143.9		102.0		59.3
	Ceded		(402.10)		(372.40)		(336.50)
Net premiums and other considerations		$	3,497.2	$	2,862.4	$	2,934.9
Benefits, claims and settlement expenses:
	Direct		4,650.6		4,190.1		4,575.5
	Assumed		289.6		204.5		157.9
	Ceded		(330.20)		(280.10)		(176.80)
Net benefits, claims and settlement expenses		$	4,610.0	$	4,114.5	$	4,556.6

Separate Accounts

The separate accounts are legally segregated and are not subject to the claims that arise out of any of our other business. The client, rather than us, directs the investments and bears the investment risk of these funds. The separate account assets represent the fair value of funds that are separately administered by us for contracts with equity, real estate and fixed income investments and are presented as a summary total within the consolidated statements of financial position. An equivalent amount is reported as separate account liabilities, which represent the obligation to return the monies to the client. We receive fees for mortality, withdrawal and expense risks, as well as administrative, maintenance and investment advisory services that are included in the consolidated statements of operations. Net deposits, net investment income and realized and unrealized capital gains and losses of the separate accounts are not reflected in the consolidated statements of operations. 

At December 31, 2014 and 2013, the separate accounts include a separate account valued at $205.4 million and $223.1 million, respectively, which primarily includes shares of PFG stock that were allocated and issued to eligible participants of qualified employee benefit plans administered by us as part of the policy credits issued under Principal Mutual Holding Company’s 2001 demutualization. The separate account shares are recorded at fair value and are reported as separate account assets with a corresponding separate account liability to eligible participants of the qualified plan. Changes in fair value of the separate account shares are reflected in both the separate account assets and separate account liabilities and do not impact our results of operations.

Income Taxes

Our ultimate parent, PFG, files a U.S. consolidated income tax return that includes all of our qualifying subsidiaries. In addition, we file income tax returns in all states in which we conduct business. PFG allocates income tax expenses and benefits to companies in the group generally based upon pro rata contribution of taxable income or operating losses. We are taxed at corporate rates on taxable income based on existing tax laws. Current income taxes are charged or credited to net income based upon amounts estimated to be payable or recoverable as a result of taxable operations for the current year. Deferred income taxes are provided for the tax effect of temporary differences in the financial reporting and income tax bases of assets and liabilities and net operating losses using enacted income tax rates and laws. The effect on deferred income tax assets and deferred income tax liabilities of a change in tax rates is recognized in operations in the period in which the change is enacted.

206

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Goodwill and Other Intangibles

Goodwill and other intangible assets include the cost of acquired subsidiaries in excess of the fair value of the net tangible assets recorded in connection with acquisitions. Goodwill and indefinite‑lived intangible assets are not amortized. Rather, they are tested for impairment during the third quarter each year, or more frequently if events or changes in circumstances indicate that the asset might be impaired. Goodwill is tested at the reporting unit level, which is a business one level below the operating segment, if financial information is prepared and regularly reviewed by management at that level. Once goodwill has been assigned to a reporting unit, it is no longer associated with a particular acquisition; therefore, all of the activities within a reporting unit, whether acquired or organically grown, are available to support the goodwill value. Impairment testing for indefinite‑lived intangible assets consists of a comparison of the fair value of the intangible asset with its carrying value.

Intangible assets with a finite useful life are amortized as related benefits emerge and are reviewed periodically for indicators of impairment in value. If facts and circumstances suggest possible impairment, the sum of the estimated undiscounted future cash flows expected to result from the use of the asset is compared to the current carrying value of the asset. If the undiscounted future cash flows are less than the carrying value, an impairment loss is recognized for the excess of the carrying amount of assets over their fair value.

2. Related Party Transactions

We have entered into various related party transactions with our ultimate parent and its other affiliates. During the years ended December 31, 2014, 2013 and 2012, we received $334.5 million, $327.1 million and $274.0 million, respectively, of expense reimbursements from affiliated entities.

We and our direct parent, PFSI, are parties to a cash advance agreement, which allows us, collectively, to pool our available cash in order to more efficiently and effectively invest our cash. The cash advance agreement allows (i) us to advance cash to PFSI in aggregate principal amounts not to exceed $1.0 billion, with such advanced amounts earning interest at the daily 30-day LIBOR rate (the “Internal Crediting Rate”); and (ii) PFSI to advance cash to us in aggregate principal amounts not to exceed $1.0 billion, with such advance amounts paying interest at the Internal Crediting Rate plus 10 basis points to reimburse PFSI for the costs incurred in maintaining short-term investing and borrowing programs. Under this cash advance agreement, we had a receivable from PFSI of $400.7 million and $359.1 million at December 31, 2014 and 2013, respectively, and earned interest of $0.3 million, $0.4 million and $1.0 million during 2014, 2013 and 2012, respectively.

We have short-term affiliated debt and long-term affiliated debt with our parent. See Note 10, Debt, for additional information.

We and an affiliated entity, Principal National Life Insurance Company, are parties to a reinsurance agreement to reinsure certain life insurance business. Under this agreement, we had an assumed reinsurance liability of $1,853.6 million and $1,481.4 million as of December 31, 2014 and 2013, respectively. In addition, we recognized premiums and other fees of $278.1 million, $223.6 million and $168.4 million for the years ended December 31, 2014, 2013 and 2012, respectively, associated with this agreement. Furthermore, we recognized expenses of $473.1 million, $428.6 million and $377.1 million for the years ended December 31, 2014, 2013 and 2012, respectively, associated with this agreement.

We receive commission fees, distribution and services fees from Principal Funds for distributing proprietary products on their behalf. Furthermore, we receive management and administrative fees from Principal Funds for investments our products hold in the Principal Mutual Funds and Principal Variable Contracts. Fees and other revenue was $377.4 million, $407.9 million and $342.1 million for the years ended December 31, 2014, 2013 and 2012, respectively. In addition, we pay commission expense to affiliated registered representatives to sell proprietary products. Commission expense was $66.8 million, $87.8 million and $77.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Pursuant to certain regulatory requirements or otherwise in the ordinary course of business, we guarantee certain payments of our affiliates and have agreements with affiliates to provide and/or receive management, administrative and other services, all of which, individually and in the aggregate, are immaterial to our business, financial condition and net income.

Effective November 2014, PFG became the sponsor of the defined benefit pension plans for both employees and individual field agents. Prior to November 2014, we were the sponsor of these plans. In connection with the change in sponsorship, we transferred $308.2 million of assets to PFG and PFG assumed $282.2 million of liabilities from us. In addition, we were allocated $9.6 million from PFG related to the defined benefit pension plans after the change in sponsorship was effective. See Note 12, Employee and Agent Benefits, for further details.

207

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

3. Goodwill and Other Intangible Assets

Goodwill

The changes in the carrying amount of goodwill reported in our segments were as follows:

		Retirement		Principal		U.S.
		and Investor		Global		Insurance
		Services		Investors		Solutions		Consolidated
		(in millions)
Balance at January 1, 2013		$	18.7	$	223.4	$	53.9	$	296.0
	Goodwill from acquisitions		—		—		2.5		2.5
	Foreign currency		—		1.2		—		1.2
Balance at December 31, 2013			18.7		224.6		56.4		299.7
	Foreign currency		—		(3.9)		—		(3.9)
Balance at December 31, 2014		$	18.7	$	220.7	$	56.4	$	295.8

Finite Lived Intangible Assets

Finite lived intangible assets that continue to be subject to amortization over a weighted average remaining expected life of 14 years were as follows:

	December 31,
	2014						2013
	Gross				Net		Gross				Net
	carrying		Accumulated		carrying		carrying		Accumulated		carrying
	value		amortization		value		value		amortization		value
	(in millions)
Total finite lived intangible assets	$	77.4	$	27.6	$	49.8	$	94.5	$	37.1	$	57.4

During 2014, 2013 and 2012, we fully amortized finite lived intangible assets of $15.8 million, $5.2 million and $5.0 million, respectively.

The amortization expense for intangible assets with finite useful lives was $6.7 million, $6.5 million and $6.3 million for 2014, 2013 and 2012, respectively. At December 31, 2014, the estimated amortization expense for the next five years is as follows (in millions):

Year ending December 31:
	2015	$	5.4
	2016		5.4
	2017		5.4
	2018		5.2
	2019		5.3

Indefinite Lived Intangible Assets

The net carrying amount of unamortized indefinite lived intangible assets was $94.5 million as of both December 31, 2014 and 2013. This represents our share of the purchase price from our parent’s 2006 acquisition of WM Advisors, Inc. related to investment management contracts that are not subject to amortization. We were allocated $99.9 million of the purchase price based on the fact that we will benefit from our parent’s acquisition, which also included $3.2 million related to goodwill and $2.2 million related to amortizable finite lived intangible assets that were subject to a three-year amortization period.

208

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

4. Variable Interest Entities

We have relationships with and may have a variable interest in various types of special purpose entities. Following is a discussion of our interest in entities that meet the definition of a VIE. When we are the primary beneficiary, we are required to consolidate the entity in our financial statements. The primary beneficiary of a VIE is defined as the enterprise with (1) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (2) the obligation to absorb losses of the entity or the right to receive benefits from the entity that could potentially be significant to the VIE. For VIEs that are investment companies, the primary beneficiary is the enterprise who absorbs the majority of the entity’s expected losses, receives a majority of the expected residual returns or both. On an ongoing basis, we assess whether we are the primary beneficiary of VIEs in which we have a relationship.

Consolidated Variable Interest Entities

Grantor Trusts

We contributed undated subordinated floating rate notes to three grantor trusts. The trusts separated the cash flows by issuing an interest-only certificate and a residual certificate related to each note contributed. Each interest-only certificate entitles the holder to interest on the stated note for a specified term, while the residual certificate entitles the holder to interest payments subsequent to the term of the interest-only certificate and to all principal payments. We retained the interest-only certificates and the residual certificates were subsequently sold to third parties. We have determined these grantor trusts are VIEs due to insufficient equity to sustain them. We determined we are the primary beneficiary as a result of our contribution of securities into the trusts and our continuing interest in the trusts.

Collateralized Private Investment Vehicle

We invest in synthetic collateralized debt obligations, collateralized bond obligations, collateralized loan obligations and other collateralized structures, which are VIEs due to insufficient equity to sustain the entities (collectively known as “collateralized private investment vehicles”). The performance of the notes of these structures is primarily linked to a synthetic portfolio by derivatives; each note has a specific loss attachment and detachment point. The notes and related derivatives are collateralized by a pool of permitted investments. The investments are held by a trustee and can only be liquidated to settle obligations of the trusts. These obligations primarily include derivatives and the notes due at maturity or termination of the trusts. We determined we are the primary beneficiary for one of these entities because we act as the investment manager of the underlying portfolio and we have an ownership interest.

Commercial Mortgage-Backed Securities

We sold commercial mortgage loans to a real estate mortgage investment conduit trust. The trust issued various commercial mortgage-backed securities (“CMBS”) certificates using the cash flows of the underlying commercial mortgages it purchased. This is considered a VIE due to insufficient equity to sustain itself. We have determined we are the primary beneficiary as we retained the special servicing role for the assets within the trust as well as the ownership of the bond class that controls the unilateral kick out rights of the special servicer.

Real Estate

During the third quarter of 2014, we re-evaluated our consolidation conclusions for certain real estate limited partnerships and limited liability companies. We determined the entities were properly consolidated in the financial statements, but should have been consolidated under the VIE model as opposed to the voting interest model. As a result, we have included the consolidation impacts of these entities within the current and prior period VIE disclosures. 

We invest in several real estate limited partnerships and limited liability companies. The entities invest in real estate properties. These entities are VIEs based on the combination of our significant economic interest and related voting rights. We determined we are the primary beneficiary as a result of our power to control the entities through our significant ownership.

209

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The carrying amounts of our consolidated VIE assets, which can only be used to settle obligations of consolidated VIEs, and liabilities of consolidated VIEs for which creditors do not have recourse are as follows:

				Collateralized
				private investment
		Grantor trusts		vehicle		CMBS		Real estate		Total
		(in millions)
December 31, 2014
Fixed maturities, available-for-sale		$	278.2	$	—	$	—	$	—	$	278.2
Fixed maturities, trading			—		100.4		—		—		100.4
Real estate			—		—		—		284.9		284.9
Other investments			—		—		35.0		5.6		40.6
Cash			—		—		—		4.7		4.7
Accrued investment income			0.4		—		0.2		1.4		2.0
Other assets			—		—		—		0.3		0.3
	Total assets	$	278.6		100.4		35.2	$	296.9	$	711.1
Long-term debt		$	—	$	—	$	—	$	82.3	$	82.3
Income taxes currently payable			—		—		—		10.6		10.6
Deferred income taxes			1.5		—		—		(0.4)		1.1
Other liabilities (1)			239.1		85.6		4.8		14.5		344.0
	Total liabilities	$	240.6	$	85.6	$	4.8	$	107.0	$	438.0
December 31, 2013
Fixed maturities, available-for-sale		$	272.0	$	—	$	—	$	—	$	272.0
Fixed maturities, trading			—		110.4		—		—		110.4
Real estate			—		—		—		266.3		266.3
Other investments			—		—		68.1		—		68.1
Cash			—		—		—		12.0		12.0
Accrued investment income			0.3		—		0.5		1.1		1.9
Other assets			—		—		—		0.1		0.1
	Total assets	$	272.3	$	110.4	$	68.6	$	279.5	$	730.8
Long-term debt		$	—	$	—	$	—	$	47.7		47.7
Deferred income taxes			1.5		—		—		—	$	1.5
Other liabilities (1)			217.2		93.8		31.4		20.0		362.4
	Total liabilities	$	218.7	$	93.8	$	31.4	$	67.7	$	411.6

(1) Grantor trusts contain an embedded derivative of a forecasted transaction to deliver the underlying securities; the collateralized private investment vehicle includes derivative liabilities and an obligation to redeem notes at maturity or termination of the trust.

We did not provide financial or other support to investees designated as VIEs for the periods ended December 31, 2014 and 2013.

Unconsolidated Variable Interest Entities

Invested Securities

We hold a variable interest in a number of VIEs where we are not the primary beneficiary. Our investments in these VIEs are reported in fixed maturities, available-for-sale; fixed maturities, trading and other investments in the consolidated statements of financial position and are described below.

Unconsolidated VIEs include CMBS, residential mortgage-backed pass-through securities (“RMBS”) and other asset-backed securities (“ABS”). All of these entities were deemed VIEs because the equity within these entities is insufficient to sustain them. We determined we are not the primary beneficiary in the entities within these categories of investments. This determination was based primarily on the fact we do not own the class of security that controls the unilateral right to replace the special servicer or equivalent function. 

210

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

As previously discussed, we invest in several types of collateralized private investment vehicles, which are VIEs. These include cash and synthetic structures that we do not manage. We have determined we are not the primary beneficiary of these collateralized private investment vehicles primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.

We have invested in various VIE trusts as a debt holder. All of these entities are classified as VIEs due to insufficient equity to sustain them. We have determined we are not the primary beneficiary primarily because we do not control the economic performance of the entities and were not involved with the design of the entities.

We have invested in partnerships and other funds, some of which are classified as VIEs. Some of these entities have returns in the form of income tax credits. These entities are classified as VIEs as the general partners do not have equity investments at risk in the entities. We have determined we are not the primary beneficiary because we are not the general partner, who makes all the significant decisions for the entities. Other limited partnerships and fund interests have returns from investment income. These entities are classified as VIEs as the decision makers do not have equity investments at risk in the entities. We have determined we are not the primary beneficiary because we do not make the significant decisions for the entities, or our variable interest does not absorb the majority of the variability of the entities’ net assets.

The carrying value and maximum loss exposure for our unconsolidated VIEs were as follows:

				Maximum exposure to
		Asset carrying value		loss (1)
		(in millions)
December 31, 2014
Fixed maturities, available-for-sale:
	Corporate	$	456.7	$	353.3
	Residential mortgage-backed pass-through securities		2,805.2		2,687.0
	Commercial mortgage-backed securities		3,975.5		3,896.9
	Collateralized debt obligations		504.1		521.2
	Other debt obligations		4,616.4		4,583.4
Fixed maturities, trading:
	Residential mortgage-backed pass-through securities		34.4		34.4
	Commercial mortgage-backed securities		1.5		1.5
	Collateralized debt obligations		39.4		39.4
	Other debt obligations		0.2		0.2
Other investments:
	Other limited partnership and fund interests		173.1		173.1
December 31, 2013
Fixed maturities, available-for-sale:
	Corporate	$	523.4	$	448.2
	Residential mortgage-backed pass-through securities		2,823.6		2,779.2
	Commercial mortgage-backed securities		4,026.4		4,078.0
	Collateralized debt obligations		363.4		391.9
	Other debt obligations		4,167.8		4,157.5
Fixed maturities, trading:
	Residential mortgage-backed pass-through securities		47.5		47.5
	Commercial mortgage-backed securities		1.8		1.8
	Collateralized debt obligations		59.6		59.6
	Other debt obligations		1.2		1.2
Other investments:
	Other limited partnership and fund interests		123.5		123.5

(1) Our risk of loss is limited to our initial investment measured at amortized cost for fixed maturities, available-for-sale and other investments. Our risk of loss is limited to our investment measured at fair value for our fixed maturities, trading.

211

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Sponsored Investment Funds

We provide asset management and other services to certain investment structures that are considered VIEs as we generally earn performance-based management fees. We are not the primary beneficiary of these entities as we do not have the obligation to absorb losses of the entities that could be potentially significant to the VIE or the right to receive benefits from these entities that could be potentially significant.

5. Investments

Fixed Maturities and Equity Securities

The amortized cost, gross unrealized gains and losses, other-than-temporary impairments in AOCI and fair value of fixed maturities and equity securities available-for-sale are summarized as follows:

										Other-than-
				Gross		Gross				temporary
		Amortized		unrealized		unrealized				impairments in
		cost		gains		losses		Fair value		AOCI (1)
		(in millions)
December 31, 2014
Fixed maturities, available-for-sale:
	U.S. government and agencies	$	1,074.5	$	39.1	$	2.9	$	1,110.7	$	—
	Non-U.S. governments		357.2		90.8		1.4		446.6		—
	States and political subdivisions		3,891.0		289.3		4.1		4,176.2		—
	Corporate		26,953.6		2,149.2		188.1		28,914.7		18.3
	Residential mortgage-backed pass-through securities		2,687.0		124.5		6.3		2,805.2		—
	Commercial mortgage-backed securities		3,896.9		141.5		62.9		3,975.5		88.9
	Collateralized debt obligations		521.2		3.5		20.6		504.1		1.3
	Other debt obligations		4,583.4		57.5		24.5		4,616.4		66.9
Total fixed maturities, available-for-sale		$	43,964.8	$	2,895.4	$	310.8	$	46,549.4	$	175.4
Total equity securities, available-for-sale		$	113.1	$	5.6	$	9.8	$	108.9
December 31, 2013
Fixed maturities, available-for-sale:
	U.S. government and agencies	$	807.0	$	12.7	$	50.0	$	769.7	$	—
	Non-U.S. governments		451.4		73.3		1.1		523.6		—
	States and political subdivisions		3,597.0		120.8		85.4		3,632.4		—
	Corporate		27,677.2		1,811.1		271.1		29,217.2		17.2
	Residential mortgage-backed pass-through securities		2,779.2		91.1		46.7		2,823.6		—
	Commercial mortgage-backed securities		4,078.0		170.6		222.2		4,026.4		183.4
	Collateralized debt obligations		391.9		6.0		34.5		363.4		0.7
	Other debt obligations		4,157.5		51.8		41.5		4,167.8		76.3
Total fixed maturities, available-for-sale		$	43,939.2	$	2,337.4	$	752.5	$	45,524.1	$	277.6
Total equity securities, available-for-sale		$	108.2	$	7.7	$	13.3	$	102.6

(1) Excludes $167.5 million and $148.6 million as of December 31, 2014 and December 31, 2013, respectively, of net unrealized gains on impaired fixed maturities, available-for-sale related to changes in fair value subsequent to the impairment date, which are included in gross unrealized gains and gross unrealized losses.

212

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The amortized cost and fair value of fixed maturities available-for-sale at December 31, 2014, by expected maturity, were as follows:

	Amortized cost		Fair value
	(in millions)
Due in one year or less	$	2,597.2	$	2,626.7
Due after one year through five years		12,782.3		13,303.7
Due after five years through ten years		7,582.6		8,025.4
Due after ten years		9,314.2		10,692.4
Subtotal		32,276.3		34,648.2
Mortgage-backed and other asset-backed securities		11,688.5		11,901.2
Total	$	43,964.8	$	46,549.4

Actual maturities may differ because borrowers may have the right to call or prepay obligations. Our portfolio is diversified by industry, issuer and asset class. Credit concentrations are managed to established limits.

Net Investment Income

Major categories of net investment income are summarized as follows:

	For the year ended December 31,
	2014		2013		2012
	(in millions)
Fixed maturities, available-for-sale	$	2,017.0	$	2,109.3	$	2,228.5
Fixed maturities, trading		12.2		11.2		15.1
Equity securities, available-for-sale		5.4		6.9		8.3
Equity securities, trading		6.5		2.8		2.9
Mortgage loans		563.4		565.2		588.9
Real estate		103.2		60.7		70.6
Policy loans		43.8		43.5		47.1
Cash and cash equivalents		3.7		4.4		4.9
Derivatives		(87.9)		(115.2)		(129.8)
Other		71.1		67.2		54.5
Total		2,738.4		2,756.0		2,891.0
Investment expenses		(74.9)		(74.5)		(79.2)
Net investment income	$	2,663.5	$	2,681.5	$	2,811.8

213

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Net Realized Capital Gains and Losses
			For the year ended December 31,
			2014		2013		2012
			(in millions)
Fixed maturities, available-for-sale:
	Gross gains		$	85.0	$	37.9	$	26.4
	Gross losses			(40.7)		(115.2)		(143.9)
	Other-than-temporary impairment losses reclassified
		to (from) OCI		(102.2)		(22.0)		17.3
	Hedging, net			(21.4)		(115.5)		(27.5)
Fixed maturities, trading				8.9		(5.2)		4.9
Equity securities, available-for-sale:
	Gross gains			10.2		0.8		0.5
	Gross losses			(0.3)		(0.3)		(0.9)
Equity securities, trading				10.8		22.4		26.3
Mortgage loans				(9.4)		(16.0)		(51.0)
Derivatives				60.4		(22.9)		(21.7)
Other				61.4		24.7		241.7
Net realized capital gains (losses)			$	62.7	$	(211.3)	$	72.1

Proceeds from sales of investments (excluding call and maturity proceeds) in fixed maturities, available-for-sale were $2,068.9 million, $1,493.7 million and $1,119.3 million in 2014, 2013 and 2012, respectively.

Other-Than-Temporary Impairments

We have a process in place to identify fixed maturity and equity securities that could potentially have a credit impairment that is other than temporary. This process involves monitoring market events that could impact issuers’ credit ratings, business climate, management changes, litigation and government actions and other similar factors. This process also involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues.

Each reporting period, all securities are reviewed to determinewhether an other-than-temporary decline in value exists and whether losses should be recognized. We consider relevant facts and circumstances in evaluating whether a credit or interest-related impairment of a security is other than temporary. Relevant facts and circumstances considered include: (1) the extent and length of time the fair value has been below cost; (2) the reasons for the decline in value; (3) the financial position and access to capital of the issuer, including the current and future impact of any specific events; (4) for structured securities, the adequacy of the expected cash flows; (5) for fixed maturities, our intent to sell a security or whether it is more likely than not we will be required to sell the security before the recovery of its amortized cost which, in some cases, may extend to maturity and (6) for equity securities, our ability and intent to hold the security for a period of time that allows for the recovery in value. To the extent we determine that a security is deemed to be other than temporarily impaired, an impairment loss is recognized.

Impairment losses on equity securities are recognized in net income and are measured as the difference between amortized cost and fair value.The way in which impairment losses on fixed maturities are recognized in the financial statements is dependent on the facts and circumstances related to the specific security. If we intend to sell a security or it is more likely than not that we would be required to sell a security before the recovery of its amortized cost, we recognize an other-than-temporary impairment in net income for the difference between amortized cost and fair value. If we do not expect to recover the amortized cost basis, we do not plan to sell the security and if it is not more likely than not that we would be required to sell a security before the recovery of its amortized cost, the recognition of the other-than-temporary impairment is bifurcated. We recognize the credit loss portion in net income and the noncredit loss portion in OCI (“bifurcated OTTI”).

214

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Total other-than-temporary impairment losses, net of recoveries from the sale of previously impaired securities, were as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Fixed maturities, available-for-sale		$	18.5	$	(89.5)	$	(135.5)
Equity securities, available-for-sale			10.0		(0.3)		(0.4)
Total other-than-temporary impairment losses, net of recoveries from
	the sale of previously impaired securities		28.5		(89.8)		(135.9)
Other-than-temporary impairment losses on fixed maturities,
	available-for-sale reclassified to (from) OCI (1)		(102.2)		(22.0)		17.3
Net impairment losses on available-for-sale securities		$	(73.7)	$	(111.8)	$	(118.6)

(1) Represents the net impact of (a) gains resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI and (b) losses resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold.

We estimate the amount of the credit loss component of a fixed maturity security impairment as the difference between amortized cost and the present value of the expected cash flows of the security. The present value is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The ABS cash flow estimates are based on security specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate security cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or liquidations using bond specific facts and circumstances including timing, security interests and loss severity.

The following table provides a rollforward of accumulated credit losses for fixed maturities with bifurcated credit losses. The purpose of the table is to provide detail of (1) additions to the bifurcated credit loss amounts recognized in net realized capital gains (losses) during the period and (2) decrements for previously recognized bifurcated credit losses where the loss is no longer bifurcated and/or there has been a positive change in expected cash flows or accretion of the bifurcated credit loss amount.

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Beginning balance		$	(235.4)	$	(329.0)	$	(428.0)
Credit losses for which an other-than-temporary impairment was
	not previously recognized		(7.2)		(15.1)		(21.3)
Credit losses for which an other-than-temporary impairment was
	previously recognized		(67.4)		(75.9)		(80.0)
Reduction for credit losses previously recognized on fixed maturities
	now sold, paid down or intended to be sold		163.1		172.0		191.9
Net reduction for positive changes in cash flows expected
	to be collected and amortization (1)		6.6		12.6		8.4
Ending balance		$	(140.3)	$	(235.4)	$	(329.0)

(1) Amounts are recognized in net investment income.

215

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Gross Unrealized Losses for Fixed Maturities and Equity Securities

For fixed maturities and equity securities available-for-sale with unrealized losses, including other-than-temporary impairment losses reported in OCI, the gross unrealized losses and fair value, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position are summarized as follows:

			December 31, 2014
			Less than				Greater than or
			twelve months				equal to twelve months				Total
					Gross				Gross				Gross
			Fair		unrealized		Fair		unrealized		Fair		unrealized
			value		losses		value		losses		value		losses
			(in millions)
Fixed maturities, available-for-sale:
	U.S. government and agencies		$	200.3	$	0.7	$	95.0	$	2.2	$	295.3	$	2.9
	Non-U.S. governments			13.5		1.4		—		—		13.5		1.4
	States and political subdivisions			208.1		0.7		210.5		3.4		418.6		4.1
	Corporate			3,005.9		75.1		1,091.1		113.0		4,097.0		188.1
	Residential mortgage-backed pass-
		through securities		18.0		—		395.3		6.3		413.3		6.3
	Commercial mortgage-backed
		securities		375.3		3.0		395.0		59.9		770.3		62.9
	Collateralized debt obligations			114.8		1.0		112.0		19.6		226.8		20.6
	Other debt obligations			971.2		3.5		432.7		21.0		1,403.9		24.5
Total fixed maturities, available-for-sale			$	4,907.1	$	85.4	$	2,731.6	$	225.4	$	7,638.7	$	310.8
Total equity securities, available-for-sale			$	10.0	$	—	$	36.0	$	9.8	$	46.0	$	9.8

Our consolidated portfolio consists of fixed maturities where 80% were investment grade (rated AAA through BBB-) with an average price of 96 (carrying value/amortized cost) at December 31, 2014. Gross unrealized losses in our fixed maturities portfolio decreased during the year ended December 31, 2014, due primarily to a decrease in interest rates.

For those securities that had been in a continuous unrealized loss position for less than twelve months, our consolidated portfolio held 685 securities with a carrying value of $4,907.1 million and unrealized losses of $85.4 million reflecting an average price of 98 at December 31, 2014. Of this portfolio, 77% was investment grade (rated AAA through BBB-) at December 31, 2014, with associated unrealized losses of $44.4 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.

For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, our consolidated portfolio held 429 securities with a carrying value of $2,731.6 million and unrealized losses of $225.4 million. The average rating of this portfolio was A with an average price of 92 at December 31, 2014. Of the $225.4 million in unrealized losses, the commercial mortgage-backed securities sector accounts for $59.9 million in unrealized losses with an average price of 87 and an average credit rating of A-. The remaining unrealized losses consist primarily of $113.0 million within the corporate sector at December 31, 2014. The average price of the corporate sector was 91 and the average credit rating was BBB+. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.

Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturity available-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired at December 31, 2014.

216

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

			December 31, 2013
			Less than				Greater than or
			twelve months				equal to twelve months				Total
					Gross				Gross				Gross
			Fair		unrealized		Fair		unrealized		Fair		unrealized
			value		losses		value		losses		value		losses
			(in millions)
Fixed maturities, available-for-sale:
	U.S. government and agencies		$	517.2	$	49.2	$	9.2	$	0.8	$	526.4	$	50.0
	Non-U.S. governments			23.7		1.1		—		—		23.7		1.1
	States and political subdivisions			1,319.0		75.0		46.1		10.4		1,365.1		85.4
	Corporate			3,757.8		143.5		1,033.8		127.6		4,791.6		271.1
	Residential mortgage-backed pass-
		through securities		1,150.3		38.2		85.9		8.5		1,236.2		46.7
	Commercial mortgage-backed
		securities		683.7		15.3		495.6		206.9		1,179.3		222.2
	Collateralized debt obligations			88.8		1.4		47.4		33.1		136.2		34.5
	Other debt obligations			1,359.0		16.1		287.9		25.4		1,646.9		41.5
Total fixed maturities, available-for-sale			$	8,899.5	$	339.8	$	2,005.9	$	412.7	$	10,905.4	$	752.5
Total equity securities, available-for-sale			$	16.7	$	0.3	$	48.3	$	13.0	$	65.0	$	13.3

Our consolidated portfolio consists of fixed maturities where 87% were investment grade (rated AAA through BBB-) with an average price of 94 (carrying value/amortized cost) at December 31, 2013. Gross unrealized losses in our fixed maturities portfolio decreased slightly during the year ended December 31, 2013, due to spread improvements.

For those securities that had been in a continuous unrealized loss position for less than twelve months, our consolidated portfolio held 1,154 securities with a carrying value of $8,899.5 million and unrealized losses of $339.8 million reflecting an average price of 96 at December 31, 2013. Of this portfolio, 94% was investment grade (rated AAA through BBB-) at December 31, 2013, with associated unrealized losses of $325.9 million. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.

For those securities that had been in a continuous unrealized loss position greater than or equal to twelve months, our consolidated portfolio held 359 securities with a carrying value of $2,005.9 million and unrealized losses of $412.7 million. The average rating of this portfolio was BBB- with an average price of 83 at December 31, 2013. Of the $412.7 million in unrealized losses, the commercial mortgage-backed securities sector accounts for $206.9 million in unrealized losses with an average price of 71 and an average credit rating of BB-. The remaining unrealized losses consist primarily of $127.6 million within the corporate sector at December 31, 2013. The average price of the corporate sector was 89 and the average credit rating was BBB+. The unrealized losses on these securities can primarily be attributed to changes in market interest rates and changes in credit spreads since the securities were acquired.

Because we expected to recover our amortized cost, it was not our intent to sell the fixed maturityavailable-for-sale securities with unrealized losses and it was not more likely than not that we would be required to sell these securities before recovery of the amortized cost, which may be maturity, we did not consider these investments to be other-than-temporarily impaired at December 31, 2013.

217

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Net Unrealized Gains and Losses on Available-for-Sale Securities and Derivative Instruments

The net unrealized gains and losses on investments in fixed maturities available-for-sale, equity securities available-for-sale and derivative instruments in cash flow hedge relationships are reported as a separate component of stockholder’s equity. The cumulative amount of net unrealized gains and losses on available-for-sale securities and derivative instruments in cash flow hedge relationships net of adjustments related to DAC and related actuarial balances and applicable income taxes was as follows:

		December 31, 2014		December 31, 2013
		(in millions)
Net unrealized gains on fixed maturities, available-for-sale (1)		$	2,712.3	$	1,893.0
Noncredit component of impairment losses on fixed maturities, available-for-sale			(175.4)		(277.6)
Net unrealized losses on equity securities, available-for-sale			(4.2)		(5.6)
Adjustments for assumed changes in amortization patterns			(346.8)		(265.9)
Adjustments for assumed changes in policyholder liabilities			(849.3)		(498.0)
Net unrealized gains on derivative instruments			203.8		107.1
Net unrealized gains on equity method subsidiaries and noncontrolling interest
	adjustments		42.9		45.6
Provision for deferred income taxes			(553.5)		(348.5)
Net unrealized gains on available-for-sale securities and derivative instruments		$	1,029.8	$	650.1

(1) Excludes net unrealized gains (losses) on fixed maturities, available-for-sale included in fair value hedging relationships.

Mortgage Loans

Mortgage loans consist of commercial and residential mortgage loans. We evaluate risks inherent in our commercial mortgage loans in two classes: (1) brick and mortar property loans, including mezzanine loans, where we analyze the property's rent payments as support for the loan, and (2) credit tenant loans (“CTL”), where we rely on the credit analysis of the tenant for the repayment of the loan. We evaluate risks inherent in our residential mortgage loan portfolio in two classes: (1) home equity mortgages and (2) first lien mortgages. The carrying amount of our mortgage loan portfolio was as follows:

		December 31, 2014		December 31, 2013
		(in millions)
Commercial mortgage loans		$	10,684.0	$	10,282.5
Residential mortgage loans			536.4		605.7
	Total amortized cost		11,220.4		10,888.2
Valuation allowance			(56.0)		(69.0)
Total carrying value		$	11,164.4	$	10,819.2

We periodically purchase mortgage loans as well as sell mortgage loans we have originated. We purchased $99.0 million, $44.9 million and $62.3 million of residential mortgage loans in 2014, 2013 and 2012, respectively. We sold $34.6 million, $0.0 million and $0.0 million of residential mortgage loans in 2014, 2013 and 2012, respectively. We purchased $57.3 million, $166.1 million and $149.1 million of commercial mortgage loans in 2014, 2013 and 2012, respectively. We sold $0.2 million, $13.0 million and $31.1 million of commercial mortgage loans in 2014, 2013 and 2012, respectively.

218

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Our commercial mortgage loan portfolio consists primarily of non-recourse, fixed rate mortgages on stabilized properties. Our commercial mortgage loan portfolio is diversified by geographic region and specific collateral property type as follows:

	December 31, 2014					December 31, 2013
	Amortized		Percent			Amortized		Percent
	cost		of total			cost		of total
	(in millions)
Geographic distribution
New England	$	528.0		4.9	%	$	528.5		5.1	%
Middle Atlantic		2,951.0		27.7			2,489.0		24.1
East North Central		442.1		4.1			519.9		5.1
West North Central		233.3		2.2			302.9		2.9
South Atlantic		1,970.9		18.5			1,949.5		19.0
East South Central		197.4		1.8			192.8		1.9
West South Central		1,023.9		9.6			830.3		8.1
Mountain		772.0		7.2			747.1		7.3
Pacific		2,565.4		24.0			2,722.5		26.5
Total	$	10,684.0		100.0	%	$	10,282.5		100.0	%
Property type distribution
Office	$	3,646.1		34.1	%	$	3,360.5		32.6	%
Retail		2,512.1		23.5			2,668.5		26.0
Industrial		1,916.1		18.0			1,766.2		17.2
Apartments		2,200.5		20.6			1,911.2		18.6
Hotel		331.5		3.1			333.1		3.2
Mixed use/other		77.7		0.7			243.0		2.4
Total	$	10,684.0		100.0	%	$	10,282.5		100.0	%

Our residential mortgage loan portfolio is composed of home equity mortgages with an amortized cost of $283.5 million and $394.9 million and first lien mortgages with an amortized cost of $252.9 million and $210.8 million as of December 31, 2014 and December 31, 2013, respectively. Our residential home equity mortgages are generally second lien mortgages comprised of closed-end loans and lines of credit.

Mortgage Loan Credit Monitoring

Commercial Credit Risk Profile Based on Internal Rating

We actively monitor and manage our commercial mortgage loan portfolio. All commercial mortgage loans are analyzed regularly and substantially all are internally rated, based on a proprietary risk rating cash flow model, in order to monitor the financial quality of these assets. The model stresses expected cash flows at various levels and at different points in time depending on the durability of the income stream, which includes our assessment of factors such as location (macro and micro markets), tenant quality and lease expirations. Our internal rating analysis presents expected losses in terms of a Standard & Poor’s (“S&P”) bond equivalent rating. As the credit risk for commercial mortgage loans increases, we adjust our internal ratings downward with loans in the category “B+ and below” having the highest risk for credit loss. Internal ratings on commercial mortgage loans are updated at least annually and potentially more often for certain loans with material changes in collateral value or occupancy and for loans on an internal “watch list”.

Commercial mortgage loans that require more frequent and detailed attention than other loans in our portfolio are identified and placed on an internal “watch list”. Among the criteria that would indicate a potential problem are significant negative changes in ratios of loan to value or contract rents to debt service, major tenant vacancies or bankruptcies, borrower sponsorship problems, late payments, delinquent taxes and loan relief/restructuring requests.

219

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The amortized cost of our commercial mortgage loan portfolio by credit risk, as determined by our internal rating system expressed in terms of an S&P bond equivalent rating, was as follows:

	December 31, 2014
	Brick and mortar		CTL		Total
	(in millions)
A- and above	$	9,098.6	$	168.8	$	9,267.4
BBB+ thru BBB-		1,019.4		178.5		1,197.9
BB+ thru BB-		148.3		—		148.3
B+ and below		68.8		1.6		70.4
Total	$	10,335.1	$	348.9	$	10,684.0
	December 31, 2013
	Brick and mortar		CTL		Total
	(in millions)
A- and above	$	8,067.1	$	194.5	$	8,261.6
BBB+ thru BBB-		1,444.3		250.0		1,694.3
BB+ thru BB-		155.4		0.1		155.5
B+ and below		169.1		2.0		171.1
Total	$	9,835.9	$	446.6	$	10,282.5

Residential Credit Risk Profile Based on Performance Status

Our residential mortgage loan portfolio is monitored based on performance of the loans. Monitoring on a residential mortgage loan increases when the loan is delinquent or earlier if there is an indication of impairment. We define non-performing residential mortgage loans as loans 90 days or greater delinquent or on non-accrual status.

The amortized cost of our performing and non-performing residential mortgage loans was as follows:

	December 31, 2014
	Home equity		First liens		Total
	(in millions)
Performing	$	268.4	$	247.6	$	516.0
Nonperforming		15.0		5.4		20.4
Total	$	283.4	$	253.0	$	536.4
	December 31, 2013
	Home equity		First liens		Total
	(in millions)
Performing	$	378.3	$	203.6	$	581.9
Nonperforming		16.6		7.2		23.8
Total	$	394.9	$	210.8	$	605.7

Non-Accrual Mortgage Loans

Commercial and residential mortgage loans are placed on non-accrual status if we have concern regarding the collectability of future payments or if a loan has matured without being paid off or extended. Factors considered may include conversations with the borrower, loss of major tenant, bankruptcy of borrower or major tenant, decreased property cash flow for commercial mortgage loans or number of days past due and other circumstances for residential mortgage loans. Based on an assessment as to the collectability of the principal, a determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. When a loan is placed on nonaccrual status, the accrued unpaid interest receivable is reversed against interest income. Accrual of interest resumes after factors resulting in doubts about collectability have improved.

220

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The amortized cost of mortgage loans on non-accrual status was as follows:

		December 31, 2014		December 31, 2013
		(in millions)
Commercial:
	Brick and mortar	$	9.6	$	33.2
Residential:
	Home equity		15.0		16.6
	First liens		5.4		7.2
Total		$	30.0	$	57.0

The aging of our mortgage loans, based on amortized cost, was as follows:

	December 31, 2014
					90 days or
	30-59 days		60-89 days		more past		Total past
	past due		past due		due		due		Current		Total loans
	(in millions)
Commercial-brick and mortar	$	—	$	4.5	$	0.7	$	5.2	$	10,329.9	$	10,335.1
Commercial-CTL		—		—		—		—		348.9		348.9
Residential-home equity		2.3		1.2		3.4		6.9		276.5		283.4
Residential-first liens		0.3		1.1		4.3		5.7		247.3		253.0
Total	$	2.6	$	6.8	$	8.4	$	17.8	$	11,202.6	$	11,220.4
	December 31, 2013
					90 days or
	30-59 days		60-89 days		more past		Total past
	past due		past due		due		due		Current		Total loans
	(in millions)
Commercial-brick and mortar	$	—	$	—	$	16.7	$	16.7	$	9,819.2	$	9,835.9
Commercial-CTL		—		—		—		—		446.6		446.6
Residential-home equity		4.4		1.0		3.0		8.4		386.5		394.9
Residential-first liens		1.2		0.3		5.6		7.1		203.7		210.8
Total	$	5.6	$	1.3	$	25.3	$	32.2	$	10,856.0	$	10,888.2

We did not have any mortgage loans that were 90 days or more past due and still accruing interest as of either December 31, 2014 or December 31, 2013.

Mortgage Loan Valuation Allowance

We establish a valuation allowance to provide for the risk of credit losses inherent in our portfolio. The valuation allowance includes loan specific reserves for loans that are deemed to be impaired as well as reserves for pools of loans with similar risk characteristics where a property risk or market specific risk has not been identified but for which we anticipate a loss may occur. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to contractual terms of the loan agreement. When we determine that a loan is impaired, a valuation allowance is established equal to the difference between the carrying amount of the mortgage loan and the estimated value reduced by the cost to sell. Estimated value is based on either the present value of the expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price or fair value of the collateral. Subsequent changes in the estimated value are reflected in the valuation allowance. Amounts on loans deemed to be uncollectible are charged off and removed from the valuation allowance. The change in the valuation allowance provision is included in net realized capital gains (losses) on our consolidated statements of operations.

221

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The valuation allowance is maintained at a level believed adequate by management to absorb estimated probable credit losses. Management's periodic evaluation and assessment of the valuation allowance adequacy is based on known and inherent risks in the portfolio, adverse situations that may affect a borrower's ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, portfolio delinquency information, underwriting standards, peer group information, current economic conditions, loss experience and other relevant factors. The evaluation of our impaired loan component is subjective, as it requires the estimation of timing and amount of future cash flows expected to be received on impaired loans.

We review our commercial mortgage loan portfolio and analyze the need for a valuation allowance for any loan that is delinquent for 60 days or more, in process of foreclosure, restructured, on the internal “watch list” or that currently has a valuation allowance. In addition to establishing allowance levels for specifically identified impaired commercial mortgage loans, management determines an allowance for all other loans in the portfolio for which historical experience and current economic conditions indicate certain losses exist. These loans are segregated by risk rating level with an estimated loss ratio applied against each risk rating level. The loss ratio is generally based upon historic loss experience for each risk rating level as adjusted for certain current environmental factors management believes to be relevant.

For our residential mortgage loan portfolio, we separate the loans into several homogeneous pools, each of which consist of loans of a similar nature including but not limited to loans similar in collateral, term and structure and loan purpose or type. We evaluate loan pools based on aggregated risk ratings, estimated specific loss potential in the different classes of credits, and historical loss experience by pool type. We adjust these quantitative factors for qualitative factors of present conditions. Qualitative factors include items such as economic and business conditions, changes in the portfolio, value of underlying collateral and concentrations. Residential mortgage loan pools exclude loans that have been restructured or impaired, as those loans are evaluated individually.

222

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

A rollforward of our valuation allowance and ending balances of the allowance and loan balance by basis of impairment method was as follows:

		Commercial		Residential		Total
		(in millions)
For the year ended December 31, 2014
Beginning balance		$	28.7	$	40.3	$	69.0
	Provision		(0.9)		7.9		7.0
	Charge-offs		(0.9)		(22.7)		(23.6)
	Recoveries		—		3.6		3.6
Ending balance		$	26.9	$	29.1	$	56.0
Allowance ending balance by basis of impairment method:
	Individually evaluated for impairment	$	2.4	$	8.8	$	11.2
	Collectively evaluated for impairment		24.5		20.3		44.8
Allowance ending balance		$	26.9	$	29.1	$	56.0
Loan balance by basis of impairment method:
	Individually evaluated for impairment	$	4.4	$	26.4	$	30.8
	Collectively evaluated for impairment		10,679.6		510.0		11,189.6
Loan ending balance		$	10,684.0	$	536.4	$	11,220.4
For the year ended December 31, 2013
Beginning balance		$	51.8	$	44.4	$	96.2
	Provision		4.1		11.1		15.2
	Charge-offs		(28.0)		(18.3)		(46.3)
	Recoveries		0.8		3.1		3.9
Ending balance		$	28.7	$	40.3	$	69.0
Allowance ending balance by basis of impairment method:
	Individually evaluated for impairment	$	2.4	$	9.8	$	12.2
	Collectively evaluated for impairment		26.3		30.5		56.8
Allowance ending balance		$	28.7	$	40.3	$	69.0
Loan balance by basis of impairment method:
	Individually evaluated for impairment	$	4.4	$	31.4	$	35.8
	Collectively evaluated for impairment		10,278.1		574.3		10,852.4
Loan ending balance		$	10,282.5	$	605.7	$	10,888.2
For the year ended December 31, 2012
Beginning balance		$	64.8	$	36.0	$	100.8
	Provision		13.5		39.9		53.4
	Charge-offs		(26.7)		(35.1)		(61.8)
	Recoveries		0.2		3.6		3.8
Ending balance		$	51.8	$	44.4	$	96.2
Allowance ending balance by basis of impairment method:
	Individually evaluated for impairment	$	2.4	$	9.8	$	12.2
	Collectively evaluated for impairment		49.4		34.6		84.0
Allowance ending balance		$	51.8	$	44.4	$	96.2
Loan balance by basis of impairment method:
	Individually evaluated for impairment	$	13.6	$	37.5	$	51.1
	Collectively evaluated for impairment		10,205.9		664.6		10,870.5
Loan ending balance		$	10,219.5	$	702.1	$	10,921.6

Impaired Mortgage Loans

Impaired mortgage loans are loans with a related specific valuation allowance, loans whose carrying amount has been reduced to the expected collectible amount because the impairment has been considered other than temporary or a loan modification has been classified as a troubled debt restructuring (“TDR”). Based on an assessment as to the collectability of the principal, a

223

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

determination is made to apply any payments received either against the principal or according to the contractual terms of the loan. Our recorded investment in and unpaid principal balance of impaired loans along with the related loan specific allowance for losses, if any, and the average recorded investment and interest income recognized during the time the loans were impaired were as follows:

		December 31, 2014
				Unpaid
		Recorded		principal		Related
		investment		balance		allowance
		(in millions)
With no related allowance recorded:
	Commercial-brick and mortar	$	5.2	$	6.7	$	—
	Residential-first liens		3.4		3.4		—
With an allowance recorded:
	Commercial-brick and mortar		4.4		4.4		2.4
	Residential-home equity		16.5		17.1		8.2
	Residential-first liens		6.4		6.4		0.6
Total:
	Commercial	$	9.6	$	11.1	$	2.4
	Residential	$	26.3	$	26.9	$	8.8
		December 31, 2013
				Unpaid
		Recorded		principal		Related
		investment		balance		allowance
		(in millions)
With no related allowance recorded:
	Commercial-brick and mortar	$	21.5	$	32.7	$	—
	Residential-first liens		4.6		4.6		—
With an allowance recorded:
	Commercial-brick and mortar		4.4		4.4		2.4
	Residential-home equity		19.5		19.7		9.2
	Residential-first liens		7.3		6.2		0.6
Total:
	Commercial	$	25.9	$	37.1	$	2.4
	Residential	$	31.4	$	30.5	$	9.8

224

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		Average
		recorded		Interest income
		investment		recognized
		(in millions)
For the year ended December 31, 2014
With no related allowance recorded:
	Commercial-brick and mortar	$	13.4	$	—
	Residential-first liens		4.0		—
With an allowance recorded:
	Commercial-brick and mortar		4.4		0.2
	Residential-home equity		18.0		0.6
	Residential-first liens		6.9		0.2
Total:
	Commercial	$	17.8	$	0.2
	Residential	$	28.9	$	0.8
For the year ended December 31, 2013
With no related allowance recorded:
	Commercial-brick and mortar	$	22.2	$	0.2
	Residential-first liens		7.2		—
With an allowance recorded:
	Commercial-brick and mortar		4.4		0.3
	Residential-home equity		20.2		1.1
	Residential-first liens		7.1		0.2
Total:
	Commercial	$	26.6	$	0.5
	Residential	$	34.5	$	1.3
For the year ended December 31, 2012
With no related allowance recorded:
	Commercial-brick and mortar	$	11.4	$	2.6
	Residential-first liens		7.0		—
With an allowance recorded:
	Commercial-brick and mortar		59.2		0.2
	Residential-home equity		17.7		0.9
	Residential-first liens		6.2		0.1
Total:
	Commercial	$	70.6	$	2.8
	Residential	$	30.9	$	1.0

Mortgage Loan Modifications

Our commercial and residential mortgage loan portfolios include loans that have been modified. We assess loan modifications on a case-by-case basis to evaluate whether a TDR has occurred. The commercial mortgage loan TDRs were modified to delay or reduce principal payments and to increase, reduce or delay interest payments. For these TDR assessments, we have determined the loan rates are now considered below market based on current circumstances. The commercial mortgage loan modifications resulted in delayed cash receipts and a decrease in interest income. The residential mortgage loan TDRs include modifications of interest-only payment periods, delays in principal balloon payments, and interest rate reductions. Residential mortgage loan modifications resulted in delayed or decreased cash receipts and a decrease in interest income.

The following table includes information about outstanding loans that were modified and met the criteria of a TDR during the periods indicated. In addition, the table includes information for loans that were modified and met the criteria of a TDR within the past twelve months that were in payment default during the periods indicated:

225

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

	For the year ended December 31, 2014
	TDRs			TDRs in payment default
	Number of	Recorded		Number of	Recorded
	contracts	investment		contracts	investment
		(in millions)			(in millions)
Commercial-brick and mortar	2	$	5.1	1	$	0.7
Residential-home equity	75		3.0	3		—
Residential-first liens	1		0.1	—		—
Total	78	$	8.2	4	$	0.7
	For the year ended December 31, 2013
	TDRs			TDRs in payment default
	Number of	Recorded		Number of	Recorded
	contracts	investment		contracts	investment
		(in millions)			(in millions)
Commercial-brick and mortar	2	$	0.9	—	$	—
Residential-home equity	69		3.8	19		—
Residential-first liens	3		0.6	1		0.3
Total	74	$	5.3	20	$	0.3
	For the year ended December 31, 2012
	TDRs			TDRs in payment default
	Number of	Recorded		Number of	Recorded
	contracts	investment		contracts	investment
		(in millions)			(in millions)
Commercial-brick and mortar	2	$	18.0	1	$	13.7
Residential-home equity	324		15.0	12		—
Residential-first liens	12		2.1	—		—
Total	338	$	35.1	13	$	13.7

Commercial mortgage loans that have been designated as a TDR have been previously reserved in the mortgage loan valuation allowance to the estimated fair value of the underlying collateral reduced by the cost to sell.

Residential mortgage loans that have been designated as a TDR are specifically reserved for in the mortgage loan valuation allowance if losses result from the modification. Residential mortgage loans that have defaulted or have been discharged through bankruptcy are reduced to the expected collectible amount.

Real Estate

Depreciation expense on invested real estate was $46.4 million, $44.4 million and $45.1 million in 2014, 2013 and 2012, respectively. Accumulated depreciation was $387.8 million and $364.8 million as of December 31, 2014 and 2013, respectively.

Other Investments

Other investments include interests in unconsolidated entities, joint ventures and partnerships and properties owned jointly with venture partners and operated by the partners. Such investments are generally accounted for using the equity method. In applying the equity method, we record our share of income or loss reported by the equity investees in net investment income. Summarized financial information for these unconsolidated entities was as follows:

226

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

			December 31,
			2014		2013
			(in millions)
Total assets			$	14,066.7	$	7,985.3
Total liabilities				3,773.7		2,781.1
Total equity			$	10,293.0	$	5,204.2
Net investment in unconsolidated entities			$	521.6	$	384.3
	For the year ended December 31,
	2014		2013		2012
	(in millions)
Total revenues	$	1,485.2	$	773.7	$	794.5
Net income		747.3		368.3		380.5
Our share of net income of unconsolidated entities		52.9		43.9		31.5

Derivative assets are carried at fair value and reported as a component of other investments. Certain seed money investments are also carried at fair value and reported as a component of other investments, with changes in fair value included in net realized capital gains (losses) on our consolidated statements of operations.

Securities Posted as Collateral

We posted $1,439.9 million in fixed maturities, available-for-sale securities at December 31, 2014, to satisfy collateral requirements primarily associated with a reinsurance arrangement, our derivative credit support annex (collateral) agreements, Futures Commission Merchant (“FCM”) agreements, a lending arrangement and our obligation under funding agreements with the Federal Home Loan Bank of Des Moines (“FHLB Des Moines”). In addition, we posted $2,408.2 million in commercial mortgage loans and home equity mortgages as of December 31, 2014, to satisfy collateral requirements associated with our obligation under funding agreements with the FHLB Des Moines. Since we did not relinquish ownership rights on these instruments, they are reported as fixed maturities, available-for-sale and mortgage loans, respectively, on our consolidated statements of financial position. Of the securities posted as collateral, $139.7 million can be sold or repledged by the secured party.

Balance Sheet Offsetting

Financial assets subject to master netting agreements or similar agreements were as follows:

			Gross amounts not offset in the
			consolidated statements
			of financial position
	Gross amount
	of recognized		Financial		Collateral
	assets (1)		instruments (2)		received		Net amount
	(in millions)
December 31, 2014
Derivative assets	$	650.8	$	(478.9)	$	(159.4)	$	12.5
December 31, 2013
Derivative assets	$	651.1	$	(576.9)	$	(70.6)	$	3.6

(1) The gross amount of recognized derivative assets is reported with other investments on the consolidated statements of financial position. The gross amount of derivative assets is not netted against offsetting liabilities for presentation on the consolidated statements of financial position.

(2) Represents amount of offsetting derivative liabilities that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative assets for presentation on the consolidated statements of financial position.

227

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Financial liabilities subject to master netting agreements or similar agreements were as follows:

			Gross amounts not offset in the
			consolidated statements
			of financial position
	Gross amount
	of recognized		Financial		Collateral
	liabilities (1)		instruments (2)		pledged		Net amount
	(in millions)
December 31, 2014
Derivative liabilities	$	763.8	$	(478.9)	$	(220.6)	$	64.3
December 31, 2013
Derivative liabilities	$	1,017.3	$	(576.9)	$	(362.1)	$	78.3

(1) The gross amount of recognized derivative liabilities are reported with other liabilities on the consolidated statements of financial position. The above excludes $395.0 million and $207.7 million of derivative liabilities as of December 31, 2014 and December 31, 2013, respectively, which are primarily embedded derivatives that are not subject to master netting agreements or similar agreements. The gross amounts of derivative liabilities are not netted against offsetting assets for presentation on the consolidated statements of financial position.

(2) Represents amount of offsetting derivative assets that are subject to an enforceable master netting agreement or similar agreement that are not netted against the gross derivative liabilities for presentation on the consolidated statements of financial position.

The financial instruments that are subject to master netting agreements or similar agreements include right of setoff provisions. Derivative instruments include provisions to setoff positions covered under the agreements with the same counterparties and provisions to setoff positions outside of the agreements with the same counterparties in the event of default by one of the parties. Derivative instruments also include collateral provisions. Collateral received and pledged is generally settled daily with each counterparty. See Note 6, Derivative Financial Instruments, for further details.

Repurchase and reverse repurchase agreements include provisions to setoff other repurchase and reverse repurchase balances with the same counterparty. Repurchase and reverse repurchase agreements also include collateral provisions with the counterparties. For reverse repurchase agreements we require the counterparties to pledge collateral with a value greater than the amount of cash transferred. We have the right but do not sell or repledge collateral received in reverse repurchase agreements. Repurchase agreements are structured as secured borrowings for all counterparties. We pledge fixed maturities available-for-sale, which the counterparties have the right to sell or repledge. Interest incurred on repurchase agreements is reported as part of operating expense on the consolidated statements of operations. Net proceeds related to repurchase agreements are reported as a component of financing activities on the consolidated statements of cash flows. We did not have any outstanding repurchase or reverse repurchase agreements as of December 31, 2014 and December 31, 2013.

6. Derivative Financial Instruments

Derivatives are generally used to hedge or reduce exposure to market risks associated with assets held or expected to be purchased or sold and liabilities incurred or expected to be incurred. Derivatives are used to change the characteristics of our asset/liability mix consistent with our risk management activities. Derivatives are also used in asset replication strategies.

Types of Derivative Instruments

Interest Rate Contracts

Interest rate risk is the risk we will incur economic losses due to adverse changes in interest rates. Sources of interest rate risk include the difference between the maturity and interest rate changes of assets with the liabilities they support, timing differences between the pricing of liabilities and the purchase or procurement of assets and changing cash flow profiles from original projections due to prepayment options embedded within asset and liability contracts. We use various derivatives to manage our exposure to fluctuations in interest rates.

Interest rate swaps are contracts in which we agree with other parties to exchange, at specified intervals, the difference between fixed rate and floating rate interest amounts based upon designated market rates or rate indices and an agreed upon notional principal amount. Generally, no cash is exchanged at the outset of the contract and no principal payments are made by any party. Cash

228

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

is paid or received based on the terms of the swap. We use interest rate swaps primarily to more closely match the interest rate characteristics of assets and liabilities and to mitigate the risks arising from timing mismatches between assets and liabilities (including duration mismatches). We also use interest rate swaps to hedge against changes in the value of assets we anticipate acquiring and other anticipated transactions and commitments. Interest rate swaps are used to hedge against changes in the value of the guaranteed minimum withdrawal benefit (“GMWB”) liability. The GMWB rider on our variable annuity products provides for guaranteed minimum withdrawal benefits regardless of the actual performance of various equity and/or fixed income funds available with the product.

Interest rate options, including interest rate caps and interest rate floors, which can be combined to form interest rate collars, are contracts that entitle the purchaser to pay or receive the amounts, if any, by which a specified market rate exceeds a cap strike interest rate, or falls below a floor strike interest rate, respectively, at specified dates. We use interest rate collars to manage interest rate risk related to guaranteed minimum interest rate liabilities in our individual annuities contracts and lapse risk associated with higher interest rates.

A swaption is an option to enter into an interest rate swap at a future date. We purchase swaptions to offset or modify existing exposures. Swaptions provide us the benefit of theagreed-upon strike rate if the market rates for liabilities are higher, with the flexibility to enter into the current market rate swap if the market rates for liabilities are lower. Swaptions not only hedge against the downside risk, but also allow us to take advantage of any upside benefits.

In exchange‑traded futures transactions, we agree to purchase or sell a specified number of contracts, the values of which are determined by the values of designated classes of securities, and to post variation margin on a daily basis in an amount equal to the difference in the daily market values of those contracts. We enter into exchange‑traded futures with regulated futures commissions merchants who are members of a trading exchange. We have used exchange‑traded futures to reduce market risks from changes in interest rates and to alter mismatches between the assets in a portfolio and the liabilities supported by those assets.

Foreign Exchange Contracts

Foreign currency risk is the risk we will incur economic losses due to adverse fluctuations in foreign currency exchange rates. This risk arises from foreign currency-denominated funding agreements we issue and foreign currency-denominated fixed maturities we invest in. We use currency swaps to manage our exposure to foreign currency exchange rates.

Currency swaps are contracts in which we agree with other parties to exchange, at specified intervals, a series of principal and interest payments in one currency for that of another currency. Generally, the principal amount of each currency is exchanged at the beginning and termination of the currency swap by each party. The interest payments are primarily fixed-to-fixed rate; however, they may also be fixed-to-floating rate or floating-to-fixed rate. These transactions are entered into pursuant to master agreements that provide for a single net payment to be made by one counterparty for payments made in the same currency at each due date. We use currency swaps to reduce market risks from changes in currency exchange rates with respect to investments or liabilities denominated in foreign currencies that we either hold or intend to acquire or sell.

Equity Contracts

Equity risk is the risk that we will incur economic losses due to adverse fluctuations in common stock. We use various derivatives to manage our exposure to equity risk, which arises from products in which the interest we credit is tied to an external equity index as well as products subject to minimum contractual guarantees.

We purchase equity call spreads to hedge the equity participation rates promised to contractholders in conjunction with our fixed deferred annuity and universal life products that credit interest based on changes in an external equity index. We use exchange-traded futures and equity put options to hedge against changes in the value of the GMWB liability related to the GMWB rider on our variable annuity product, as previously explained. The premium associated with certain options is paid quarterly over the life of the option contract.

229

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Credit Contracts

Credit risk relates to the uncertainty associated with the continued ability of a given obligor to make timely payments of principal and interest. We use credit default swaps to enhance the return on our investment portfolio by providing comparable exposure to fixed income securities that might not be available in the primary market. They are also used to hedge credit exposures in our investment portfolio. Credit derivatives are used to sell or buy credit protection on an identified name or names on an unfunded or synthetic basis in return for receiving or paying a quarterly premium. The premium generally corresponds to a referenced name's credit spread at the time the agreement is executed. In cases where we sell protection, we also buy a quality cash bond to match against the credit default swap, thereby entering into a synthetic transaction replicating a cash security. When selling protection, if there is an event of default by the referenced name, as defined by the agreement, we are obligated to pay the counterparty the referenced amount of the contract and receive in return the referenced security in a principal amount equal to the notional value of the credit default swap.

Total return swaps are contracts in which we agree with other parties to exchange, at specified intervals, an amount determined by the difference between the previous price and the current price of a reference asset based upon an agreed upon notional principal amount plus an additional amount determined by the financing spread.  We currently use futures traded on an exchange (“exchange traded”) and total return swaps referencing equity indices to hedge our portfolio from potential credit losses related to systemic events.

Other Contracts

Embedded Derivatives. We purchase or issue certain financial instruments or products that contain a derivative instrument that is embedded in the financial instrument or product. When it is determined that the embedded derivative possesses economic characteristics that are not clearly or closely related to the economic characteristics of the host contract and a separate instrument with the same terms would qualify as a derivative instrument, the embedded derivative is bifurcated from the host instrument for measurement purposes. The embedded derivative, which is reported with the host instrument in the consolidated statements of financial position, is carried at fair value.

We have investment-type insurance contracts in which the return is tied to a leveraged inflation index. In addition, we had an investment-type insurance contract in which the return was tied to an external equity index. We economically hedge the risk associated with these investment-type insurance contracts.

We offer group annuity contracts that have guaranteed separate accounts as an investment option.

We have structured investment relationships with trusts we have determined to be VIEs, which are consolidated in our financial statements. The notes issued by these trusts include obligations to deliver an underlying security to residual interest holders and the obligations contain an embedded derivative of the forecasted transaction to deliver the underlying security.

We have fixed deferred annuities and universal life contracts that credit interest based on changes in an external equity index. We also have certain variable annuity products with a GMWB rider, which allows the customer to make withdrawals of a specified annual amount, either for a fixed number of years or for the lifetime of the customer, even if the account value is fully exhausted. Declines in the equity markets may increase our exposure to benefits under contracts with the GMWB. We economically hedge the exposure in these contracts, as previously explained.

Exposure

Our risk of loss is typically limited to the fair value of our derivative instruments and not to the notional or contractual amounts of these derivatives. We are also exposed to credit losses in the event of nonperformance of the counterparties. Our current credit exposure is limited to the value of derivatives that have become favorable to us. This credit risk is minimized by purchasing such agreements from financial institutions with high credit ratings and by establishing and monitoring exposure limits. We also utilize various credit enhancements, including collateral and credit triggers to reduce the credit exposure to our derivative instruments.

Derivatives may be exchange-traded or they may be privately negotiated contracts, which are usually referred to as over-the-counter (“OTC”) derivatives. Certain of our OTC derivatives are cleared and settled through central clearing counterparties (“OTC cleared”), while others are bilateral contracts between two counterparties (“bilateral OTC”).Our derivative transactions are generally documented under International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements. Management believes that such agreements provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Under such agreements, in connection with an early termination of a transaction, we are permitted to set off our receivable from a counterparty

230

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

against our payables to the same counterparty arising out of all included transactions. For reporting purposes, we do not offset fair value amounts recognized for the right to reclaim cash collateral or the obligation to return cash collateral against fair value amounts recognized for derivative instruments executed with the same counterparties under master netting agreements.

We posted $271.6 million and $393.1 million in cash and securities under collateral arrangements as of December 31, 2014 and December 31, 2013, respectively, to satisfy collateral requirements associated with our derivative credit support agreements and FCM agreements. These amounts include initial margin requirements.

Certain of our derivative instruments contain provisions that require us to maintain an investment grade rating from each of the major credit rating agencies on our debt. If the ratings on our debt were to fall below investment grade, it would be in violation of these provisions and the counterparties to the derivative instruments could request immediate payment or demand immediate and ongoing full overnight collateralization on derivative instruments in net liability positions. The aggregate fair value, inclusive of accrued interest, of all derivative instruments with credit-risk-related contingent features that were in a liability position without regard to netting under derivative credit support annex agreements as of December 31, 2014 and December 31, 2013, was $656.2 million and $1,042.9 million, respectively. Cleared derivatives have contingent features that require us to post excess margin as required by the FCM. The terms surrounding excess margin vary by FCM agreement. With respect to derivatives containing collateral triggers, we posted collateral and initial margin of $271.6 million and $393.1 million as of December 31, 2014 and December 31, 2013, respectively, in the normal course of business, which reflects netting under derivative agreements. If the credit-risk-related contingent features underlying these agreements were triggered on December 31, 2014, we would be required to post an additional $67.7 million of collateral to our counterparties.

As of December 31, 2014 and December 31, 2013, we had received $138.7 million and $21.0 million, respectively, of cash collateral associated with our derivative credit support annex agreements and FCM agreements, for which we recorded a corresponding liability reflecting our obligation to return the collateral.

Notional amounts are used to express the extent of our involvement in derivative transactions and represent a standard measurement of the volume of our derivative activity. Notional amounts represent those amounts used to calculate contractual flows to be exchanged and are not paid or received, except for contracts such as currency swaps. Credit exposure represents the gross amount owed to us under derivative contracts as of the valuation date. The notional amounts and credit exposure of our derivative financial instruments by type were as follows:

231

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		December 31, 2014		December 31, 2013
		(in millions)
Notional amounts of derivative instruments
Interest rate contracts:
	Interest rate swaps	$	19,182.6	$	20,570.8
	Interest rate options		4,900.0		4,100.0
	Swaptions		260.0		325.0
	Interest rate futures		147.5		92.5
Foreign exchange contracts:
	Currency swaps		1,835.1		2,247.1
Equity contracts:
	Equity options		3,293.4		2,010.4
	Equity futures		498.1		273.3
Credit contracts:
	Credit default swaps		1,234.5		1,153.2
	Total return swaps		90.0		90.0
	Futures		10.4		9.1
Other contracts:
	Embedded derivatives		8,646.8		7,036.0
Total notional amounts at end of period		$	40,098.4	$	37,907.4
Credit exposure of derivative instruments
Interest rate contracts:
	Interest rate swaps	$	510.8	$	435.5
	Interest rate options		41.0		42.5
	Swaptions		—		1.0
Foreign exchange contracts:
	Currency swaps		87.6		187.5
Equity contracts:
	Equity options		30.2		30.0
Credit contracts:
	Credit default swaps		13.3		9.5
	Total return swaps		—		0.1
Total gross credit exposure			682.9		706.1
Less: collateral received			173.9		104.5
Net credit exposure		$	509.0	$	601.6

232

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The fair value of our derivative instruments classified as assets and liabilities was as follows:

		Derivative assets (1)				Derivative liabilities (2)
		December 31, 2014		December 31, 2013		December 31, 2014		December 31, 2013
		(in millions)
Derivatives designated as hedging
	instruments
Interest rate contracts		$	8.8	$	0.1	$	193.9	$	285.4
Foreign exchange contracts			80.0		121.6		69.1		51.2
Total derivatives designated as hedging
	instruments	$	88.8	$	121.7	$	263.0	$	336.6
Derivatives not designated as hedging
	instruments
Interest rate contracts		$	508.6	$	452.2	$	321.5	$	489.6
Foreign exchange contracts			9.9		37.6		12.0		10.6
Equity contracts			30.2		30.0		131.7		145.0
Credit contracts			13.3		9.6		35.6		35.5
Other contracts			—		—		395.0		207.7
Total derivatives not designated as hedging
	instruments		562.0		529.4		895.8		888.4
Total derivative instruments		$	650.8	$	651.1	$	1,158.8	$	1,225.0

(1) The fair value of derivative assets is reported with other investments on the consolidated statements of financial position.

(2) The fair value of derivative liabilities is reported with other liabilities on the consolidated statements of financial position, with the exception of certain embedded derivative liabilities. Embedded derivative (assets) liabilities with a fair value of $155.9 million and $(9.5) million as of December 31, 2014 and December 31, 2013, respectively, are reported with contractholder funds on the consolidated statements of financial position.

Credit Derivatives Sold

When we sell credit protection, we are exposed to the underlying credit risk similar to purchasing a fixed maturity security instrument. The majority of our credit derivative contracts sold reference a single name or reference security (referred to as “single name credit default swaps”). The remainder of our credit derivatives reference either a basket or index of securities. These instruments are either referenced in an over-the-counter credit derivative transaction, or embedded within an investment structure that has been fully consolidated into our financial statements.

These credit derivative transactions are subject to events of default defined within the terms of the contract, which normally consist of bankruptcy, failure to pay, or modified restructuring of the reference entity and/or issue. If a default event occurs for a reference name or security, we are obligated to pay the counterparty an amount equal to the notional amount of the credit derivative transaction. As a result, our maximum future payment is equal to the notional amount of the credit derivative. In certain cases, we also have purchased credit protection with identical underlyings to certain of our sold protection transactions. The effect of this purchased protection would reduce our total maximum future payments by $10.0 million as of December 31, 2014 and $44.9 million as of December 31, 2013. These purchased credit derivative transactions had a net asset (liability) fair value of $(0.1) million as of December 31, 2014 and $(0.5) million as of December 31, 2013. In certain circumstances, our potential loss could also be reduced by any amount recovered in the default proceedings of the underlying credit name.

We purchased an investment structure with embedded credit features that is fully consolidated into our financial statements. This consolidation results in recognition of the underlying credit derivatives and collateral within the structure, typically high quality fixed maturities that are owned by a special purpose vehicle. These credit derivatives reference several names in a basket structure. In the event of default, the collateral within the structure would typically be liquidated to pay the claims of the credit derivative counterparty.

The following tables show our credit default swap protection sold by types of contract, types of referenced/underlying asset class and external agency rating for the underlying reference security. The maximum future payments are undiscounted and have not been reduced by the effect of any offsetting transactions, collateral or recourse features described above.

233

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

			December 31, 2014
									Weighted
							Maximum		average
			Notional		Fair		future		expected life
			amount		value		payments		(in years)
			(in millions)
Single name credit default swaps
	Corporate debt
		AAA	$	30.0	$	1.0	$	30.0		4.2
		AA		79.0		1.6		79.0		3.3
		A		254.5		3.3		254.5		2.8
		BBB		345.0		1.2		345.0		3.6
		BB		10.0		0.9		10.0		5.0
	Government/municipalities
		AA		30.0		0.6		30.0		4.3
	Sovereign
		AA		10.0		0.1		10.0		4.7
		BBB		40.0		(0.1)		40.0		4.7
Total single name credit default swaps				798.5		8.6		798.5		3.5
Basket and index credit default swaps
	Corporate debt
		Near default (1)		100.4		(19.1)		100.4		2.2
	Government/municipalities
		AA		30.0		(1.8)		30.0		2.7
	Structured finance
		BBB		16.9		0.1		16.9		3.5
Total basket and index credit default swaps				147.3		(20.8)		147.3		2.5
Total credit default swap protection sold			$	945.8	$	(12.2)	$	945.8		3.3

			December 31, 2013
									Weighted
							Maximum		average
			Notional		Fair		future		expected life
			amount		value		payments		(in years)
			(in millions)
Single name credit default swaps
	Corporate debt
		AAA	$	10.0	$	0.3	$	10.0		4.7
		AA		84.0		1.8		84.0		4.0
		A		294.5		4.2		294.5		4.0
		BBB		265.0		(1.2)		265.0		3.9
Total single name credit default swaps				653.5		5.1		653.5		4.0
Basket and index credit default swaps
	Corporate debt
		Near default (1)		110.4		(19.9)		110.4		3.2
	Government/municipalities
		AA		30.0		(3.5)		30.0		3.7
	Structured finance
		BBB		25.0		(0.9)		25.0		3.5
Total basket and index credit default swaps				165.4		(24.3)		165.4		3.4
Total credit default swap protection sold			$	818.9	$	(19.2)	$	818.9		3.9

234

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

(1) Includes $78.0 million and $88.0 million as of December 31, 2014 and December 31, 2013, respectively, notional of derivatives in consolidated collateralized private investment vehicle VIEs where the credit risk is borne by third party investors.

We also have invested in fixed maturities classified as available-for-sale that contain credit default swaps that do not require bifurcation and fixed maturities classified as trading that contain credit default swaps. These securities are subject to the credit risk of the issuer, normally a special purpose vehicle, which consists of the underlying credit default swaps and high quality fixed maturities that serve as collateral. A default event occurs if the cumulative losses exceed a specified attachment point, which is typically not the first loss of the portfolio. If a default event occurs that exceeds the specified attachment point, our investment may not be fully returned. We would have no future potential payments under these investments. The following tables show, by the types of referenced/underlying asset class and external rating, our fixed maturities with embedded credit derivatives.

		December 31, 2014
						Weighted
						average
		Amortized		Carrying		expected life
		cost		value		(in years)
		(in millions)
Corporate debt
	A	$	24.1	$	24.1		2.0
Total corporate debt			24.1		24.1		2.0
Structured finance
	A		56.1		56.1		1.5
	BB		5.8		5.8		2.7
	CCC		9.5		9.5		4.7
Total structured finance			71.4		71.4		2.1
Total fixed maturities with credit derivatives		$	95.5	$	95.5		2.0

		December 31, 2013
						Weighted
						average
		Amortized		Carrying		expected life
		cost		value		(in years)
		(in millions)
Corporate debt
	BBB	$	23.4	$	23.4		3.0
Total corporate debt			23.4		23.4		3.0
Structured finance
	A		18.1		16.7		4.8
	BB		5.5		5.5		3.3
	B		4.1		4.1		3.1
	CCC		23.5		23.5		4.8
Total structured finance			51.2		49.8		4.5
Total fixed maturities with credit derivatives		$	74.6	$	73.2		4.0

Fair Value Hedges

We use fixed-to-floating rate interest rate swaps to more closely align the interest rate characteristics of certain assets and liabilities. In general, these swaps are used in asset and liability management to modify duration, which is a measure of sensitivity to interest rate changes.

We enter into currency exchange swap agreements to convert certain foreign denominated assets and liabilities into U.S. dollar floating-rate denominated instruments to eliminate the exposure to future currency volatility on those items.

235

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The net interest effect of interest rate swap and currency swap transactions for derivatives in fair value hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.

Hedge effectiveness testing for fair value relationships is performed utilizing a regression analysis approach for both prospective and retrospective evaluations. This regression analysis will consider multiple data points for the assessment that the hedge continues to be highly effective in achieving offsetting changes in fair value. In certain periods, the comparison of the change in value of the derivative and the change in the value of the hedged item may not be offsetting at a specific period in time due to small movements in value. However, any amounts recorded as fair value hedges have shown to be highly effective in achieving offsetting changes in fair value both for present and future periods.

The following table shows the effect of derivatives in fair value hedging relationships and the related hedged items on the consolidated statements of operations. All gains or losses on derivatives were included in the assessment of hedge effectiveness.

		Amount of gain (loss)								Amount of gain (loss)
		recognized in net income on								recognized in net income on
		derivatives for the year						Hedged items in fair		related hedged item for the year ended
Derivatives in fair value		ended December 31, (1)						fair value hedging		December 31, (1)
hedging relationships		2014		2013		2012		relationships		2014		2013		2012
		(in millions)								(in millions)
								Fixed maturities,
Interest rate contracts		$	25.4	$	139.5	$	38.6		available-for-sale	$	(27.7)	$	(133.3)	$	(34.1)
								Investment-type
Interest rate contracts			2.0		(0.7)		—		insurance contracts		(1.9)		0.2		—
Foreign exchange								Fixed maturities,
	contracts		5.5		(0.2)		0.7		available-for-sale		(5.4)		0.4		0.4
Foreign exchange								Investment-type
	contracts		0.2		(36.7)		9.3		insurance contracts		(0.2)		36.5		(12.6)
Total		$	33.1	$	101.9	$	48.6	Total		$	(35.2)	$	(96.2)	$	(46.3)

(1) The gain (loss) on both derivatives and hedged items in fair value relationships is reported in net realized capital gains (losses) on the consolidated statements of operations. The net amount represents the ineffective portion of our fair value hedges.

The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in fair value hedging relationships.

	Amount of gain (loss) for the year
	ended December 31,
Hedged Item	2014		2013		2012
	(in millions)
Fixed maturities, available-for-sale (1)	$	(93.0)	$	(120.7)	$	(134.3)
Investment-type insurance contracts (2)		4.3		33.2		37.1

(1) Reported in net investment income on the consolidated statements of operations.

(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.

Cash Flow Hedges

We utilize floating-to-fixed rate interest rate swaps to eliminate the variability in cash flows of recognized financial assets and liabilities and forecasted transactions.

We enter into currency exchange swap agreements to convert both principal and interest payments of certain foreign denominated assets and liabilities into U.S. dollar denominated fixed-rate instruments to eliminate the exposure to future currency volatility on those items.

The net interest effect of interest rate swap and currency swap transactions for derivatives in cash flow hedges is recorded as an adjustment to income or expense of the underlying hedged item in our consolidated statements of operations.

236

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The maximum length of time we are hedging our exposure to the variability in future cash flows for forecasted transactions, excluding those related to the payments of variable interest on existing financial assets and liabilities, is 5.5 years. At December 31, 2014, we had $67.1 million of net gains reported in AOCI on the consolidated statements of financial position related to active hedges of forecasted transactions. If a hedged forecasted transaction is no longer probable of occurring, cash flow hedge accounting is discontinued. If it is probable that the hedged forecasted transaction will not occur, the deferred gain or loss is immediately reclassified from AOCI into net income. We reclassified $0.0 million and $0.2 million from AOCI into net realized capital gains (losses) as a result of the determination that hedged cash flows were probable of not occurring during the years ended December 31, 2014 and 2013, respectively.

The following table shows the effect of derivatives in cash flow hedging relationships on the consolidated statements of operations and consolidated statements of financial position. All gains or losses on derivatives were included in the assessment of hedge effectiveness.

				Amount of gain (loss)								Amount of gain (loss)
				recognized in AOCI on								reclassified from AOCI on
Derivatives in				derivatives (effective portion)						Location of gain (loss)		derivatives (effective portion)
cash flow				for the year ended						reclassified from		for the year ended
hedging		Related		December 31,						AOCI into net income		December 31,
relationships		hedged item		2014		2013		2012		(effective portion)		2014		2013		2012
				(in millions)								(in millions)
Interest rate		Fixed maturities,								Net investment
	contracts		available-for-sale	$	29.0	$	(80.5)	$	16.2		income	$	13.8	$	11.7	$	8.9
Interest rate		Investment-type								Benefits, claims and
	contracts		insurance contracts		2.0		2.5		2.5		settlement expenses		—		—		—
Foreign exchange		Fixed maturities,								Net realized capital
	contracts		available-for-sale		68.7		(0.9)		(27.9)		losses		(10.2)		(16.7)		(6.4)
Foreign exchange		Investment-type								Benefits, claims and
	contracts		insurance contracts		7.2		5.0		7.6		settlement expenses		—		—		—
Total				$	106.9	$	(73.9)	$	(1.6)	Total		$	3.6	$	(5.0)	$	2.5

The following table shows the periodic settlements on interest rate contracts and foreign exchange contracts in cash flow hedging relationships.

	Amount of gain (loss) for the year
	ended December 31,
Hedged item	2014		2013		2012
	(in millions)
Fixed maturities, available-for-sale (1)	$	5.1	$	7.7	$	8.0
Investment-type insurance contracts (2)		(11.1)		(11.0)		(13.4)

(1) Reported in net investment income on the consolidated statements of operations.

(2) Reported in benefits, claims and settlement expenses on the consolidated statements of operations.

The ineffective portion of our cash flow hedges is reported in net realized capital gains (losses) on the consolidated statements of operations. The net gain resulting from the ineffective portion of foreign currency contracts in cash flow hedging relationships was $0.0 million, $0.8 million and $0.5 million for the years ended December 31, 2014, 2013 and 2012, respectively.

We expect to reclassify net gains of $10.1 million from AOCI into net income in the next 12 months, which includes both net deferred gains on discontinued hedges and net losses on periodic settlements of active hedges. Actual amounts may vary from this amount as a result of market conditions.

Derivatives Not Designated as Hedging Instruments

Our use of futures, certain swaptions and swaps, collars and options are effective from an economic standpoint, but they have not been designated as hedges for financial reporting purposes. As such, periodic changes in the market value of these instruments, which includes mark-to-market gains and losses as well as periodic and final settlements, primarily flow directly into net realized capital gains (losses) on the consolidated statements of operations.

237

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The following table shows the effect of derivatives not designated as hedging instruments, including fair value changes of embedded derivatives that have been bifurcated from the host contract, on the consolidated statements of operations.

	Amount of gain (loss) recognized in
	net income on derivatives for the
	year ended December 31,
Derivatives not designated as hedging instruments	2014		2013		2012
	(in millions)
Interest rate contracts	$	246.1	$	(137.6)	$	(7.7)
Foreign exchange contracts		(31.4)		6.1		40.0
Equity contracts		21.9		(159.4)		(100.5)
Credit contracts		(34.7)		40.6		12.0
Other contracts		(190.2)		148.3		35.7
Total	$	11.7	$	(102.0)	$	(20.5)

7. Closed Block

In connection with the 1998 MIHC formation, we formed a Closed Block to provide reasonable assurance to policyholders included therein that, after the formation of the MIHC, assets would be available to maintain dividends in aggregate in accordance with the 1997 policy dividend scales, if the experience underlying such scales continued. Certain of our assets were allocated to the Closed Block in an amount that produces cash flows which, together with anticipated revenue from policies and contracts included in the Closed Block, were expected to be sufficient to support the Closed Block policies, including, but not limited to, provisions for payment of claims, certain expenses, charges and taxes, and to provide for continuation of policy and contract dividends in aggregate in accordance with the 1997 dividend scales, if the experience underlying such scales continues, and to allow for appropriate adjustments in such scales, if such experience changes. Due to adjustable life policies being included in the Closed Block, the Closed Block is charged with amounts necessary to properly fund for certain adjustments, such as face amount and premium increases, that are made to these policies after the Closed Block inception date. These amounts are referred to as Funding Adjustment Charges and are treated as capital transfers from the Closed Block.

Assets allocated to the Closed Block inure solely to the benefit of the holders of policies included in the Closed Block. Closed Block assets and liabilities are carried on the same basis as other similar assets and liabilities. We will continue to pay guaranteed benefits under all policies, including the policies within the Closed Block, in accordance with their terms. If the assets allocated to the Closed Block, the investment cash flows from those assets and the revenues from the policies included in the Closed Block, including investment income thereon, prove to be insufficient to pay the benefits guaranteed under the policies included in the Closed Block, we will be required to make such payments from our general funds. No additional policies were added to the Closed Block, nor was the Closed Block affected in any other way, as a result of the demutualization.

A policyholder dividend obligation (“PDO”) is required to be established for earnings in the Closed Block that are not available to PFG stockholders. A model of the Closed Block was established to produce the pattern of expected earnings in the Closed Block, adjusted to eliminate the impact of related amounts in AOCI.

If actual cumulative earnings of the Closed Block are greater than the expected cumulative earnings of the Closed Block, only the expected cumulative earnings will be recognized in income with the excess recorded as a PDO. This PDO represents undistributed accumulated earnings that will be paid to Closed Block policyholders as additional policyholder dividends unless offset by future performance of the Closed Block that is less favorable than originally expected. If actual cumulative performance is less favorable than expected, only actual earnings will be recognized in income. At December 31, 2014 and 2013, cumulative actual earnings have been less than cumulative expected earnings. However, cumulative net unrealized gains were greater than expected, resulting in the recognition of a PDO of $165.2 million and $111.6 million as of December 31, 2014 and 2013, respectively.

238

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Closed Block liabilities and assets designated to the Closed Block were as follows:

		December 31, 2014		December 31, 2013
		(in millions)
Closed Block liabilities
Future policy benefits and claims		$	4,366.5	$	4,532.0
Other policyholder funds			9.6		10.5
Policyholder dividends payable			259.2		270.5
Policyholder dividends obligation			165.2		111.6
Deferred income taxes			—		2.2
Other liabilities			17.6		24.7
	Total Closed Block liabilities		4,818.1		4,951.5
Assets designated to the Closed Block
Fixed maturities, available-for-sale			2,399.5		2,470.9
Fixed maturities, trading			11.9		13.4
Equity securities, available-for-sale			3.8		3.6
Mortgage loans			912.1		828.6
Policy loans			610.0		644.2
Other investments			101.1		118.5
	Total investments		4,038.4		4,079.2
Cash and cash equivalents			29.2		70.3
Accrued investment income			48.8		49.5
Premiums due and other receivables			13.6		11.7
Deferred tax asset			58.1		66.2
Other assets			—		2.2
	Total assets designated to the Closed Block		4,188.1		4,279.1
Excess of Closed Block liabilities over assets designated to the Closed Block			630.0		672.4
Amounts included in accumulated other comprehensive income			18.9		12.9
Maximum future earnings to be recognized from Closed Block assets and
	liabilities	$	648.9	$	685.3

Closed Block revenues and expenses were as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Revenues
Premiums and other considerations		$	351.9	$	379.9	$	397.4
Net investment income			201.9		207.7		222.8
Net realized capital gains (losses)			(2.3)		(12.3)		3.6
	Total revenues		551.5		575.3		623.8
Expenses
Benefits, claims and settlement expenses			313.3		320.1		325.7
Dividends to policyholders			173.2		184.4		192.6
Operating expenses			4.3		4.7		4.9
	Total expenses		490.8		509.2		523.2
Closed Block revenues, net of Closed Block expenses, before income taxes			60.7		66.1		100.6
Income taxes			19.5		21.1		32.6
Closed Block revenues, net of Closed Block expenses and income taxes			41.2		45.0		68.0
Funding adjustment charges			(4.8)		(6.5)		(4.8)
Closed Block revenues, net of Closed Block expenses, income taxes and
	funding adjustment charges	$	36.4	$	38.5	$	63.2

239

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The change in maximum future earnings of the Closed Block was as follows:

	For the year ended December 31,
	2014		2013		2012
	(in millions)
Beginning of year	$	685.3	$	723.8	$	787.0
End of year		648.9		685.3		723.8
Change in maximum future earnings	$	(36.4)	$	(38.5)	$	(63.2)

We charge the Closed Block with federal income taxes, payroll taxes, state and local premium taxes and other state or local taxes, licenses and fees as provided in the plan of reorganization.

8. Deferred Acquisition Costs

Acquisition costs deferred and amortized were as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Balance at beginning of year		$	2,848.8	$	2,394.7	$	2,197.3
Cost deferred during the year			347.4		393.0		393.6
Amortized to expense during the year (1)			(348.5)		(170.6)		(82.3)
Adjustment related to unrealized gains on available-for-sale securities and
	derivative instruments		(93.1)		231.7		(113.9)
Balance at end of year		$	2,754.6	$	2,848.8	$	2,394.7

(1) Includes adjustments for revisions to estimated gross profits.

9. Insurance Liabilities

Contractholder Funds

Major components of contractholder funds in the consolidated statements of financial position are summarized as follows:

		December 31,
		2014		2013
		(in millions)
Liabilities for investment-type insurance contracts:
	Liabilities for individual annuities	$	10,077.7	$	10,582.7
	GICs		10,115.3		10,858.3
	Funding agreements		7,338.1		7,642.9
	Other investment-type insurance contracts		1,008.5		731.8
Total liabilities for investment-type insurance contracts			28,539.6		29,815.7
Universal life and other reserves			4,888.7		4,812.0
Total contractholder funds		$	33,428.3	$	34,627.7

Our GICs and funding agreements contain provisions limiting or prohibiting early surrenders, which typically include penalties for early surrenders, minimum notice requirements or, in the case of funding agreements with survivor options, minimum pre-death holding periods and specific maximum amounts.

Funding agreements include those issued directly to nonqualified institutional investors, as well as under five separate programs where the funding agreements have been issued directly or indirectly to unconsolidated special purpose entities. Claims for principal and interest under funding agreements are afforded equal priority to claims of life insurance and annuity policyholders under insolvency provisions of Iowa Insurance Laws.

240

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

We were authorized to issue up to $4.0 billion of funding agreements under a program established in 1998 to support the prospective issuance of medium term notes by an unaffiliated entity in non-U.S. markets. As of December 31, 2014 and 2013, $111.2 million and $370.9 million, respectively, of liabilities are outstanding with respect to the issuance outstanding under this program. We were also authorized to issue up to Euro 4.0 billion (approximately USD$5.3 billion) of funding agreements under a program established in 2006 to support the prospective issuance of medium term notes by an unaffiliated entity in non-U.S. markets. The unaffiliated entity is an unconsolidated special purpose vehicle. As of December 31, 2014 and 2013, $1,137.1 million and $1,278.7 million, respectively, of liabilities are outstanding with respect to issuances outstanding under this program. We do not anticipate any new issuance activity under either of these programs due to the existence of the program established in 2011 described below.

In addition, we were authorized to issue up to $7.0 billion of funding agreements under a program established in 2001 to support the prospective issuance of medium term notes by an unaffiliated entity in both domestic and international markets. The unaffiliated entity is an unconsolidated special purpose entity. As of December 31, 2014 and 2013, $505.8 million and $637.6 million, respectively, of liabilities are being held with respect to issuances outstanding under this program. We do not anticipate any new issuance activity under this program, given our December 2005 termination of the dealership agreement for this program and the availability of the program established in 2011 described below.

Additionally, we were authorized to issue up to $4.0 billion of funding agreements under a program established in March 2004 to support the prospective issuance of medium term notes by unaffiliated entities in both domestic and international markets. In February 2006, this program was amended to authorize issuance of up to an additional $5.0 billion in recognition of the use of nearly all $4.0 billion of initial issuance authorization. In recognition of the use of nearly all $9.0 billion, this program was amended in November 2007 to authorize issuance of up to an additional $5.0 billion. Under this program, both the notes and the supporting funding agreements were registered with the United States Securities and Exchange Commission (“SEC”). As of December 31, 2014 and 2013, $549.2 million and $975.0 million, respectively, of liabilities are being held with respect to issuances outstanding under this program. In contrast with direct funding agreements, GIC issuances and the other three funding agreement‑backed medium term note programs described above, our payment obligations on each funding agreement issued under this SEC-registered program are guaranteed by PFG. We do not anticipate any new issuance activity under this program due to the existence of the program established in 2011 described below.

We were authorized to issue up to $5.0 billion of funding agreements under a program established in 2011 to support the prospective issuance of medium term notes by an unaffiliated entity in both domestic and international markets. The unaffiliated entity is an unconsolidated special purpose entity. As of December 31, 2014 and 2013, $3,284.7 million and $2,630.5 million of liabilities are being held with respect to any issuances outstanding under this program. Similar to the SEC-registered program, our payment obligations on each funding agreement issued under this program are guaranteed by PFG. The program established in 2011 is not registered with the SEC.

241

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Future Policy Benefits and Claims

Activity associated with unpaid disability and health claims is summarized as follows:

		December 31,
		2014		2013		2012
		(in millions)
Balance at beginning of year		$	1,144.7	$	1,066.0	$	1,006.9
Incurred:
	Current year		760.5		712.0		711.8
	Prior years		1.2		1.0		9.7
Total incurred			761.7		713.0		721.5
Payments:
	Current year		445.5		432.1		446.3
	Prior years		220.8		202.2		216.1
Total payments			666.3		634.3		662.4
Balance at end of year:
	Current year		315.0		279.9		265.5
	Prior years		925.1		864.8		800.5
Total balance at end of year		$	1,240.1	$	1,144.7	$	1,066.0
Amounts not included in the rollforward above:
	Claim adjustment expense liabilities	$	47.5	$	43.4	$	46.6
	Reinsurance recoverables for unpaid claims	$	300.0	$	260.1	$	239.1

Incurred liability adjustments relating to prior years, which affected current operations during 2014, 2013 and 2012, resulted in part from developed claims for prior years being different than were anticipated when the liabilities for unpaid disability and health claims were originally estimated. These trends have been considered in establishing the current year liability for unpaid disability and health claims.

10. Debt

Short-Term Debt

As of December 31, 2014 and 2013, we had short-term credit facilities with various financial institutions in an aggregate amount of $945.0 million and $1,045.0 million, respectively. As of December 31, 2014 and 2013, we had $154.5 million and $292.4 million, respectively, of outstanding borrowings related to our credit facilities, which consisted of a payable to PFSI, with no assets pledged as support. Interest paid on intercompany debt was $0.5 million, $0.8 million and $1.0 million during 2014, 2013 and 2012, respectively. Our credit facilities include a $400.0 million 5-year facility that matures in March 2019, with PFG, PFSI and us as co-borrowers, a $300.0 million 364-day facility with us as borrower that matures in March 2015, and a $200.0 million 3-year facility with PFG, PFSI, Principal Financial Services V (UK) LTD and us as the co-borrowers that matures in March 2017. These facilities may be used for general corporate purposes, including commercial paper back-stop. Our commercial paper programs require 100% back-stop support, of which there were no outstanding balances as of December 31, 2014 and 2013.

The weighted‑average interest rate on short-term borrowings as of December 31, 2014 and 2013, was 0.1% and 0.2%, respectively.

242

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Long-Term Debt

The components of long-term debt were as follows:

	December 31,
	2014		2013
	(in millions)
8.0% surplus notes payable, due 2044	$	—	$	99.3
Non-recourse mortgages and notes payable		82.3		53.1
Total long-term debt	$	82.3	$	152.4

The amounts included above are net of the discount and premium associated with issuing these notes, which are being amortized to expense over their respective terms using the interest method.

On March 10, 1994, we issued $100.0 million of surplus notes due March 1, 2044, at an 8% annual interest rate. None of our affiliates held any portion of the notes. Each payment of interest and principal on the notes, however, could be made only with the prior approval of the Commissioner of Insurance of the State of Iowa (the “Commissioner”) and only to the extent that we had sufficient surplus earnings to make such payments. On March 1, 2014, we redeemed the surplus notes in whole at a redemption price equal to 102.3% of par, which was approved by the Commissioner.

The non-recourse mortgages, other mortgages and notes payable are primarily financings for real estate developments. Outstanding principal balances as of December 31, 2014, ranged from $1.7 million to $32.6 million per development with interest rates being variable. Outstanding principal balances as of December 31, 2013, ranged from $1.6 million to $20.1 million per development with interest rates being 5.5% or variable. Outstanding debt is secured by the underlying real estate properties, which were reported as real estate on our consolidated statements of financial position with a carrying value of $155.6 million and $101.4 million as of December 31, 2014 and 2013, respectively.

At December 31, 2014, future annual maturities of the long-term debt were as follows (in millions):

Year ending December 31:
	2015	$	—
	2016		—
	2017		—
	2018		—
	2019		—
	Thereafter		82.3
	Total future maturities of the long-term debt	$	82.3

243

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

11. Income Taxes

Income Tax Expense

Our income tax expense was as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Current income taxes (benefits):
	U.S. federal	$	218.8	$	98.2	$	(8.1)
	State		6.0		4.9		7.6
	Foreign		4.9		17.9		19.5
	Tax benefit of operating loss carryforward		(161.4)		(130.4)		(70.7)
Total current income taxes (benefits)			68.3		(9.4)		(51.7)
Deferred income taxes (benefits):
	U.S. federal		172.7		181.4		206.1
	State		2.0		1.4		(3.1)
Total deferred income taxes			174.7		182.6		203.2
Total income taxes		$	243.0	$	173.2	$	151.5

Effective Income Tax Rate

Our provision for income taxes may not have the customary relationship of taxes to income. A reconciliation between the U.S. corporate income tax rate and the effective income tax rate was as follows:

	For the year ended December 31,
	2014		2013		2012
U.S. corporate income tax rate	35	%	35	%	35	%
Dividends received deduction	(12)		(13)		(12)
Interest exclusion from taxable income	(2)		(2)		(3)
Tax credits	(2)		—		—
Other	1		—		(2)
Effective income tax rate	20	%	20	%	18	%

Unrecognized Tax Benefits

A summary of the changes in unrecognized tax benefits follows.

		For the year ended December 31,
		2014		2013
		(in millions)
Balance at beginning of period		$	106.0	$	129.1
	Additions based on tax positions related to the current year		12.1		8.8
	Additions for tax positions of prior years		58.8		—
	Reductions for tax positions related to the current year		(8.4)		(3.3)
	Reductions for tax positions of prior years		—		(28.6)
Balance at end of period (1)		$	168.5	$	106.0

(1) Of this amount, $52.5 million, if recognized, would reduce the 2014 effective income tax rate. We recognize interest and penalties related to uncertain tax positions in operating expenses.

As of December 31, 2014 and 2013, we had recognized $100.4 million and $37.0 million of accumulated pre-tax interest and penalties related to unrecognized tax benefits, respectively.

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Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Net Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our net deferred income taxes were as follows:

			December 31,
			2014		2013
			(in millions)
Deferred income tax assets:
	Insurance liabilities		$	390.8	$	281.6
	Investments, including derivatives			380.6		455.0
	Net operating and capital loss carryforwards			114.4		241.9
	Employee benefits			147.3		307.3
	Other deferred income tax assets			50.6		21.5
		Total deferred income tax assets		1,083.7		1,307.3
Deferred income tax liabilities:
	Deferred acquisition costs			(728.3)		(761.5)
	Investments, including derivatives			(374.2)		(375.6)
	Net unrealized gains on available-for-sale securities			(901.0)		(578.4)
	Real estate			(132.7)		(117.2)
	Intangible assets			(22.9)		(27.3)
	Other deferred income tax liabilities			(7.4)		—
		Total deferred income tax liabilities		(2,166.5)		(1,860.0)
		Total net deferred income tax liabilities	$	(1,082.8)	$	(552.7)

Net deferred income taxes by jurisdiction were as follows:

		December 31,
		2014		2013
		(in millions)
Deferred income tax liabilities:
	U.S. federal	$	(1,078.8)	$	(550.7)
	State		(4.0)		(2.0)
Total net deferred income tax liabilities		$	(1,082.8)	$	(552.7)

In management’s judgment, total deferred income tax assets are more likely than not to be realized. Included in the deferred income tax asset are net operating loss and tax credit carryforwards for tax purposes available to offset future taxable income. We had net operating loss and tax credit carryforwards for U.S. federal income tax purposes of $191.4 million and $670.8 million at December 31, 2014 and 2013, respectively, primarily attributable to our captive reinsurance companies that joined our consolidated U.S. federal income tax return in 2012 and 2013. These U.S. federal net operating loss and tax credit carryforwards will expire between 2022 and 2033. All accumulated U.S. federal net operating loss and tax credit carryforwards are anticipated to be utilized before expiration; therefore, no valuation allowance has been provided for the related deferred income tax assets.

Domestic state net operating loss carryforwards were $17.7 million and $10.0 million as of December 31, 2014 and 2013, respectively, and will expire between 2015 and 2034. We maintain valuation allowances by jurisdiction against the deferred income tax assets related to certain of these carryforwards, as utilization of these income tax benefits fail the more likely than not criteria in certain jurisdictions. Adjustments to the valuation allowance will be made if there is a change in management’s assessment of the amount of the deferred income tax assets that are more likely than not to be realized.

245

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Other Tax Information

The Internal Revenue Service (“IRS”) has completed examination of the consolidated U.S. federal income tax returns for years prior to 2009. We are contesting certain issues and have filed suit in the Court of Federal Claims, requesting refunds for the years 1995-2003. We do not expect the litigation to be resolved within the next twelve months. We had $300.7 million and $331.4 million of current income tax receivables associated with outstanding audit issues reported as other assets in our consolidated statements of financial position as of December 31, 2014 and 2013, respectively.

We filed claims for refund for tax years 2004 – 2005 during 2012 and will file claims for refund relating to disputed adjustments for tax years 2006 – 2008 in 2015. The IRS commenced audit of our U.S. federal income tax return for 2009 during the fourth quarter of 2011, for 2010 during the first quarter of 2012 and for 2011 during the first quarter of 2013. We do not expect the results of these audits or developments in other tax areas for all open tax years to significantly change the possible increase in the amount of unrecognized tax benefits, but the outcome of tax reviews is uncertain and unforeseen results can occur.

The U.S. Court of Federal Claims issued a summary judgment determination in the case of Principal Life Insurance Company and Subsidiaries v. the United States on May 9, 2014. The court ruled against our timing of recognition of gains and losses associated with the purchase and sale of principal-only certificates. The ruling caused a re-evaluation of our uncertain tax positions, which resulted in a $47.5 million reduction in net income in the second quarter of 2014. We believe that we have adequate defenses against, or sufficient provisions for, the contested issues, but final resolution of the contested issues could take several years while legal remedies are pursued. Consequently, we do not expect the ultimate resolution of issues from tax years 1995-2003 or those that might arise in tax years subsequent to 2003 to have a material impact on our net income. We do not believe there is a reasonable possibility the total amount of unrecognized tax benefits will significantly increase or decrease in the next twelve months.

12. Employee and Agent Benefits

We participate in postretirement benefit plans covering substantially all of our employees and certain agents, including employees of other companies affiliated with our ultimate parent, PFG ("affiliated companies"). Actuarial information regarding the status of the post-retirement benefit plans is calculated for the total plan only. The affiliated company portion of the actuarial present value of the accumulated or projected benefit obligations, or net assets available for benefits, is not separately determined. However, we are reimbursed for employee benefits related to the affiliated companies for plans we sponsor and we reimburse PFG for plans it sponsors. The reimbursement is not reflected in our employee and agent benefits disclosures.

Prior to November 2014, we sponsored defined benefit pension plans covering substantially all of our U.S. employees and certain agents. Some of these plans provide supplemental pension benefits to employees and agents with salaries and/or pension benefits in excess of the qualified plan limits imposed by federal tax law. The employees and agents are generally first eligible for the pension plans when they reach age 21. For plan participants employed prior to January 1, 2002, the pension benefits are based on the greater of a final average pay benefit or a cash balance benefit. The final average pay benefit is based on the years of service and generally the employee's or agent's average annual compensation during the last five years of employment. Partial benefit accrual of final average pay benefits is recognized from first eligibility until retirement based on attained service divided by potential service to age 65 with a minimum of 35 years of potential service. The cash balance portion of the plan started on January 1, 2002. An employee's account is credited with an amount based on the employee's salary, age and service. These credits accrue with interest. For plan participants hired on and after January 1, 2002, only the cash balance plan applies. The policy is to fund the cost of providing pension benefits in the years that the employees and agents are providing service to us. The funding policy for the qualified defined benefit plan is to contribute an amount annually at least equal to the minimum annual contribution required under the Employee Retirement Income Security Act (“ERISA”), and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. The funding policy for the nonqualified benefit plan is to fund the plan in the years that the employees are providing service, taking into account the funded status of the trust. While assets are designated to cover the computed liability of the nonqualified plan, the assets are not included as part of the asset balances presented in this footnote as they do not qualify as plan assets in accordance with U.S. GAAP. Effective November 2014, PFG became the sponsor of these plans. We continue to reflect pension expense through our expense allocation agreement with PFG. In connection with the change in sponsorship, PFG assumed the pension plan liability from us.

We provide certain health care, life insurance and long-term care benefits for retired employees. Subsidized retiree health benefits are provided for employees hired prior to January 1, 2002. Employees hired after December 31, 2001, have access to retiree health benefits but it is intended that they pay for the full cost of the coverage. The health care plans are contributory with participants' contributions adjusted annually. The contributions are based on the number of years of service and age at retirement for those hired prior to January 1, 2002, who retired prior to January 1, 2011. For employees hired prior to January 1, 2002, who retired on or after January 1, 2011, the contributions are 60% of the expected cost. As part of the substantive plan, the retiree health contributions are

246

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

assumed to be adjusted in the future as claim levels change. The life insurance plans are contributory for a small group of previously grandfathered participants that have elected supplemental coverage and dependent coverage.

Covered employees are first eligible for the health and life postretirement benefits when they reach age 57 and have completed ten years of service with us. Retiree long-term care benefits are provided for employees whose retirement was effective prior to July 1, 2000. Our policy is to fund the cost of providing retiree benefits in the years that the employees are providing service, taking into account the funded status of the trust.

Obligations and Funded Status

The plans' combined funded status, reconciled to amounts recognized in the consolidated statements of financial position, was as follows:

					Other postretirement
	Pension benefits				benefits
	December 31,				December 31,
	2014		2013		2014		2013
	(in millions)
Change in benefit obligation
Benefit obligation at beginning of year	$	(2,440.2)	$	(2,638.0)	$	(140.6)	$	(147.8)
Service cost		(45.0)		(57.1)		(1.4)		(1.0)
Interest cost		(97.6)		(103.8)		(6.6)		(5.7)
Actuarial gain (loss)		—		279.2		(26.0)		7.9
Participant contribution		—		—		(6.6)		(6.8)
Benefits paid		69.5		79.5		12.2		13.6
Plan transfer due to change in sponsorship		2,513.3		—		—		—
Other		—		—		(0.7)		(0.8)
Benefit obligation at end of year	$	—	$	(2,440.2)	$	(169.7)	$	(140.6)
Change in plan assets
Fair value of plan assets at beginning of year	$	1,925.6	$	1,682.1	$	613.0	$	519.7
Actual return on plan assets		110.0		199.8		31.9		95.9
Employer contribution		116.4		123.2		0.4		4.2
Participant contributions		—		—		6.6		6.8
Benefits paid		(69.5)		(79.5)		(12.2)		(13.6)
Plan transfer due to change in sponsorship		(2,082.5)		—		—		—
Fair value of plan assets at end of year	$	—	$	1,925.6	$	639.7	$	613.0
Amount recognized in statement of financial position
Other assets	$	—	$	—	$	470.7	$	473.0
Other liabilities		—		(514.6)		(0.7)		(0.6)
Total	$	—	$	(514.6)	$	470.0	$	472.4
Amount recognized in accumulated other comprehensive
(income) loss
Total net actuarial (gain) loss	$	—	$	391.1	$	(53.0)	$	(83.1)
Prior service benefit		—		(11.8)		(35.9)		(56.2)
Pre-tax accumulated other comprehensive (income) loss	$	—	$	379.3	$	(88.9)	$	(139.3)

The accumulated benefit obligation for all defined benefit pension plans was $2,287.4 million at December 31, 2013.

Employer contributions to the pension plans include contributions made directly to the qualified pension plan assets and contributions from corporate assets to pay nonqualified pension benefits. Benefits paid from the pension plans include both qualified and nonqualified plan benefits. Nonqualified pension plan assets are not included as part of the asset balances presented in this footnote. The nonqualified pension plan assets are held in Rabbi trusts for the benefit of all nonqualified plan participants. The assets held in a Rabbi trust are available to satisfy the claims of general creditors only in the event of bankruptcy. Therefore, these assets are fully consolidated in our consolidated statements of financial position and are not reflected in our funded status as they do not qualify

247

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

as plan assets under U.S. GAAP. Effective November 2014, the assets held in Rabbi trusts were transferred to PFG due the change in sponsorship and are no longer fully consolidated in our consolidated statements of financial position. The market value of assets held in these trusts was $304.3 million as of December 31, 2013.

Pension Plan Changes and Plan Gains/Losses

On January 1, 2010, benefits under the Principal Pension Plan were frozen for certain participants.

For the year ended December 31, 2013, the pension plans had a gain primarily due to an increase in the discount rate.

Other Postretirement Plan Changes and Plan Gains/Losses

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the “Medicare Modernization Act”) was signed into law. The Medicare Modernization Act introduced a prescription drug benefit under Medicare (“Medicare Part D”) as well as a federal subsidy to sponsors of retiree medical benefit plans. During each of the years ended December 31, 2014, 2013 and 2012, the Medicare subsidies we received and accrued for were $0.7 million, $0.8 million and $0.8 million, respectively.

An actuarial loss occurred during 2014 for the other postretirement benefit plans. This was due to a decrease in the discount rate, a change in the mortality assumption, a lower than expected increase in the medical premium equivalents for participants over age 65 and a greater than expected increase in the claim costs for participants under age 65. An actuarial gain occurred during 2013 for the other postretirement benefit plans. This was due to an increase in the discount rate and trend assumption for participants over age 65 and a change in assumption for retirees who voluntarily drop medical coverage at age 65 or older.

Impact from Exit of Group Medical Insurance Business

On September 30, 2010, we announced our decision to exit the group medical insurance business and entered into an agreement with United Healthcare Services, Inc. to renew medical insurance coverage for our customers as the business transitions. Our exit from the group medical insurance business resulted in a curtailment gain associated with the pension and other postretirement benefits of the impacted employees, which was recognized in our consolidated financial statements as impacted employees were terminated. We recognized a final curtailment in 2012, which resulted in a curtailment gain of $0.7 million for the pension plan and $3.5 million for the other postretirement benefits.

Information for Pension Plans With an Accumulated Benefit Obligation in Excess of Plan Assets

For 2013, both the qualified and nonqualified plans had accumulated benefit obligations in excess of plan assets. As noted previously, the nonqualified plans had assets deposited in trusts that fail to meet the U.S. GAAP requirements to be included in plan assets; however, these assets were included in our consolidated statements of financial position.

	December 31,
	2014		2013
	(in millions)
Projected benefit obligation	$	—	$	2,440.2
Accumulated benefit obligation		—		2,287.4
Fair value of plan assets		—		1,925.6

Information for Other Postretirement Benefit Plans With an Accumulated Postretirement Benefit Obligation
in Excess of Plan Assets
	December 31,
	2014		2013
	(in millions)
Accumulated postretirement benefit obligation	$	1.5	$	1.5
Fair value of plan assets		0.8		0.9

248

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Components of Net Periodic Benefit Cost
	Pension benefits						Other postretirement benefits
	For the year ended December 31,
	2014		2013		2012		2014		2013		2012
	(in millions)
Service cost	$	45.0	$	57.1	$	47.0	$	1.4	$	1.0	$	1.3
Interest cost		97.6		103.8		109.1		6.6		5.7		8.2
Expected return on plan assets		(110.0)		(127.4)		(114.6)		(32.6)		(28.8)		(33.5)
Amortization of prior service benefit		(3.9)		(8.7)		(9.4)		(20.3)		(25.9)		(28.6)
Recognized net actuarial (gain) loss		42.1		118.5		90.9		(3.4)		1.0		0.9
Amounts recognized due to special events		—		—		(0.7)		—		—		(3.5)
Net periodic benefit cost (income)	$	70.8	$	143.3	$	122.3	$	(48.3)	$	(47.0)	$	(55.2)

The pension plans' actuarial gains and losses were amortized using a straight-line amortization method over the average remaining service period of plan participants. For the qualified pension plan, gains and losses were amortized without use of the 10% allowable corridor. For the nonqualified pension plans the corridors allowed were used. For the other postretirement benefit plans, the corridors allowed are used.

						Other postretirement
		Pension benefits				benefits
		For the year ended December 31,
		2014		2013		2014		2013
		(in millions)
Other changes recognized in accumulated other comprehensive
	(income) loss
Net actuarial (gain) loss		$	—	$	(351.7)	$	26.7	$	(75.0)
Amortization of gain (loss)			(42.1)		(118.5)		3.4		(1.0)
Amortization of prior service benefit			3.9		8.7		20.3		25.9
Total recognized in pre-tax accumulated other comprehensive (income) loss		$	(38.2)	$	(461.5)	$	50.4	$	(50.1)
Total recognized in net periodic benefit cost and pre-tax accumulated
	other comprehensive (income) loss	$	32.6	$	(318.2)	$	2.1	$	(97.1)

In connection with the pension plan sponsorship change, we transferred $341.1 of pre-tax accumulated other comprehensive loss to PFG.

Net actuarial (gain) loss and net prior service cost benefit have been recognized in AOCI.

The estimated net actuarial (gain) loss and prior service cost (benefit) for the postretirement benefits that will be amortized from AOCI into net periodic benefit cost during the 2015 fiscal year are $(0.8) million and $(18.4) million, respectively.

Assumptions

Weighted‑average assumptions used to determine benefit obligations as disclosed under the Obligations and Funded Status section

					Other postretirement
	Pension benefits				benefits
	For the year ended December 31,
	2014		2013		2014		2013
Discount rate	N/A	%	4.90	%	4.00	%	4.90	%
Rate of compensation increase	N/A	%	4.80	%	4.82	%	4.83	%

249

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Weighted average assumptions used to determine net periodic benefit cost
	Pension benefits						Other postretirement benefits
	For the year ended December 31,
	2014		2013		2012		2014		2013		2012
Discount rate	4.90	%	4.00	%	5.15	%	4.90	%	4.00	%	5.15	%
Expected long-term return on plan assets	6.75	%	7.50	%	8.00	%	5.36	%	5.62	%	7.30	%
Rate of compensation increase	4.80	%	4.80	%	5.00	%	4.83	%	4.83	%	5.00	%

For the pension benefits, the discount rate was determined by projecting future benefit payments inherent in the projected benefit obligation and discounting those cash flows using a spot yield curve for high quality corporate bonds. The plans’ expected benefit payments were discounted to determine a present value using the yield curve and the discount rate was the level rate that produces the same present value. The expected return on plan assets was the long-term rate we expected to be earned based on the plans’ investment strategy. Historical and expected future returns of multiple asset classes were analyzed to develop a risk free rate of return and risk premiums for each asset class. The overall rate for each asset class was developed by combining a long-term inflation component, the risk free real rate of return and the associated risk premium. A weighted average rate was developed based on those overall rates and the target asset allocation of the plans.

For other postretirement benefits, the 5.36% expected long-term return on plan assets for 2014 is based on the weighted average expected long-term asset returns for the medical, life and long-term care plans. The expected long-term rates for the medical, life and long-term care plans are 5.4%, 5.0% and 5.85%, respectively.

Assumed Health Care Cost Trend Rates

	December 31,
	2014		2013
Health care cost trend rate assumed for next year under age 65	7.0	%	8.0	%
Health care cost trend rate assumed for next year age 65 and over	6.0	%	6.0	%
Rate to which the cost trend rate is assumed to decline (the ultimate trend rate)	4.5	%	4.5	%
Year that the rate reaches the ultimate trend rate (under age 65)	2019		2020
Year that the rate reaches the ultimate trend rate (65 and older)	2020		2019

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

	1-percentage		1-percentage
	point increase		point decrease
		(in millions)
Effect on total of service cost and interest cost components	$	0.4	$	(0.4)
Effect on accumulated postretirement benefit obligation		(8.5)		7.5

Pension Plan and Other Postretirement Benefit Plan Assets

Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels.

• Level 1 – Fair values are based on unadjusted quoted prices in active markets for identical assets. Our Level 1 assets include cash, fixed income investment funds and exchange traded equity securities.

• Level 2 – Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset, either directly or indirectly. Our Level 2 assets primarily include fixed income and equity investment funds and real estate investments.

• Level 3 – Fair values are based on significant unobservable inputs for the asset. Our Level 3 assets include a Principal Life general account investment.

Prior to November 2014, our pension plan assets consisted of investments in separate accounts. Net asset value (“NAV”) of the separate accounts was calculated in a manner consistent with U.S. GAAP for investment companies and was determinative of their

250

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

fair value. Several of the separate accounts invested in publicly quoted mutual funds or actively managed stocks. The fair value of the underlying mutual funds or stock was used to determine the NAV of the separate account, which was not publicly quoted. Some of the separate accounts also invested in fixed income securities. The fair value of the underlying securities was based on quoted prices of similar assets and used to determine the NAV of the separate account.

Our other postretirement benefit plan assets consist of cash, investments in fixed income security portfolios and investments in equity security portfolios. Because of the nature of cash, its carrying amount approximates fair value. The fair value of fixed income investment funds, U.S. equity portfolios and international equity portfolios is based on quoted prices in active markets for identical assets. The fair value of the Principal Life general account investment is the amount the plan would receive if withdrawing funds from this participating contract. The amount that would be received is calculated using a cash-out factor based on an associated pool of general account fixed income securities. The cash-out factor is a ratio of the asset investment value of these securities to asset book value. As the investment values change, the cash-out factor is adjusted, impacting the amount the plan receives at measurement date. To determine investment value for each category of assets, we project cash flows. This is done using contractual provisions for the assets, with adjustment for expected prepayments and call provisions. Projected cash flows are discounted to present value for each asset category. Interest rates for discounting are based on current rates on similar new assets in the general account based on asset strategy.

Pension Plan Assets

The fair value of the qualified pension plan’s assets by asset category was as follows:

		December 31, 2013
		Assets		Fair value hierarchy level
		measured at
		fair value		Level 1		Level 2		Level 3
		(in millions)
Asset category
U.S. large cap equity portfolios (1)		$	414.0	$	—	$	414.0	$	—
U.S. small/mid cap equity portfolios (2)			102.9		—		102.9		—
Balanced asset portfolios (3)			96.9		—		96.9		—
International equity portfolios (4)			171.0		—		171.0		—
Fixed income security portfolios (5)			1,048.5		—		1,048.5		—
Real estate investment portfolios:
	Direct real estate investments (6)		92.3		—		92.3		—
Total		$	1,925.6	$	—	$	1,925.6	$	—

(1) The portfolios invested primarily in publicly traded equity securities of large U.S. companies.

(2) The portfolios invested primarily in publicly traded equity securities of mid-sized and small U.S. companies.

(3) The portfolios were a combination of underlying fixed income and equity investment options. These investment options may have included balanced, asset allocation, target-date and target-risk investment options. Although typically lower risk than investment options that invested solely in equities, all investment options in this category had the potential to lose value.

(4) The portfolios invested primarily in publicly traded equity securities of non-U.S. companies.

(5) The portfolios invested in various fixed income securities, primarily of U.S. origin. These included, but were not limited to, corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, U.S. Treasury securities, agency securities, asset-backed securities and collateralized mortgage obligations.

(6) The portfolio invested primarily in U.S. commercial real estate properties.

We had no Level 3 assets in 2013 or 2012.

We had established an investment policy that provided the investment objectives and guidelines for the pension plan. Our investment strategy was to achieve the following:

• Obtain a reasonable long-term return consistent with the level of risk assumed and at a cost of operation within prudent levels. Performance benchmarks were monitored.

• Ensure sufficient liquidity to meet the emerging benefit liabilities for the plan.

• Provide for diversification of assets in an effort to avoid the risk of large losses and maximize the investment return to the pension plan consistent with market and economic risk.

251

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

In administering the qualified pension plan’s asset allocation strategy, we considered the projected liability stream of benefit payments, the relationship between current and projected assets of the plan and the projected actuarial liabilities streams, the historical performance of capital markets adjusted for the perception of future short‑ and long-term capital market performance and the perception of future economic conditions.

Other Postretirement Benefit Plan Assets

The fair value of the other postretirement benefit plans’ assets by asset category as of the most recent measurement date is as follows:

		December 31, 2014
		Assets		Fair value hierarchy level
		measured at
		fair value		Level 1		Level 2		Level 3
		(in millions)
Asset category
Cash and cash equivalents		$	5.5	$	5.5	$	—	$	—
Fixed income security portfolios:
	Fixed income investment funds (1)		164.4		161.1		3.3		—
	Principal Life general account investment (2)		36.3		—		—		36.3
U.S. equity portfolios (3)			375.6		311.0		64.6		—
International equity portfolios (4)			57.9		44.5		13.4		—
Total		$	639.7	$	522.1	$	81.3	$	36.3
		December 31, 2013
		Assets		Fair value hierarchy level
		measured at
		fair value		Level 1		Level 2		Level 3
		(in millions)
Asset category
Cash and cash equivalents		$	4.7	$	4.7	$	—	$	—
Fixed income security portfolios:
	Fixed income investment funds (1)		157.9		157.9		—		—
	Principal Life general account investment (2)		38.8		—		—		38.8
U.S. equity portfolios (3)			351.6		288.0		63.6		—
International equity portfolios (4)			60.0		45.9		14.1		—
Total		$	613.0	$	496.5	$	77.7	$	38.8

(1) The portfolios invest in various fixed income securities, primarily of U.S. origin. These include, but are not limited to, corporate bonds, mortgage-backed securities, commercial mortgage-backed securities, U.S. Treasury securities, agency securities, asset-backed securities and collateralized mortgage obligations.

(2) The general account is invested in various fixed income securities.

(3) The portfolios invest primarily in publicly traded equity securities of large U.S. companies.

(4) The portfolios invest primarily in publicly traded equity securities of non-U.S. companies.

As of December 31, 2014 and 2013, respectively, $81.3 million and $77.7 million of assets in the U.S. equity and international equity portfolios were included in a trust owned life insurance contract.

252

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The reconciliation for all assets measured at fair value using significant unobservable inputs (Level 3) is as follows:

For the year ended December 31, 2014

Actual return gains (losses)

Beginning

on plan assets

Ending

asset

Relating to

Net

asset

balance

assets still

Relating to

purchases,

balance

as of

held at the

assets sold

sales,

Transfers

Transfers

as of

December 31,

reporting

during the

and

into

out of

December 31,

2013

date

period

settlements

Level 3

Level 3

2014

(in millions)

Asset category

Principal Life general account

investment

$

38.8

$

0.8

$

—

$

(3.3)

$

—

$

—

$

36.3

For the year ended December 31, 2013

Actual return gains (losses)

Beginning

on plan assets

Ending

assets

Relating to

Net

assets

balance

assets still

Relating to

purchases,

balance

as of

held at the

assets sold

sales,

Transfers

Transfers

as of

December 31,

reporting

during the

and

into

out of

December 31,

2012

date

period

settlements

Level 3

Level 3

2013

(in millions)

Asset category

Principal Life general account

investment

$

42.1

$

1.1

$

—

$

(4.4)

$

—

$

—

$

38.8

For the year ended December 31, 2012

Actual return gains (losses)

Beginning

on plan assets

Ending

assets

Relating to

Net

assets

balance

assets still

Relating to

purchases,

balance

as of

held at the

assets sold

sales,

Transfers

Transfers

as of

December 31,

reporting

during the

and

into

out of

December 31,

2011

date

period

settlements

Level 3

Level 3

2012

(in millions)

Asset category

Principal Life general account

investment

$

42.5

$

3.1

$

—

$

(3.5)

$

—

$

—

$

42.1

According to our investment policy, the target asset allocation for the other postretirement benefit plans is:

Asset Category	Target allocation
U.S. equity portfolios	45% - 65%
International equity portfolios	5% - 15%
Fixed income security portfolios	30% - 50%

The investment strategies and policies for the other postretirement benefit plans are similar to those employed by the qualified pension plan.

Contributions

Prior to November 2014, our funding policy for the qualified pension plan was to fund the plan annually in an amount at least equal to the minimum annual contribution required under ERISA and, generally, not greater than the maximum amount that can be deducted for federal income tax purposes. We may contribute to our other postretirement benefit plans in 2015 pending future analysis.

253

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Estimated Future Benefit Payments

The estimated future benefit payments, which reflect expected future service, and the expected amount of subsidy receipts under Medicare Part D are:

		Other postretirement
		benefits (gross benefit
		payments, including		Amount of Medicare
		prescription drug benefits)		Part D subsidy receipts
	(in millions)
Year ending December 31:
2015	$	18.2	$	0.9
2016		18.9		1.0
2017		19.4		1.0
2018		19.6		1.0
2019		20.1		1.0
2020-2024		104.5		4.8

The above table reflects the total estimated future benefits to be paid from the plan, including both our share of the benefit cost and the participants' share of the cost, which is funded by their contributions to the plan.

The assumptions used in calculating the estimated future benefit payments are the same as those used to measure the benefit obligation for the year ended December 31, 2014.

254

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The information that follows shows supplemental information for our defined benefit pension plans. Certain key summary data is shown separately for qualified and nonqualified plans.

		For the year ended December 31,
		2014							2013
		Qualified		Nonqualified					Qualified		Nonqualified
		Plan			Plan		Total		Plan			Plan		Total
		(in millions)
Amount recognized in statement of financial
	position
Other assets		$	—		$	—	$	—	$	—		$	—	$	—
Other liabilities			—			—		—		(138.6)			(376.0)		(514.6)
Total		$	—		$	—	$	—	$	(138.6)		$	(376.0)	$	(514.6)
Amount recognized in accumulated other
	comprehensive loss
Total net actuarial loss		$	—		$	—	$	—	$	298.3		$	92.8	$	391.1
Prior service benefit			—			—		—		(6.5)			(5.3)		(11.8)
Pre-tax accumulated other comprehensive loss		$	—		$	—	$	—	$	291.8		$	87.5	$	379.3
Components of net periodic benefit cost
Service cost		$	39.0		$	6.0	$	45.0	$	50.4		$	6.7	$	57.1
Interest cost			82.6			15.0		97.6		88.2			15.6		103.8
Expected return on plan assets		(110.0)				—		(110.0)		(127.4)			—		(127.4)
Amortization of prior service benefit			(2.6)			(1.3)		(3.9)		(6.1)			(2.6)		(8.7)
Recognized net actuarial loss			35.8			6.3		42.1		104.4			14.1		118.5
Net periodic benefit cost		$	44.8		$	26.0	$	70.8	$	109.5		$	33.8	$	143.3
Other changes recognized in accumulated other
	comprehensive (income) loss
Net actuarial gain		$	—		$	—	$	—	$	(322.4)		$	(29.3)	$	(351.7)
Amortization of net loss			(35.8)			(6.3)		(42.1)		(104.4)			(14.1)		(118.5)
Amortization of prior service benefit			2.6			1.3		3.9		6.1			2.6		8.7
Total recognized in pre-tax accumulated other
	comprehensive income	$	(33.2)		$	(5.0)	$	(38.2)	$	(420.7)		$	(40.8)	$	(461.5)
Total recognized in net periodic benefit cost
	and pre-tax accumulated other comprehensive
	(income) loss	$	11.6		$	21.0	$	32.6	$	(311.2)		$	(7.0)	$	(318.2)

We have defined contribution plans that are generally available to all U.S. employees and agents. Eligible participants could not contribute more than $17,500 of their compensation to the plans in 2014. Effective January 1, 2006, we made several changes to the retirement programs. In general, the pension and supplemental executive retirement plan benefit formulas were reduced, and the 401(k) matching contribution was increased. Employees who were ages 47 or older with at least ten years of service on December 31, 2005, could elect to retain the prior benefit provisions and forgo receipt of the additional matching contributions. The employees who elected to retain the prior benefit provisions are referred to as “Grandfathered Choice Participants.” We match the Grandfathered Choice Participant's contribution at a 50% contribution rate up to a maximum contribution of 3% of the participant's compensation. For all other participants, we match the participant's contributions at a 75% contribution rate up to a maximum of 6% of the participant's compensation. The defined contribution plans allow employees to choose among various investment options, including PFG’s common stock. We contributed $41.7 million, $39.8 million and $37.3 million in 2014, 2013 and 2012, respectively, to our qualified defined contribution plans.

We also have nonqualified deferred compensation plans available to select employees and agents that allow them to defer compensation amounts in excess of limits imposed by federal tax law with respect to the qualified plans. In 2014, we matched the Grandfathered Choice Participant's deferral at a 50% match deferral rate up to a maximum matching deferral of 3% of the participant's compensation. For all other participants, we matched the participant's deferral at a 75% match deferral rate up to a maximum matching deferral of 6% of the participant's compensation. We contributed $4.1 million, $5.0 million and $4.6 million in 2014, 2013 and 2012, respectively, to our nonqualified deferred compensation plans.

255

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

13. Contingencies, Guarantees and Indemnifications

Litigation and Regulatory Contingencies

We are regularly involved in litigation, both as a defendant and as a plaintiff, but primarily as a defendant. Litigation naming us as a defendant ordinarily arises out of our business operations as a provider of asset management and accumulation products and services; individual life insurance, specialty benefits insurance and our investment activities. Some of the lawsuits may be class actions, or purport to be, and some may include claims for unspecified or substantial punitive and treble damages.

We may discuss such litigation in one of three ways. We accrue a charge to income and disclose legal matters for which the chance of loss is probable and for which the amount of loss can be reasonably estimated. We may disclose contingencies for which the chance of loss is reasonably possible and provide an estimate of the possible loss or range of loss or a statement that such an estimate cannot be made. Finally, we may voluntarily disclose loss contingencies for which the chance of loss is remote in order to provide information concerning matters that potentially expose us to possible losses.

In addition, regulatory bodies such as state insurance departments, the SEC, the Financial Industry Regulatory Authority, the Department of Labor and other regulatory agencies regularly make inquiries and conduct examinations or investigations concerning our compliance with, among other things, insurance laws, securities laws, ERISA and laws governing the activities of broker-dealers. We receive requests from regulators and other governmental authorities relating to industry issues and may receive additional requests, including subpoenas and interrogatories, in the future.

On March 18, 2014, McCaffree Financial Corp. Employee Retirement Program (“McCaffree”) filed a putative class action lawsuit in the United States District Court for the Southern District of Iowa against us. The complaint alleged, among other things, breach of duty of loyalty, breach of duty of prudence and prohibited transactions under ERISA. McCaffree seeks a nationwide class action on behalf of all participants and beneficiaries of defined contribution retirement plans that invested in any Principal Separate Account in the last six years. McCaffree seeks disgorgement of all fees it alleges we improperly retained in addition to other general claims for relief. We have filed a motion to dismiss the case and on December 11, 2014, the court granted the motion. McCaffree filed a notice of appeal on December 22, 2014. We will continue to aggressively defend the case.

On August 29, 2013, American Chemicals & Equipment, Inc. 401(k) Retirement Plan (“ACE”) filed a lawsuit in the United States District Court for the Northern District of Alabama against Principal Management Corporation and Principal Global Investors, LLC (the “ACE Defendants”). The lawsuit alleges the ACE Defendants breached their fiduciary duty under Section 36(b) of the Investment Company Act by charging excessive fees on certain of the LifeTime series target date funds. On January 24, 2014, the court granted the motion filed by the ACE Defendants to transfer the case to the Southern District of Iowa. The ACE Defendants continue to aggressively defend the lawsuit.

On December 2, 2009 and December 4, 2009, two plaintiffs, Cruise and Mullaney, each filed putative class action lawsuits in the United States District Court for the Southern District of New York against us; PFG; Principal Global Investors, LLC; Principal Management Corporation; and Principal Real Estate Investors, LLC (the “Cruise/Mullaney Defendants”). The lawsuits alleged the Cruise/Mullaney Defendants failed to manage the Principal U.S. Property Separate Account (“PUSPSA”) in the best interests of investors, improperly imposed a “withdrawal freeze” on September 26, 2008, and instituted a “withdrawal queue” to honor withdrawal requests as sufficient liquidity became available. The two lawsuits, as well as two subsequently filed complaints asserting similar claims, have been consolidated and are now known as In re Principal U.S. Property Account Litigation. Plaintiffs’ request for permission to appeal the denial of class certification was denied by the U.S. Eighth Circuit Court of Appeals on December 31, 2013. The case was dismissed on December 15, 2014.

In 2008, we received approximately $440.0 million in connection with the termination of certain structured transactions and the resulting prepayment of our investment in those transactions. The transactions involved Lehman Brothers Special Financing Inc. and Lehman Brothers Holdings Inc. (collectively, “Lehman”) in various capacities. Subsequent to Lehman’s 2008 bankruptcy filing, its bankruptcy estate initiated several lawsuits seeking to recover from numerous sources significant amounts to which it claims entitlement under various theories. We are one of a large group of defendants to this action, and believe that we have meritorious defenses to Lehman’s claims and intend to aggressively defend against them. The estate’s claim against us, including interest (which we also dispute), was approximately $541.0 million.

While the outcome of any pending or future litigation or regulatory matter cannot be predicted, management does not believe that any such matter will have a material adverse effect on our business or financial position.As of December 31, 2014, there were no

256

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

estimated losses accrued related to the legal matters discussed above because we believe the loss from these matters is not probable and cannot be reasonably estimated.

We believe all of the litigation contingencies discussed above involve a chance of loss that is either remote or reasonably possible. Unless otherwise noted, all of these matters involve unspecified claim amounts, in which the respective plaintiffs seek an indeterminate amount of damages. To the extent such matters present a reasonably possible chance of loss, we are generally not able to estimate the possible loss or range of loss associated therewith.

The outcome of such matters is always uncertain, and unforeseen results can occur. It is possible that such outcomes could require us to pay damages or make other expenditures or establish accruals in amounts that we could not estimate at December 31, 2014.

Guarantees and Indemnifications

In the normal course of business, we have provided guarantees to our ultimate parent, PFG, related to benefit payments of the nonqualified pension plan and to third parties primarily related to a former subsidiary. These agreements generally expire through 2019. The maximum exposure under these agreements as of December 31, 2014, was approximately $345.0 million. At inception, the fair value of such guarantees was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. Should we be required to perform under these guarantees, we generally could recover a portion of the loss from third parties through recourse provisions included in agreements with such parties, the sale of assets held as collateral that can be liquidated in the event that performance is required under the guarantees or other recourse generally available to us; therefore, such guarantees would not result in a material adverse effect on our business or financial position. While the likelihood is remote, such outcomes could materially affect net income in a particular quarter or annual period.

We are also subject to various other indemnification obligations issued in conjunction with divestitures, acquisitions and financing transactions whose terms range in duration and often are not explicitly defined. Certain portions of these indemnifications may be capped, while other portions are not subject to such limitations; therefore, the overall maximum amount of the obligation under the indemnifications cannot be reasonably estimated. At inception, the fair value of such indemnifications was insignificant. In addition, we believe the likelihood is remote that material payments will be required. Therefore, any liability accrued within our consolidated statements of financial position is insignificant. While we are unable to estimate with certainty the ultimate legal and financial liability with respect to these indemnifications, we believe that performance under these indemnifications would not result in a material adverse effect on our business or financial position. While the likelihood is remote, performance under these indemnifications could materially affect net income in a particular quarter or annual period.

Guaranty Funds

Under state insurance guaranty fund laws, insurers doing business in a state can be assessed, up to prescribed limits, for certain obligations of insolvent insurance companies to policyholders and claimants. A state’s fund assesses its members based on their pro rata market share of written premiums in the state for the classes of insurance for which the insolvent insurer was engaged. Some states permit member insurers to recover assessments paid through full or partial premium tax offsets. We accrue liabilities for guaranty fund assessments when an assessment is probable, can be reasonably estimated and when the event obligating us to pay has occurred. While we cannot predict the amount and timing of any future assessments, we have established reserves we believe are adequate for assessments relating to insurance companies that are currently subject to insolvency proceedings. As of December 31, 2014 and 2013, the liability balance for guaranty fund assessments, which is not discounted, was $16.8 million and $22.5 million, respectively, and was reported within other liabilities in the consolidated statements of financial position. As of December 31, 2014 and 2013, $7.1 million and $11.5 million, respectively, related to premium tax offsets were included in premiums due and other receivables in the consolidated statements of financial position.

Operating Leases

As a lessee, we lease office space, data processing equipment, office furniture and office equipment under various operating leases. Rental expense for the years ended December 31, 2014, 2013 and 2012 was $29.5 million, $26.4 million and $33.2 million, respectively.

257

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The following represents payments due by period for operating lease obligations (in millions):

Year ending December 31:
	2015		$	35.1
	2016			31.3
	2017			27.1
	2018			19.4
	2019			11.3
	2020 and thereafter			50.8
		Total operating lease obligations		175.0
		Less: Future sublease rental income on noncancelable leases		5.8
		Total future minimum lease payments	$	169.2

Capital Leases

We lease buildings and hardware storage equipment under capital leases. As of December 31, 2014 and 2013, these leases had a gross asset balance of $54.5 million and $42.3 million and accumulated depreciation of $17.0 million and $16.1 million, respectively. Depreciation expense for the years ended December 31, 2014, 2013 and 2012 was $11.8 million, $9.3 million and $7.0 million, respectively.

The following represents future minimum lease payments due by period for capital lease obligations (in millions).

Year ending December 31:
	2015		$	6.2
	2016			5.3
	2017			2.4
	2018			0.6
	2019			—
		Total		14.5
		Less: Amounts representing interest		0.3
		Net present value of minimum lease payments	$	14.2

258

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

14. Stockholder's Equity
Other Comprehensive Income (Loss)
		For the year ended December 31, 2014
		Pre-Tax		Tax		After-Tax
		(in millions)
Net unrealized gains on available-for-sale securities during the period		$	884.2	$	(309.9)	$	574.3
Reclassification adjustment for gains included in net income (1)			(66.2)		23.1		(43.1)
Adjustments for assumed changes in amortization patterns			(63.4)		22.2		(41.2)
Adjustments for assumed changes in policyholder liabilities			(352.3)		123.5		(228.8)
Net unrealized gains on available-for-sale securities			402.3		(141.1)		261.2
Noncredit component of impairment losses on fixed maturities,
	available-for-sale during the period		102.2		(35.8)		66.4
Adjustments for assumed changes in amortization patterns			(4.7)		1.7		(3.0)
Adjustments for assumed changes in policyholder liabilities			(2.2)		0.7		(1.5)
Noncredit component of impairment losses on fixed maturities,
	available-for-sale (2)		95.3		(33.4)		61.9
Net unrealized gains on derivative instruments during the period			100.3		(35.1)		65.2
Reclassification adjustment for gains included in net income (3)			(3.6)		1.2		(2.4)
Adjustments for assumed changes in amortization patterns			(12.8)		4.5		(8.3)
Adjustments for assumed changes in policyholder liabilities			3.2		(1.1)		2.1
Net unrealized gains on derivative instruments			87.1		(30.5)		56.6
Foreign currency translation adjustment			(5.3)		1.6		(3.7)
Unrecognized postretirement benefit obligation during the period			(26.7)		9.3		(17.4)
Amortization of prior service cost and actuarial loss included in
	net periodic benefit cost (4)		14.5		(5.1)		9.4
Net unrecognized postretirement benefit obligation			(12.2)		4.2		(8.0)
Other comprehensive income		$	567.2	$	(199.2)	$	368.0

259

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		For the year ended December 31, 2013
		Pre-Tax		Tax		After-Tax
		(in millions)
Net unrealized losses on available-for-sale securities during the period		$	(1,520.2)	$	533.0	$	(987.2)
Reclassification adjustment for losses included in net income (1)			59.6		(20.8)		38.8
Adjustments for assumed changes in amortization patterns			252.8		(88.5)		164.3
Adjustments for assumed changes in policyholder liabilities			471.8		(165.4)		306.4
Net unrealized losses on available-for-sale securities			(736.0)		258.3		(477.7)
Noncredit component of impairment losses on fixed maturities,
	available-for-sale during the period		22.0		(7.6)		14.4
Adjustments for assumed changes in amortization patterns			(14.4)		5.1		(9.3)
Noncredit component of impairment losses on fixed maturities,
	available-for-sale (2)		7.6		(2.5)		5.1
Net unrealized losses on derivative instruments during the period			(46.3)		16.2		(30.1)
Reclassification adjustment for losses included in net income (3)			5.0		(1.8)		3.2
Adjustments for assumed changes in amortization patterns			10.9		(3.8)		7.1
Adjustments for assumed changes in policyholder liabilities			20.5		(7.2)		13.3
Net unrealized losses on derivative instruments			(9.9)		3.4		(6.5)
Foreign currency translation adjustment			1.6		(1.6)		—
Unrecognized postretirement benefit obligation during the period			426.7		(149.3)		277.4
Amortization of prior service cost and actuarial loss included in
	net periodic benefit cost (4)		84.9		(29.7)		55.2
Net unrecognized postretirement benefit obligation			511.6		(179.0)		332.6
Other comprehensive loss		$	(225.1)	$	78.6	$	(146.5)

260

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		For the year ended December 31, 2012
		Pre-Tax		Tax		After-Tax
		(in millions)
Net unrealized gains on available-for-sale securities during the period		$	1,475.4	$	(513.3)	$	962.1
Reclassification adjustment for losses included in net income (1)			111.6		(39.1)		72.5
Adjustments for assumed changes in amortization patterns			(169.0)		59.1		(109.9)
Adjustments for assumed changes in policyholder liabilities			(645.5)		226.1		(419.4)
Net unrealized gains on available-for-sale securities			772.5		(267.2)		505.3
Noncredit component of impairment losses on fixed maturities,
	available-for-sale during the period		(17.3)		6.1		(11.2)
Adjustments for assumed changes in amortization patterns			4.0		(1.6)		2.4
Adjustments for assumed changes in policyholder liabilities			3.2		(1.1)		2.1
Noncredit component of impairment losses on fixed maturities,
	available-for-sale (2)		(10.1)		3.4		(6.7)
Net unrealized losses on derivative instruments during the period			(25.9)		9.2		(16.7)
Reclassification adjustment for gains included in net income (3)			(2.5)		0.9		(1.6)
Adjustments for assumed changes in amortization patterns			25.9		(9.1)		16.8
Adjustments for assumed changes in policyholder liabilities			(70.0)		24.5		(45.5)
Net unrealized losses on derivative instruments			(72.5)		25.5		(47.0)
Foreign currency translation adjustment			(14.7)		5.7		(9.0)
Unrecognized postretirement benefit obligation during the period			(245.7)		86.0		(159.7)
Amortization of prior service cost and actuarial loss included in
	net periodic benefit cost (4)		49.6		(17.3)		32.3
Net unrecognized postretirement benefit obligation			(196.1)		68.7		(127.4)
Other comprehensive income		$	479.1	$	(163.9)	$	315.2

(1) Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations.

(2) Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI.

(3) See Note 6, Derivative Financial Instruments – Cash Flow Hedges, for further details.

(4) Pre-tax amortization of prior service cost and actuarial loss included in net periodic benefit cost, which is comprised of amortization of prior service cost (benefit) and recognized net actuarial (gain) loss, is reported in operating expenses on the consolidated statements of operations. See Note 12, Employee and Agent Benefits – Components of Net Periodic Benefit Cost, for further details.

261

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Accumulated Other Comprehensive Income
				Noncredit
		Net unrealized		component of		Net unrealized		Foreign		Unrecognized		Accumulated
		gains on		impairment losses		gains on		currency		postretirement		other
		available-for-sale		on fixed maturities		derivative		translation		benefit		comprehensive
		securities		available-for-sale		instruments		adjustment		obligation		income
		(in millions)
Balances at January 1, 2012		$	768.7	$	(165.2)	$	74.1	$	12.1	$	(361.1)	$	328.6
Other comprehensive loss
	during the period, net of
	adjustments		432.8		(6.7)		(45.4)		(10.2)		(159.7)		210.8
Amounts reclassified to AOCI			72.5		—		(1.6)		—		32.3		103.2
Other comprehensive income			505.3		(6.7)		(47.0)		(10.2)		(127.4)		314.0
Balances at December 31, 2012			1,274.0		(171.9)		27.1		1.9		(488.5)		642.6
Other comprehensive loss
	during the period, net of
	adjustments		(516.5)		—		(9.7)		(0.4)		277.4		(249.2)
Amounts reclassified to AOCI			38.8		5.1		3.2		—		55.2		102.3
Other comprehensive loss			(477.7)		5.1		(6.5)		(0.4)		332.6		(146.9)
Balances at December 31, 2013			796.3		(166.8)		20.6		1.5		(155.9)		495.7
Pension plan transfer due to
	change in sponsorship		—		—		—		—		221.7		221.7
Other comprehensive income
	during the period, net of
	adjustments		304.3		—		59.0		(2.4)		(17.4)		343.5
Amounts reclassified to AOCI			(43.1)		61.9		(2.4)		—		9.4		25.8
Other comprehensive income			261.2		61.9		56.6		(2.4)		(8.0)		369.3
Balances at December 31, 2014		$	1,057.5	$	(104.9)	$	77.2	$	(0.9)	$	57.8	$	1,086.7

Noncontrolling Interest

Interests held by unaffiliated parties in consolidated entities are reflected in noncontrolling interest, which represents the noncontrolling partners’ share of the underlying net assets of our consolidated subsidiaries. Noncontrolling interest that is not redeemable is reported in the equity section of the consolidated statements of financial position.

The noncontrolling interest holders in certain of our consolidated entities maintain an equity interest that is redeemable at the option of the holder, which may be exercised on varying dates. Since redemption of the noncontrolling interest is outside of our control, this interest is presented on the consolidated statements of financial position line item titled “Redeemable noncontrolling interest.” If the interest were to be redeemed, we would be required to purchase such interest at a redemption value based on fair value or a formula that management intended to reasonably approximate fair value based on a fixed multiple of earnings over a measurement period. As such, the carrying value of the redeemable noncontrolling interest is compared to the redemption value at each reporting period. Any adjustments to the carrying amount of the redeemable noncontrolling interest for changes in redemption value prior to exercise of the redemption option are determined after the attribution of net income or loss of the subsidiary and are recognized in the redemption value as they occur. Adjustments to the carrying value of redeemable noncontrolling interest result in adjustments to additional paid-in capital and/or retained earnings. Adjustments are recorded in retained earnings to the extent the redemption value of the redeemable noncontrolling interest exceeds its fair value. All other adjustments to the redeemable noncontrolling interest are recorded in additional paid-in capital.

262

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Following is a reconciliation of the changes in the redeemable noncontrolling interest (in millions):

Balance at January 1, 2012	$	22.2
Net income attributable to redeemable noncontrolling interest		1.0
Distributions to redeemable noncontrolling interest		(1.2)
Foreign currency translation adjustment		1.2
Balance at December 31, 2012		23.2
Net income attributable to redeemable noncontrolling interest		13.6
Reclassification from stockholder's equity (1)		166.7
Distributions to redeemable noncontrolling interest		(13.0)
Change in redemption value of redeemable noncontrolling interest		17.8
Foreign currency translation adjustment		0.4
Balance at December 31, 2013		208.7
Net income attributable to redeemable noncontrolling interest		9.7
Distributions to redeemable noncontrolling interest		(14.9)
Purchase of subsidiary shares from redeemable noncontrolling interest (2)		(215.7)
Change in redemption value of redeemable noncontrolling interest		34.6
Foreign currency translation adjustment		(1.3)
Balance at December 31, 2014	$	21.1

(1) During the third quarter of 2013, we identified a classification error of certain of our noncontrolling interests. The classification error had no impact on net income. We evaluated the classification error based on qualitative and quantitative factors in accordance with SEC Staff Accounting Bulletins 99 and 108 and concluded the impact was not material in the current or any prior quarterly or annual periods presented. During the third quarter of 2013, we recorded a $166.7 million increase to redeemable noncontrolling interest and a corresponding decrease to stockholder’s equity.

(2) During the third quarter of 2014 we increased our ownership stake in Columbus Circle Investors.

Dividend Limitations

Under Iowa law, we may pay stockholder dividends only from the earned surplus arising from our business and must receive the prior approval of the Commissioner to pay a stockholder dividend if such a stockholder dividend would exceed certain statutory limitations. In general, the current statutory limitation is the greater of 10% of our policyholder surplus as of the preceding year-end or the net gain from operations from the previous calendar year. Based on this limitation and 2014 statutory results, we could pay approximately $615.2 million in stockholder dividends in 2015 without exceeding the statutory limitation.

15. Fair Value Measurements

We use fair value measurements to record fair value of certain assets and liabilities and to estimate fair value of financial instruments not recorded at fair value but required to be disclosed at fair value. Certain financial instruments, particularly policyholder liabilities other than investment-type insurance contracts, are excluded from these fair value disclosure requirements.

Valuation Hierarchy

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels. The level in the fair value hierarchy within which the fair value measurement in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety considering factors specific to the asset or liability.

• Level 1 – Fair values are based on unadjusted quoted prices in active markets for identical assets or liabilities. Our Level 1 assets and liabilities primarily include exchange traded equity securities, mutual funds and U.S. Treasury bonds.

• Level 2 – Fair values are based on inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly. Our Level 2 assets and liabilities primarily include fixed maturities (including public and private bonds), equity securities, derivatives and other investments for which public quotations are not available but that are priced by third-party pricing services or internal models using substantially all observable inputs.

263

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

• Level 3 – Fair values are based on at least one significant unobservable input for the asset or liability. Our Level 3 assets and liabilities include certain assets and liabilities priced using broker quotes or other valuation methods that utilize at least one significant unobservable input. These include fixed maturities, private equity securities, real estate and commercial mortgage loan investments of our separate accounts, commercial mortgage loan investments and obligations of consolidated VIEs for which the fair value option was elected, complex derivatives, embedded derivatives and equity method real estate investments for which the fair value option was elected.

Determination of Fair Value

The following discussion describes the valuation methodologies and inputs used for assets and liabilities measured at fair value on a recurring basis or disclosed at fair value. The techniques utilized in estimating the fair values of financial instruments are reliant on the assumptions used. Care should be exercised in deriving conclusions about our business, its value or financial position based on the fair value information of financial instruments presented below.

Fair value estimates are made based on available market information and judgments about the financial instrument at a specific point in time. Such estimates do not consider the tax impact of the realization of unrealized gains or losses. In addition, the disclosed fair value may not be realized in the immediate settlement of the financial instrument. We validate prices through an investment analyst review process, which includes validation through direct interaction with external sources, review of recent trade activity or use of internal models. In circumstances where broker quotes are used to value an instrument, we generally receive one non-binding quote. Broker quotes are validated through an investment analyst review process, which includes validation through direct interaction with external sources and use of internal models or other relevant information. We did not make any significant changes to our valuation processes during 2014.

Fixed Maturities

Fixed maturities include bonds, redeemable preferred stock, ABS and certain nonredeemable preferred securities. When available, the fair value of fixed maturities is based on quoted prices of identical assets in active markets. These are reflected in Level 1 and primarily include U.S. Treasury bonds and actively traded redeemable corporate preferred securities.

When quoted prices of identical assets in active markets are not available, our first priority is to obtain prices from third party pricing vendors. We have regular interaction with these vendors to ensure we understand their pricing methodologies and to confirm they are utilizing observable market information. Their methodologies vary by asset class and include inputs such as estimated cash flows, benchmark yields, reported trades, broker quotes, credit quality, industry events and economic events. Fixed maturities with validated prices from pricing services, which includes the majority of our public fixed maturities in all asset classes, are generally reflected in Level 2. Also included in Level 2 are corporate bonds where quoted market prices are not available, for which an internal model using substantially all observable inputs or a matrix pricing valuation approach is used. In the matrix approach, securities are grouped into pricing categories that vary by sector, rating and average life. Each pricing category is assigned a risk spread based on studies of observable public market data from the investment professionals assigned to specific security classes. The expected cash flows of the security are then discounted back at the current Treasury curve plus the appropriate risk spread. Although the matrix valuation approach provides a fair valuation of each pricing category, the valuation of an individual security within each pricing category may actually be impacted by company specific factors.

If we are unable to price a fixed maturity security using prices from third party pricing vendors or other sources specific to the asset class, we may obtain a broker quote or utilize an internal pricing model specific to the asset utilizing relevant market information, to the extent available and where at least one significant unobservable input is utilized, which are reflected in Level 3 and can include fixed maturities across all asset classes. As of December 31, 2014, less than 1% of our fixed maturities were valued using internal pricing models, which were classified as Level 3 assets accordingly.

The primary inputs, by asset class, for valuations of the majority of our Level 2 investments from third party pricing vendors or our internal pricing valuation approach are described below.

U.S. Government and Agencies/Non-U.S. Governments. Inputs include recently executed market transactions, interest rate yield curves, maturity dates, market price quotations and credit spreads relating to similar instruments.

States and Political Subdivisions. Inputs include Municipal Securities Rulemaking Board reported trades, U.S. Treasury and other benchmark curves, material event notices, new issue data and obligor credit ratings.

264

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Corporate. Inputs include recently executed transactions, market price quotations, benchmark yields, issuer spreads and observations of equity and credit default swap curves related to the issuer. For private placement corporate securities valued through the matrix valuation approach inputs include the current Treasury curve and risk spreads based on sector, rating and average life of the issuance.

RMBS, CMBS, Collateralized Debt Obligations and Other Debt Obligations. Inputs include cash flows, priority of the tranche in the capital structure, expected time to maturity for the specific tranche, reinvestment period remaining and performance of the underlying collateral including prepayments, defaults, deferrals, loss severity of defaulted collateral and, for RMBS, prepayment speed assumptions. Other inputs include market indices and recently executed market transactions.

Equity Securities

Equity securities include mutual funds, common stock and nonredeemable preferred stock. Fair values of equity securities are determined using quoted prices in active markets for identical assets when available, which are reflected in Level 1. When quoted prices are not available, we may utilize internal valuation methodologies appropriate for the specific asset that use observable inputs such as underlying share prices or the net asset value (“NAV”), which are reflected in Level 2. Fair values might also be determined using broker quotes or through the use of internal models or analysis that incorporate significant assumptions deemed appropriate given the circumstances and consistent with what other market participants would use when pricing such securities, which are reflected in Level 3. 

Derivatives

The fair values of exchange-traded derivatives are determined through quoted market prices, which are reflected in Level 1. Exchange-traded derivatives include futures that are settled daily such that their fair value is not reflected in the consolidated statements of financial position. The fair values of derivative instruments cleared through centralized clearinghouses are determined through market prices published by the clearinghouses, which are reflected in Level 2. The clearinghouses may utilize the overnight indexed swap curve in their valuation. The fair values of bilateral OTC derivative instruments are determined using either pricing valuation models that utilize market observable inputs or broker quotes. The majority of our bilateral OTC derivatives are valued with models that use market observable inputs, which are reflected in Level 2. Significant inputs include contractual terms, interest rates, currency exchange rates, credit spread curves, equity prices, and volatilities. These valuation models consider projected discounted cash flows, relevant swap curves, and appropriate implied volatilities. Certain bilateral OTC derivatives utilize unobservable market data, primarily independent broker quotes that are nonbinding quotes based on models that do not reflect the result of market transactions, which are reflected in Level 3.

Our non-cleared derivative contracts are generally documented under ISDA Master Agreements, which provide for legally enforceable set-off and close-out netting of exposures to specific counterparties. Collateral arrangements are bilateral and based on current ratings of each entity. We utilize the LIBOR interest rate curve to value our positions, which includes a credit spread. This credit spread incorporates an appropriate level of nonperformance risk into our valuations given the current ratings of our counterparties, as well as the collateral agreements in place. Counterparty credit risk is routinely monitored to ensure our adjustment for non-performance risk is appropriate. Our centrally cleared derivative contracts are conducted with regulated centralized clearinghouses, which provide for daily exchange of cash collateral equal to the difference in the daily market values of those contracts that eliminates the non-performance risk on these trades.

Interest Rate Contracts. For non-cleared contracts we use discounted cash flow valuation techniques to determine the fair value of interest rate swaps using observable swap curves as the inputs. These are reflected in Level 2. For centrally cleared contracts we use published prices from clearinghouses. These are reflected in Level 2. In addition, we have a limited number of complex inflation-linked interest rate swaps, interest rate collars and swaptions that are valued using broker quotes. These are reflected in Level 3.

Foreign Exchange Contracts. We use discounted cash flow valuation techniques that utilize observable swap curves and exchange rates as the inputs to determine the fair value of foreign currency swaps. These are reflected in Level 2. In addition, we have a limited number of non-standard currency swaps that are valued using broker quotes. These are reflected within Level 3.

Equity Contracts. We use an option pricing model using observable implied volatilities, dividend yields, index prices and swap curves as the inputs to determine the fair value of equity options. These are reflected in Level 2.

Credit Contracts. We use either the ISDA Credit Default Swap Standard discounted cash flow model that utilizes observable default probabilities and recovery rates as inputs or broker prices to determine the fair value of credit default swaps. These are reflected in Level 3. In addition, we have a limited number of total return swaps that are valued based on the observable quoted price of underlying equity indices. These are reflected in Level 2.

265

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Other Investments

Other investments reported at fair value include seed money investments, other investment funds, commercial mortgage loans of consolidated VIEs and equity method real estate investments for which the fair value option was elected.

The fair value of seed money and other investment funds is determined using the NAV of the fund. The NAV of the funds represents the price at which we feel we would be able to initiate a transaction. Seed money investments in mutual funds for which the NAV is published are reflected in Level 1. Seed money investments in mutual funds in markets that do not have a published NAV and other investment funds, which are relatively illiquid due to restrictions on sale, are reflected in Level 2.

Commercial mortgage loans of consolidated VIEs and equity method real estate investments for which the fair value option was elected are reflected in Level 3. Fair value of the commercial mortgage loans is computed utilizing a discount rate based on the current market. The market discount rate is then adjusted based on various factors that differentiate it from our pool of loans. The equity method real estate investments consist of underlying real estate and debt. The real estate fair value is estimated using a discounted cash flow valuation model that utilizes various public real estate market data inputs. The debt fair value is estimated using a discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements.

Cash and Cash Equivalents

Certain cash equivalents are reported at fair value on a recurring basis and include money market instruments and other short-term investments with maturities of less than three months. Fair values of these cash equivalents may be determined using public quotations, when available, which are reflected in Level 1. When public quotations are not available, because of the highly liquid nature of these assets, carrying amounts may be used to approximate fair values, which are reflected in Level 2.

Separate Account Assets

Separate account assets include equity securities, debt securities and derivative instruments, for which fair values are determined as previously described, and are reflected in Level 1, Level 2 and Level 3. Separate account assets also include commercial mortgage loans, for which the fair value is estimated by discounting the expected total cash flows using market rates that are applicable to the yield, credit quality and maturity of the loans. The market clearing spreads vary based on mortgage type, weighted average life, rating and liquidity. These are reflected in Level 3. Finally, separate account assets include real estate, for which the fair value is estimated using discounted cash flow valuation models that utilize various public real estate market data inputs. In addition, each property is appraised annually by an independent appraiser. The real estate included in separate account assets is recorded net of related mortgage encumbrances for which the fair value is estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. The real estate within the separate accounts is reflected in Level 3.

Investment-Type Insurance Contracts

Certain annuity contracts and other investment-type insurance contracts include embedded derivatives that have been bifurcated from the host contract and that are measured at fair value on a recurring basis, which are reflected in Level 3. The key assumptions for calculating the fair value of the embedded derivative liabilities are market assumptions (such as equity market returns, interest rate levels, market volatility and correlations) and policyholder behavior assumptions (such as lapse, mortality, utilization and withdrawal patterns). Risk margins are included in the policyholder behavior assumptions. The assumptions are based on a combination of historical data and actuarial judgment. The embedded derivative liabilities are valued using stochastic models that incorporate a spread reflecting our own creditworthiness. 

The assumption for our own non-performance risk for investment-type insurance contracts and any embedded derivatives bifurcated from certain annuity and investment-type insurance contracts is based on the current market credit spreads for debt-like instruments that we have issued and are available in the market.

Other Liabilities

Certain obligations reported in other liabilities include embedded derivatives to deliver underlying securities of structured investments to third parties. The fair value of the embedded derivatives is calculated based on the value of the underlying securities that are valued based on prices obtained from third party pricing vendors as utilized and described in our discussion of how fair value is determined for fixed maturities, which are reflected in Level 2.

266

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Additionally, obligations of consolidated VIEs for which the fair value option was elected are included in other liabilities. These obligations are valued either based on prices obtained from third party pricing vendors as utilized and described in our discussion of how fair value is determined for fixed maturities, which are reflected in Level 2, or broker quotes, which are reflected in Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

Assets and liabilities measured at fair value on a recurring basis are summarized below.

	December 31, 2014
	Assets/
	(liabilities)		Fair value hierarchy level
	measured at
	fair value		Level 1		Level 2		Level 3
	(in millions)
Assets
Fixed maturities, available-for-sale:
U.S. government and agencies	$	1,110.7	$	709.4	$	401.3	$	—
Non-U.S. governments		446.6		—		436.3		10.3
States and political subdivisions		4,176.2		—		4,176.2		—
Corporate		28,914.7		40.2		28,685.9		188.6
Residential mortgage-backed securities		2,805.2		—		2,805.2		—
Commercial mortgage-backed securities		3,975.5		—		3,975.5		—
Collateralized debt obligations		504.1		—		439.9		64.2
Other debt obligations		4,616.4		—		4,552.7		63.7
Total fixed maturities, available-for-sale		46,549.4		749.6		45,473.0		326.8
Fixed maturities, trading		400.3		—		260.6		139.7
Equity securities, available-for-sale		108.9		53.4		51.4		4.1
Equity securities, trading		191.6		2.0		189.6		—
Derivative assets (1)		650.8		—		597.1		53.7
Other investments (2)		239.6		—		112.4		127.2
Cash equivalents (3)		284.5		—		284.5		—
Sub-total excluding separate account assets		48,425.1		805.0		46,968.6		651.5
Separate account assets		94,328.4		73,181.4		15,289.5		5,857.5
Total assets	$	142,753.5	$	73,986.4	$	62,258.1	$	6,509.0
Liabilities
Investment-type insurance contracts (4)	$	(155.9)	$	—	$	—	$	(155.9)
Derivative liabilities (1)		(763.8)		—		(728.3)		(35.5)
Other liabilities (4)		(310.1)		—		(243.8)		(66.3)
Total liabilities	$	(1,229.8)	$	—	$	(972.1)	$	(257.7)
Net assets	$	141,523.7	$	73,986.4	$	61,286.0	$	6,251.3

267

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

	December 31, 2013
	Assets/
	(liabilities)		Fair value hierarchy level
	measured at
	fair value		Level 1		Level 2		Level 3
	(in millions)
Assets
Fixed maturities, available-for-sale:
U.S. government and agencies	$	769.7	$	398.6	$	371.1	$	—
Non-U.S. governments		523.6		—		511.9		11.7
States and political subdivisions		3,632.4		—		3,630.6		1.8
Corporate		29,217.2		40.3		29,062.1		114.8
Residential mortgage-backed securities		2,823.6		—		2,823.6		—
Commercial mortgage-backed securities		4,026.4		—		4,024.8		1.6
Collateralized debt obligations		363.4		—		325.6		37.8
Other debt obligations		4,167.8		—		4,083.7		84.1
Total fixed maturities, available-for-sale		45,524.1		438.9		44,833.4		251.8
Fixed maturities, trading		358.5		—		188.6		169.9
Equity securities, available-for-sale		102.6		34.6		51.1		16.9
Equity securities, trading		169.7		8.7		161.0		—
Derivative assets (1)		651.1		—		576.9		74.2
Other investments (2)		279.3		—		136.4		142.9
Cash equivalents (3)		1,160.5		—		1,160.5		—
Sub-total excluding separate account assets		48,245.8		482.2		47,107.9		655.7
Separate account assets		83,790.3		65,599.5		13,092.9		5,097.9
Total assets	$	132,036.1	$	66,081.7	$	60,200.8	$	5,753.6
Liabilities
Investment-type insurance contracts (4)	$	9.5	$	—	$	—	$	9.5
Derivative liabilities (1)		(1,017.3)		—		(977.7)		(39.6)
Other liabilities (4)		(322.1)		—		(248.2)		(73.9)
Total liabilities	$	(1,329.9)	$	—	$	(1,225.9)	$	(104.0)
Net assets	$	130,706.2	$	66,081.7	$	58,974.9	$	5,649.6

(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 6, 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, other investment funds, commercial mortgage loans of consolidated VIEs and equity method investments 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.

268

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Changes in Level 3 Fair Value Measurements

The reconciliation for all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are summarized as follows:

				For the year ended December 31, 2014
						Total realized/unrealized
						gains (losses)												Changes in
				Beginning						Net						Ending		unrealized
				asset/						purchases,						asset/		gains (losses)
				(liability)						sales,						(liability)		included in
				balance		Included		Included in		issuances						balance		net income
				as of		in net		other		and		Transfers		Transfers		as of		relating to
				December 31,		income		comprehensive		settlements		into		out of		December 31,		positions still
				2013		(1)		income		(4)		Level 3		Level 3		2014		held (1)
				(in millions)
Assets
Fixed maturities,
	available-for-sale:
	Non-U.S.
			governments	$	11.7	$	—	$	(0.2)	$	(1.2)	$	—	$	—	$	10.3	$	—
	States and political
		subdivisions			1.8		—		—		(0.1)		—		(1.7)		—		—
	Corporate				114.8		(1.4)		(1.5)		48.0		46.6		(17.9)		188.6		(1.3)
	Commercial
			mortgage-backed
			securities		1.6		(1.2)		1.3		(6.0)		6.8		(2.5)		—		—
	Collateralized
			debt obligations		37.8		—		0.4		46.1		3.9		(24.0)		64.2		—
	Other debt
			obligations		84.1		—		1.4		7.9		—		(29.7)		63.7		—
Total fixed
	maturities,
	available-for-sale				251.8		(2.6)		1.4		94.7		57.3		(75.8)		326.8		(1.3)
Fixed maturities,
	trading				169.9		9.9		—		(40.1)		—		—		139.7		1.2
Equity securities,
	available-for-sale				16.9		4.2		2.8		(20.0)		0.2		—		4.1		(0.3)
Derivative assets					74.2		(32.0)		—		11.5		—		—		53.7		(32.0)
Other investments					142.9		15.7		—		(31.4)		—		—		127.2		15.7
Separate account
	assets (2)				5,097.9		653.5		—		115.6		4.4		(13.9)		5,857.5		608.4
Liabilities
Investments-type
	insurance
	contracts				9.5	(190.2)			—		24.8		—		—		(155.9)		(190.6)
Derivative liabilities					(39.6)		3.9		(0.4)		0.6		—		—		(35.5)		(0.9)
Other liabilities (3)					(73.9)		(1.4)		—		9.0		—		—		(66.3)		(0.8)

269

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

				For the year ended December 31, 2013
						Total realized/unrealized
						gains (losses)												Changes in
				Beginning						Net						Ending		unrealized
				asset/						purchases,						asset/		gains (losses)
				(liability)						sales,						(liability)		included in
				balance		Included		Included in		issuances						balance		net income
				as of		in net		other		and		Transfers		Transfers		as of		relating to
				December 31,		income		comprehensive		settlements		into		out of		December 31,		positions still
				2012		(1)		income		(4)		Level 3		Level 3		2013		held (1)
				(in millions)
Assets
Fixed maturities,
	available-for-sale:
	Non-U.S.
			governments	$	12.9	$	—	$	—	$	(1.2)	$	—	$	—	$	11.7	$	—
	States and political
		subdivisions			1.9		—		—		(0.1)		—		—		1.8		—
	Corporate				117.8		(11.4)		2.2		(15.2)		105.3		(83.9)		114.8		(8.6)
	Commercial
			mortgage-backed
			securities		—		—		(0.1)		(0.7)		2.4		—		1.6		—
	Collateralized
			debt obligations		77.6		2.1		7.2		(56.0)		31.7		(24.8)		37.8		—
	Other debt
			obligations		14.7		(0.3)		2.8		34.9		32.0		—		84.1		(0.3)
Total fixed
	maturities,
	available-for-sale				224.9		(9.6)		12.1		(38.3)		171.4		(108.7)		251.8		(8.9)
Fixed maturities,
	trading				166.8		3.0		—		0.1		—		—		169.9		3.1
Equity securities,
	available-for-sale				15.3		(0.2)		1.8		—		—		—		16.9		(0.2)
Derivative assets					73.3		(20.7)		—		21.6		—		—		74.2		(19.8)
Other investments					113.9		11.2		—		17.8		—		—		142.9		11.2
Separate account
	assets (2)				4,450.7		585.2		—		55.8		12.7		(6.5)		5,097.9		556.1
Liabilities
Investments-type
	insurance
	contracts				(148.1)		143.4		—		14.2		—		—		9.5		141.1
Derivative liabilities					(101.7)		54.4		(0.1)		7.8		—		—		(39.6)		53.9
Other liabilities (3)					(39.6)		(34.3)		—		—		—		—		(73.9)		(34.3)

270

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

				For the year ended December 31, 2012
						Total realized/unrealized
						gains (losses)												Changes in
				Beginning						Net						Ending		unrealized
				asset/						purchases,						asset/		gains (losses)
				(liability)						sales,						(liability)		included in
				balance		Included		Included in		issuances						balance		net income
				as of		in net		other		and		Transfers		Transfers		as of		relating to
				December 31,		income		comprehensive		settlements		into		out of		December 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	$	—	$	—	$	(0.5)	$	(1.1)	$	14.5	$	—	$	12.9	$	—
	States and political
		subdivisions			—		—		0.2		(0.1)		1.8		—		1.9		—
	Corporate				239.2		(8.8)		22.7		(77.6)		79.7		(137.4)		117.8		(2.2)
	Collateralized
			debt obligations		102.5		(3.3)		5.1		4.5		—		(31.2)		77.6		—
	Other debt
			obligations		27.3		(2.2)		0.5		(26.2)		15.3		—		14.7		(2.2)
Total fixed
	maturities,
	available-for-sale				369.0		(14.3)		28.0		(100.5)		111.3		(168.6)		224.9		(4.4)
Fixed maturities,
	trading				220.8		3.2		—		(66.7)		9.5		—		166.8		(4.4)
Equity securities,
	available-for-sale				18.0		(0.3)		(2.4)		—		—		—		15.3		—
Derivative assets					59.0		10.8		—		3.5		—		—		73.3		12.0
Other investments					97.5		2.1		—		14.3		—		—		113.9		2.2
Separate account
	assets (2)				4,049.0		423.2		—		(21.2)		1.6		(1.9)		4,450.7		414.6
Liabilities
Investments-type
	insurance
	contracts				(171.8)		37.4		—		(13.7)		—		—		(148.1)		34.5
Derivative liabilities					(177.1)		36.0		1.3		38.1		—		—		(101.7)		34.4
Other liabilities (3)					(24.2)		(23.5)		—		8.1		—		—		(39.6)		(20.2)

(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 operations.

(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.

(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:

271

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		For the year ended December 31, 2014
										Net purchases,
										sales, issuances
		Purchases		Sales		Issuances		Settlements		and settlements
		(in millions)
Assets
Fixed maturities, available-for-sale:
	Non-U.S. governments	$	—	$	—	$	—	$	(1.2)	$	(1.2)
	States and political subdivisions		—		—		—		(0.1)		(0.1)
	Corporate		79.3		(23.6)		—		(7.7)		48.0
	Commercial mortgage-backed securities		—		(5.8)		—		(0.2)		(6.0)
	Collateralized debt obligations		61.3		—		—		(15.2)		46.1
	Other debt obligations		19.2		—		—		(11.3)		7.9
Total fixed maturities, available-for-sale			159.8		(29.4)		—		(35.7)		94.7
Fixed maturities, trading			—		(10.0)		—		(30.1)		(40.1)
Equity securities, available-for-sale			—		(20.0)		—		—		(20.0)
Derivative assets			11.8		(0.3)		—		—		11.5
Other investments			0.2		—		—		(31.6)		(31.4)
Separate account assets (5)			537.6		(330.5)		(331.8)		240.3		115.6
Liabilities
Investment-type insurance contracts			—		—		20.7		4.1		24.8
Derivative liabilities			(1.5)		2.1		—		—		0.6
Other liabilities			—		9.0		—		—		9.0

		For the year ended December 31, 2013
										Net purchases,
										sales, issuances
		Purchases		Sales		Issuances		Settlements		and settlements
		(in millions)
Assets
Fixed maturities, available-for-sale:
	Non-U.S. governments	$	—	$	—	$	—	$	(1.2)	$	(1.2)
	States and political subdivisions		—		—		—		(0.1)		(0.1)
	Corporate		18.0		(17.0)		—		(16.2)		(15.2)
	Commercial mortgage-backed securities		—		—		—		(0.7)		(0.7)
	Collateralized debt obligations		17.0		(47.4)		—		(25.6)		(56.0)
	Other debt obligations		37.8		—		—		(2.9)		34.9
Total fixed maturities, available-for-sale			72.8		(64.4)		—		(46.7)		(38.3)
Fixed maturities, trading			—		—		—		0.1		0.1
Derivative assets			22.1		(0.5)		—		—		21.6
Other investments			30.2		—		—		(12.4)		17.8
Separate account assets (5)			276.0		(170.8)		(21.8)		(27.6)		55.8
Liabilities
Investment-type insurance contracts			—		—		10.9		3.3		14.2
Derivative liabilities			(3.4)		11.2		—		—		7.8

272

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		For the year ended December 31, 2012
										Net purchases,
										sales, issuances
		Purchases		Sales		Issuances		Settlements		and settlements
		(in millions)
Assets
Fixed maturities, available-for-sale:
	Non-U.S. governments	$	—	$	—	$	—	$	(1.1)	$	(1.1)
	States and political subdivisions		—		—		—		(0.1)		(0.1)
	Corporate		0.3		(65.2)		—		(12.7)		(77.6)
	Collateralized debt obligations		5.1		(1.1)		—		0.5		4.5
	Other debt obligations		—		—		—		(26.2)		(26.2)
Total fixed maturities, available-for-sale			5.4		(66.3)		—		(39.6)		(100.5)
Fixed maturities, trading			—		(24.6)		—		(42.1)		(66.7)
Derivative assets			3.7		(0.2)		—		—		3.5
Other investments			34.0		—		—		(19.7)		14.3
Separate account assets (5)			134.8		(120.8)		(208.4)		173.2		(21.2)
Liabilities
Investment-type insurance contracts			—		—		(16.6)		2.9		(13.7)
Derivative liabilities			(3.9)		42.0		—		—		38.1
Other liabilities			—		8.1		—		—		8.1

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

Transfers

Transfers of assets and liabilities measured at fair value on a recurring basis between fair value hierarchy levels are summarized below.

			For the year ended December 31, 2014
			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:
	States and political subdivisions		$	—	$	—	$	—	$	—	$	—	$	1.7
	Corporate			—		—		—		46.6		—		17.9
	Commercial mortgage-backed
		securities		—		—		—		6.8		—		2.5
	Collateralized debt obligations			—		—		—		3.9		—		24.0
	Other debt obligations			—		—		—		—		—		29.7
Total fixed maturities,
	available-for-sale			—		—		—		57.3		—		75.8
Equity securities, available-for-
	sale			—		—		—		0.2		—		—
Separate account assets				33.0		—		71.3		4.4		—		13.9

273

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

			For the year ended December 31, 2013
			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:
	Corporate		$	—	$	—	$	—	$	105.3	$	—	$	83.9
	Commercial mortgage-backed
		securities		—		—		—		2.4		—		—
	Collateralized debt obligations			—		—		—		31.7		—		24.8
	Other debt obligations			—		—		—		32.0		—		—
Total fixed maturities,
	available-for-sale			—		—		—		171.4		—		108.7
Separate account assets				253.9		0.1		15.5		12.6		—		6.5

		For the year ended December 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	$	—	$	—
	States and political subdivisions		—		—		—		1.8		—		—
	Corporate		—		—		—		79.7		—		137.4
	Collateralized debt obligations		—		—		—		—		—		31.2
	Other debt obligations		—		—		—		15.3		—		—
Total fixed maturities,
	available-for-sale		—		—		—		111.3		—		168.6
Fixed maturities, trading			—		—		—		9.5		—		—
Separate account assets			3,255.7		0.3		205.5		1.3		—		1.9

Transfers between fair value hierarchy levels are recognized at the beginning of the reporting period.

We had significant transfers of separate account assets between Level 1 and Level 2, primarily related to foreign equity securities. When these securities are valued at the local close price of the exchange where the assets traded, they are reflected in Level 1. When events materially affecting the value occur between the close of the local exchange and the New York Stock Exchange, we use adjusted prices determined by a third party pricing vendor to update the foreign market closing prices and the fair value is reflected in Level 2.

Assets transferred into Level 3 during 2014, 2013 and 2012, primarily included those assets for which we are now unable to obtain pricing from a recognized third party pricing vendor as well as assets that were previously priced using a matrix valuation approach that may no longer be relevant when applied to asset-specific situations.

Assets transferred out of Level 3 during 2014, 2013 and 2012, included those for which we are now able to obtain pricing from a recognized third party pricing vendor or from internal models using substantially all market observable information.

274

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Quantitative Information about Level 3 Fair Value Measurements

The following table provides quantitative information about the significant unobservable inputs used for recurring fair value measurements categorized within Level 3, excluding assets and liabilities for which significant quantitative unobservable inputs are not developed internally, which primarily consists of those valued using broker quotes. Refer to “Assets and liabilities measured at fair value on a recurring basis” for a complete valuation hierarchy summary.

		December 31, 2014
		Assets /
		(liabilities)
		measured at		Valuation	Unobservable	Input/range		Weighted
		fair value		technique(s)	input description	of inputs		average
		(in millions)
Assets
Fixed maturities, available-for-sale:
	Non-U.S. governments	$	10.3	Discounted cash   flow	Discount rate (1)	2.2	%	2.2	%
					Illiquidity premium	50 basis points ("bps")		50bps
	Corporate		83.0	Discounted cash   flow	Discount rate (1)	1.8%-6.7%		4.0	%
					Comparability   adjustment	0bps-1bps		0bps
					Illiquidity premium	0bps-25bps		13bps
	Collateralized debt obligations		12.7	Discounted cash   flow	Discount rate (1)	2.7%-17.1%		6.1	%
					Probability of default	0%-100%		23.5	%
					Potential loss   severity	0%-70%		16.4	%
	Other debt obligations		49.3	Discounted cash   flow	Discount rate (1)	1.4%-5.0%		2.3	%
					Illiquidity premium	0bps-1,000bps		175bps
Fixed maturities, trading			15.2	Discounted cash   flow	Discount rate (1)	1.8%-126.9%		3.5	%
					Illiquidity premium	200bps- 1,400bps		460bps
			100.4	See note (2)

275

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

	December 31, 2014
	Assets /
	(liabilities)
	measured at		Valuation	Unobservable	Input/range		Weighted
	fair value		technique(s)	input description	of inputs		average
	(in millions)
Other investments		35.0	Discounted cash   flow - commercial   mortgage loans of   consolidated VIEs	Discount rate (1)	4.2	%	4.2	%
				Illiquidity premium	76bps		76bps
		92.2	Discounted cash   flow - equity   method real estate   investments	Discount rate (1)	7.3%-8.0%		7.6	%
				Terminal   capitalization rate	5.5%-6.8%		6.1	%
				Average market rent   growth rate	3.3%-3.7%		3.5	%
			Discounted cash   flow - equity   method real estate   investments -   debt	Loan to value	34.2%-58.9%		46.5	%
				Credit spread rate	1.8%-2.0%		1.9	%
Separate account assets		5,857.4	Discounted cash   flow - mortgage   loans	Discount rate (1)	1.1%-6.9%		3.2	%
				Illiquidity premium	0bps-60bps		7bps
				Credit spread rate	70bps-632bps		221bps
			Discounted cash   flow - real estate	Discount rate (1)	6.0%-24.6%		7.4	%
				Terminal   capitalization rate	4.5%-9.5%		6.4	%
				Average market rent   growth rate	1.3%-4.4%		3.0	%
			Discounted cash   flow - real estate   debt	Loan to value	6.8%-64.1%		46.5	%
				Credit spread rate	2.1%-4.8%		3.4	%

276

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

	December 31, 2014
	Assets /
	(liabilities)
	measured at		Valuation	Unobservable	Input/range	Weighted
	fair value		technique(s)	input description	of inputs	average
	(in millions)
Liabilities
Investment-type insurance   contracts		(155.9)	Discounted cash   flow	Long duration   interest rate	2.6%-2.7% (3)
				Long-term equity   market volatility	18.4%-39.5%
				Non-performance risk	0.1%-1.4%
				Utilization rate	See note (4)
				Lapse rate	0.5%-11.8%
				Mortality rate	See note (5)
Derivative liabilities		(19.3)	See note (2)
Other liabilities		(66.3)	See note (2)

			December 31, 2013
			Assets /
			(liabilities)
			measured at		Valuation	Unobservable	Input/range		Weighted
			fair value		technique(s)	input description	of inputs		average
			(in millions)
Assets
Fixed maturities, available-for-sale:
	Non-U.S. governments		$	11.7	Discounted cash   flow	Discount rate (1)	2.0	%	2.0	%
						Illiquidity premium	50 bps		50bps
	Corporate			70.1	Discounted cash   flow	Discount rate (1)	1.9%-7.7%		4.4	%
						Earnings before   interest, taxes,   depreciation and   amortization multiple	0x-4.5x		0.2x
						Comparability   adjustment	0bps-125bps		43bps
						Probability of default	0%-100%		5.4	%
						Potential loss   severity	0%-16%		0.9	%
						Illiquidity premium	0bps-25bps		15bps
	Commercial mortgage-backed			1.6	Discounted cash	Discount rate (1)	1.5%-4.5%		1.5	%
		securities			flow
	Collateralized debt obligations			13.6	Discounted cash   flow	Discount rate (1)	1.5	%	1.5	%
						Illiquidity premium	400bps		400bps

277

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

		December 31, 2013
		Assets /
		(liabilities)
		measured at		Valuation	Unobservable	Input/range		Weighted
		fair value		technique(s)	input description	of inputs		average
		(in millions)
	Other debt obligations		33.6	Discounted cash   flow	Discount rate (1)	2.0%-15.0%		6.7	%
					Illiquidity premium	0bps-50bps		11bps
Fixed maturities, trading			36.3	Discounted cash   flow	Discount rate (1)	1.6%-83.0%		3.4	%
					Illiquidity premium	0bps-1,400bps		370bps
			110.4	See note (2)
Other investments			68.1	Discounted cash   flow - commercial   mortgage loans of   consolidated VIEs	Discount rate (1)	4.8	%	4.8	%
					Illiquidity premium	94bps		94bps
			74.8	Discounted cash   flow - equity   method real estate   investments	Discount rate (1)	7.8%-8.1%		7.9	%
					Terminal   capitalization rate	5.5%-6.8%		6.1	%
					Average market rent   growth rate	3.5%-3.6%		3.6	%
				Discounted cash   flow - equity   method real estate   investments -   debt	Loan to value	40.5%-61.0%		50.7	%
					Credit spread rate	1.5%-2.0%		1.8	%

278

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

	December 31, 2013
	Assets /
	(liabilities)
	measured at		Valuation	Unobservable	Input/range	Weighted
	fair value		technique(s)	input description	of inputs	average
	(in millions)
Separate account assets		5,090.4	Discounted cash   flow - mortgage   loans	Discount rate (1)	0.6%-5.6%	3.3	%
				Illiquidity premium	0bps-60bps	12bps
				Credit spread rate	32bps-440bps	214bps
			Discounted cash   flow - real estate	Discount rate (1)	6.0%-16.0%	7.6	%
				Terminal   capitalization rate	4.5%-9.0%	6.6	%
				Average market rent   growth rate	2.4%-4.7%	3.0	%
			Discounted cash   flow - real estate   debt	Loan to value	11.0%-55.9%	50.3	%
				Credit spread rate	1.5%-5.2%	3.3	%
Liabilities
Investment-type insurance   contracts		9.5	Discounted cash   flow	Long duration   interest rate	3.8%-3.9% (3)
				Long-term equity   market volatility	18.4%-40.1%
				Non-performance risk	0.2%-1.2%
				Utilization rate	See note (4)
				Lapse rate	0.5%-11.8%
				Mortality rate	See note (5)
Derivative liabilities		(19.9)	See note (2)
Other liabilities		(73.9)	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 value of the obligations, which are due at maturity or termination of the trust, 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.

279

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Market comparable discount rates are used as the base rate in the discounted cash flows used to determine the fair value of certain assets. Increases or decreases in the credit spreads on the comparable assets could cause the fair value of the assets to significantly decrease or increase, respectively. Additionally, we may adjust the base discount rate or the modeled price by applying an illiquidity premium given the highly structured nature of certain assets. Increases or decreases in this illiquidity premium could cause significant decreases or increases, respectively, in the fair value of the asset.

Embedded derivatives can be either assets or liabilities within the investment-type insurance contracts line item, depending on certain inputs at the reporting date. Increases to an asset or decreases to a liability are described as increases to fair value. Increases or decreases in market volatilities could cause significant decreases or increases, respectively, in the fair value of embedded derivatives in investment-type insurance contracts. Long duration interest rates are used as the mean return when projecting the growth in the value of associated account value and impact the discount rate used in the discounted future cash flows valuation. The amount of claims will increase if account value is not sufficient to cover guaranteed withdrawals. Increases or decreases in risk free rates could cause the fair value of the embedded derivative to significantly increase or decrease, respectively. Increases or decreases in our own credit risks, which impact the rates used to discount future cash flows, could significantly increase or decrease, respectively, the fair value of the embedded derivative. All of these changes in fair value would impact net income.

Decreases or increases in the mortality rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. Decreases or increases in the overall lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The lapse rate assumption varies dynamically based on the relationship of the guarantee and associated account value. A stronger or weaker dynamic lapse rate assumption could cause the fair value of the embedded derivative to decrease or increase, respectively. The utilization rate assumption includes how many contractholders will take withdrawals, when they will take them and how much of their benefit they will take. Increases or decreases in the assumption of the number of contractholders taking withdrawals could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take withdrawals earlier or later could cause the fair value of the embedded derivative to decrease or increase, respectively. Assuming contractholders take more or less of their benefit could cause the fair value of the embedded derivative to decrease or increase, respectively.

Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis

Certain assets are measured at fair value on a nonrecurring basis. During 2014, certain mortgage loans had been marked to fair value of $68.1 million. The net impact of impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $10.0 million that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs. The fair value of the underlying collateral is determined based on a discounted cash flow valuation either from an external broker opinion of value or an internal model. Significant inputs used in the discounted cash flow calculation include: a discount rate, terminal capitalization rate and average market rent growth. The ranges of inputs used in the fair value measurements for the mortgage loans marked to fair value during 2014 were:

Discount rate = 8.8% - 11.0%

Terminal capitalization rate = 7.3% - 9.0%

Average market rent growth = 2.0% - 10.9%

During 2014, certain real estate had been written down to fair value of $22.3 million. This write down resulted in a loss of $6.2 million that was recorded in net realized capital gains (losses). This is a Level 3 fair value measurement, as the fair value of real estate is estimated based on a discounted cash flow valuation from an internal model. Significant inputs used in the discounted cash flow calculation include a discount rate, terminal capitalization rate and average market rent growth. The ranges of inputs used in the fair value measurements for the real estate marked to fair value during 2014 were:

Discount rate = 9.6% - 11.8%

Terminal capitalization rate = 8.3% - 8.5%

Average market rent growth = 3.0% - 3.6%

During 2013, certain mortgage loans had been marked to fair value of $151.5 million. The net impact of impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $28.5 million that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs. The fair value of the underlying collateral is determined based on a discounted cash flow valuation either from an external broker opinion of

280

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

value or an internal model. Significant inputs used in the discounted cash flow calculation include: a discount rate, terminal capitalization rate and average market rent growth. The ranges of inputs used in the fair value measurements for the mortgage loans marked to fair value during 2013 were:

Discount rate = 8.0% - 20.0%

Terminal capitalization rate = 7.3% - 10.5%

Average market rent growth = 1.0% - 10.9%

During 2013, certain mortgage servicing rights had been marked to fair value of $7.3 million. The net impact of impairments and subsequent improvements in estimated fair value of previously impaired mortgage servicing rights resulted in a net gain of $1.3 million that was recorded in operating expenses. These mortgage servicing rights are a Level 3 fair value measurement, as fair value is determined by calculating the present value of the future servicing cash flows from the underlying mortgage loans. The discount rate used in calculating the present value of the future servicing cash flows was 4.3% for the year ended December 31, 2013.

During 2012, certain mortgage loans had been marked to fair value of $171.2 million. The net impact of impairments and improvements in estimated fair value of previously impaired loans resulted in a net loss of $13.1 million that was recorded in net realized capital gains (losses) as part of the mortgage loan valuation allowance. This includes the impact of certain loans no longer on our books. These collateral-dependent mortgage loans are a Level 3 fair value measurement, as fair value is based on the fair value of the underlying real estate collateral, which is estimated using appraised values that involve significant unobservable inputs. The fair value of the underlying collateral is determined based on a discounted cash flow valuation either from an external broker opinion of value or an internal model. Significant inputs used in the discounted cash flow calculation include: a discount rate, terminal capitalization rate and average market rent growth. The ranges of inputs used in the fair value measurements for the mortgage loans marked to fair value during 2012 were:

Discount rate = 8.0% - 20.0%

Terminal capitalization rate = 6.3% - 10.5%

Average market rent growth = 3.0% - 8.0%

During 2012, certain mortgage servicing rights had been marked to fair value of $7.0 million. The net impact of impairments and subsequent improvements in estimated fair value of previously impaired mortgage servicing rights resulted in a net gain of $0.4 million that was recorded in operating expenses. These mortgage servicing rights are a Level 3 fair value measurement, as fair value is determined by calculating the present value of the future servicing cash flows from the underlying mortgage loans. The discount rate used in calculating the present value of the future servicing cash flows was 3.1% for the year ended December 31, 2012.

During 2012,certain real estate had been written down to fair value of $5.0 million. This write down resulted in a loss of $0.1 million that was recorded in net realized capital gains (losses). This is a Level 3 fair value measurement, as the fair value of real estate is estimated using appraised values that involve significant unobservable inputs that are not developed internally.

Fair Value Option

We elected fair value accounting for certain assets and liabilities of consolidated VIEs for which it was not practicable for us to determine the carrying value. The fair value option was elected for commercial mortgage loans reported with other investments and obligations reported with other liabilities in the consolidated statements of financial position. The changes in fair value of these items are reported in net realized capital gains (losses) on the consolidated statements of operations.

The fair value and aggregate contractual principal amounts of commercial mortgage loans for which the fair value option has been elected were $35.0 million and $32.4 million as of December 31, 2014, and $68.1 million and $64.0 million as of December 31, 2013, respectively. The change in fair value of the loans resulted in a $(1.5) million, $0.2 million and $2.6 million pre-tax gain (loss) for the years ended December 31, 2014, 2013 and 2012, respectively, none of which related to instrument-specific credit risk. None of these loans were more than 90 days past due or in nonaccrual status. Interest income on these commercial mortgage loans is included in net investment income on the consolidated statements of operations and is recorded based on the effective interest rates as determined at the closing of the loan. Interest income recorded on these commercial mortgage loans was $6.2 million, $5.7 million and $6.9 million for the years ended December 31, 2014, 2013 and 2012, respectively.

281

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The fair value and aggregate unpaid principal amounts of obligations for which the fair value option has been elected were $71.0 million and $132.8 million as of December 31, 2014, and $104.9 million and $174.4 million as of December 31, 2013, respectively. For the years ended December 31, 2014, 2013 and 2012, the change in fair value of the obligations resulted in a pre-tax loss of $0.7 million, $32.8 million and $37.7 million, which includes a pre-tax loss of $2.4 million, $34.3 million and $37.4 million related to instrument-specific credit risk that is estimated based on credit spreads and quality ratings, respectively. Interest expense recorded on these obligations is included in operating expenses on the consolidated statements of operations and was $3.0 million, $3.6 million and $5.3 million for the years ended December 31, 2014, 2013 and 2012, respectively.

We invest in real estate ventures for the purpose of earning investment returns and for capital appreciation. We elected the fair value option for certain ventures that are subject to the equity method of accounting because the nature of the investments are to add value to the properties and generate income from the operations of the properties. Other equity method real estate investments are not fair valued because the investments mainly generate income from the operations of the underlying properties. These investments are reported with other investments in the consolidated statements of financial position. The changes in fair value are reported in net investment income on the consolidated statements of operations. The fair value of the equity method investments for which the fair value option has been elected was $92.2 million and $74.8 million as of December 31, 2014 and 2013, respectively. The change in fair value of the investments resulted in a $17.3 million, $11.0 million and $(0.4) million pre-tax gain (loss) for the years ended December 31, 2014, 2013 and 2012, respectively.

Financial Instruments Not Reported at Fair Value

The carrying value and estimated fair value of financial instruments not recorded at fair value on a recurring basis but required to be disclosed at fair value were as follows:

	December 31, 2014
					Fair value hierarchy level
	Carrying amount		Fair value		Level 1		Level 2		Level 3
	(in millions)
Assets (liabilities)
Mortgage loans	$	11,164.4	$	11,703.0	$	—	$	—	$	11,703.0
Policy loans		799.0		1,051.4		—		—		1,051.4
Other investments		108.5		108.9		—		81.0		27.9
Cash and cash equivalents		989.5		989.5		989.5		—		—
Investment-type insurance contracts		(28,383.7)		(28,430.7)		—		(5,455.4)		(22,975.3)
Short-term debt		(154.5)		(154.5)		—		(154.5)		—
Long-term debt		(82.3)		(82.3)		—		—		(82.3)
Separate account liabilities		(82,986.8)		(82,265.5)		—		—		(82,265.5)
Bank deposits		(1,979.7)		(1,985.5)		(1,343.8)		(641.7)		—
Cash collateral payable		(138.7)		(138.7)		(138.7)		—		—

	December 31, 2013
					Fair value hierarchy level
	Carrying amount		Fair value		Level 1		Level 2		Level 3
	(in millions)
Assets (liabilities)
Mortgage loans	$	10,819.2	$	11,048.6	$	—	$	—	$	11,048.6
Policy loans		830.1		933.1		—		—		933.1
Other investments		114.2		114.9		—		81.1		33.8
Cash and cash equivalents		911.1		911.1		911.1		—		—
Investment-type insurance contracts		(29,825.2)		(30,008.7)		—		(5,902.2)		(24,106.5)
Short-term debt		(292.4)		(292.4)		—		(292.4)		—
Long-term debt		(152.4)		(156.4)		—		(103.3)		(53.1)
Separate account liabilities		(73,492.5)		(72,780.1)		—		—		(72,780.1)
Bank deposits		(1,949.0)		(1,951.1)		(1,252.2)		(698.9)		—
Cash collateral payable		(21.0)		(21.0)		(21.0)		—		—

282

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Mortgage Loans

Fair values of commercial and residential mortgage loans are primarily determined by discounting the expected cash flows at current treasury rates plus an applicable risk spread, which reflects credit quality and maturity of the loans. The risk spread is based on market clearing levels for loans with comparable credit quality, maturities and risk. The fair value of mortgage loans may also be based on the fair value of the underlying real estate collateral less cost to sell, which is estimated using appraised values. These are reflected in Level 3.

Policy Loans

Fair values of policy loans are estimated by discounting expected cash flows using a risk-free rate based on the Treasury curve. The expected cash flows reflect an estimate of timing of the repayment of the loans. These are reflected in Level 3.

Other Investments

The fair value of commercial loans and certain consumer loans included in other investments is calculated by discounting expected cash flows through the estimated maturity date using market interest rates that reflect the credit and interest rate risk inherent in the loans. The estimate of term to maturity is based on historical experience, adjusted as required, for current economic and lending conditions. The effect of nonperforming loans is considered in assessing the credit risk inherent in the fair value estimate. These are reflected in Level 3. The carrying value of the remaining investments reported in this line item approximate their fair value and are of a short-term nature. These are reflected in Level 2.

Cash and Cash Equivalents

Certain cash equivalents not reported at fair value include short-term investments with maturities of less than three months for which public quotations are not available to use in determining fair value. Because of the highly liquid nature of these assets, carrying amounts are used to approximate fair value, which are reflected in Level 2. The carrying amounts of the remaining cash and cash equivalents that are not reported at fair value on a recurring basis approximate their fair value, which are reflected in Level 1 given the nature of cash.

Investment-Type Insurance Contracts

The fair values of our reserves and liabilities for investment-type insurance contracts are determined via a third party pricing vendor or using discounted cash flow analyses when we are unable to find a price from third party pricing vendors. Third party pricing on various outstanding medium-term notes and funding agreements is based on observable inputs such as benchmark yields and spreads based on reported trades for our medium-term notes and funding agreement issuances. These are reflected in Level 2. The discounted cash flow analyses for the remaining contracts is based on current interest rates, including non-performance risk, being offered for similar contracts with maturities consistent with those remaining for the investment-type contracts being valued. These are reflected in Level 3. Investment-type insurance contracts include insurance, annuity and other policy contracts that do not involve significant mortality or morbidity risk and are only a portion of the policyholder liabilities appearing in the consolidated statements of financial position. Insurance contracts include insurance, annuity and other policy contracts that do involve significant mortality or morbidity risk. The fair values for our insurance contracts, other than investment-type contracts, are not required to be disclosed.

Short-Term Debt

The carrying amount of short-term debt approximates its fair value because of the relatively short time between origination of the debt instrument and its maturity, which is reflected in Level 2.

Long-Term Debt

Long-term debt primarily includes senior note issuances for which the fair values are determined using inputs that are observable in the market or that can be derived from or corroborated with observable market data. These are reflected in Level 2. Additionally, our long-term debt includes non-recourse mortgages and notes payable that are primarily financings for real estate developments for which the fair values are estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. These are reflected in Level 3.

283

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Separate Account Liabilities

Fair values of separate account liabilities, excluding insurance-related elements, are estimated based on market assumptions around what a potential acquirer would pay for the associated block of business, including both the separate account assets and liabilities. As the applicable separate account assets are already reflected at fair value, any adjustment to the fair value of the block is an assumed adjustment to the separate account liabilities. To compute fair value, the separate account liabilities are originally set to equal separate account assets because these are pass-through contracts. The separate account liabilities are reduced by the amount of future fees expected to be collected that are intended to offset upfront acquisition costs already incurred that a potential acquirer would not have to pay. The estimated future fees are adjusted by an adverse deviation discount and the amount is then discounted at a risk-free rate as measured by the yield on Treasury securities at maturities aligned with the estimated timing of fee collection. These are reflected in Level 3.

Bank Deposits

The fair value of deposits of our Principal Bank subsidiary with no stated maturity is equal to the amount payable on demand (i.e., their carrying amounts). These are reflected in Level 1. The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount is estimated using the rates currently offered for deposits of similar remaining maturities. These are reflected in Level 2.

Cash Collateral Payable

The carrying amount of the payable associated with our obligation to return the cash collateral received under derivative credit support annex (collateral) agreements approximates its fair value, which is reflected in Level 1.

16. Statutory Insurance Financial Information

We, the largest indirect subsidiary of PFG, prepare statutory financial statements in accordance with the accounting practices prescribed or permitted by the Insurance Division of the Department of Commerce of the State of Iowa (the “State of Iowa”). The State of Iowa recognizes only statutory accounting practices prescribed or permitted by the State of Iowa for determining and reporting the financial condition and results of operations of an insurance company to determine its solvency under the Iowa Insurance Law. The National Association of Insurance Commissioners' (“NAIC”) Accounting Practices and Procedures Manual has been adopted as a component of prescribed practices by the State of Iowa. The Commissioner has the right to permit other specific practices that deviate from prescribed practices. As of December 31, 2014, our use of prescribed statutory accounting practices has resulted in higher statutory net income of $6.4 million relative to the accounting practices and procedures of the NAIC due to our accounting for derivatives that hedge some of our equity indexed products. In addition, as of December 31, 2014, our permitted statutory accounting practice relating to variable annuities with a guaranteed living benefit rider resulted in lower statutory surplus of $150.2 million relative to carrying certain interest rate swaps at book value rather than fair value, as if they received hedge accounting treatment for statutory. Statutory accounting practices differ from U.S. GAAP primarily due to charging policy acquisition costs to expense as incurred, establishing reserves using different actuarial assumptions, valuing investments on a different basis and not admitting certain assets, including certain net deferred income tax assets.

We cede certain term and universal life insurance statutory reserves to affiliated reinsurance entities on a funds withheld coinsurance basis. The reserves are secured by cash, invested assets and financing provided by highly rated third parties. As of December 31, 2014, affiliated reinsurance entities assumed statutory reserves of $3,272.4 million from us. In the states of Vermont and Delaware, the affiliated reinsurers had permitted and prescribed practices allowing for the admissibility of certain assets backing these reserves. As of December 31, 2014, assets admitted under these practices totaled $1,129.0 million.   

Life and health insurance companies are subject to certain risk-based capital (“RBC”) requirements as specified by the NAIC. Under those requirements, the amount of capital and surplus maintained by a life and health insurance company is to be determined based on the various risk factors related to it. At December 31, 2014, we meet the minimum RBC requirements.

Our statutory net income and statutory capital and surplus were as follows:

	As of or for the year ended December 31,
	2014		2013		2012
	(in millions)
Statutory net income	$	535.5	$	607.9	$	576.1
Statutory capital and surplus		4,202.1		4,142.2		3,944.3

284

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

17. Segment Information

We provide financial products and services through the following segments: Retirement and Investor Services, Principal Global Investors and U.S. Insurance Solutions. In addition, we have a Corporate segment. The segments are managed and reported separately because they provide different products and services, have different strategies or have different markets and distribution channels.

The Retirement and Investor Services segment provides retirement and related financial products and services primarily to businesses, their employees and other individuals.

The Principal Global Investors segment provides asset management services to our asset accumulation business, our insurance operations, the Corporate segment and third‑party clients.

The U.S. Insurance Solutions segment provides individual life insurance and specialty benefits, which consists of group dental and vision insurance, individual and group disability insurance, group life insurance and non-medical fee-for-service claims administration, throughout the United States.

The Corporate segment manages the assets representing capital that has not been allocated to any other segment. Financial results of the Corporate segment primarily reflect our financing activities (including interest expense), income on capital not allocated to other segments, inter‑segment eliminations, income tax risks and certain income, expenses and other after-tax adjustments not allocated to the segments based on the nature of such items. Results of our exited group medical insurance business are reported in this segment.

Management uses segment operating earnings in goal setting, as a basis for determining employee compensation and in evaluating performance on a basis comparable to that used by securities analysts. We determine segment operating earnings by adjusting U.S. GAAP net income for net realized capital gains (losses), as adjusted, and other after-tax adjustments which management believes are not indicative of overall operating trends. Net realized capital gains (losses), as adjusted, are net of income taxes, related changes in the amortization pattern of DAC and related actuarial balances, recognition of deferred front-end fee revenues for sales charges on retirement and life insurance products and services, amortization of hedge accounting book value adjustments for certain discontinued hedges, net realized capital gains and losses distributed, noncontrolling interest capital gains and losses and certain market value adjustments to fee revenues. Net realized capital gains (losses), as adjusted, exclude periodic settlements and accruals on derivative instruments not designated as hedging instruments and exclude certain market value adjustments of embedded derivatives and realized capital gains (losses) associated with our exited group medical insurance business. Segment operating revenues exclude net realized capital gains (losses) (except periodic settlements and accruals on derivatives not designated as hedging instruments), including their impact on recognition of front-end fee revenues, certain market value adjustments to fee revenues and amortization of hedge accounting book value adjustments for certain discontinued hedges, and revenue from our exited group medical insurance business. Segment operating revenues include operating revenues from real estate properties that qualify for discontinued operations. While these items may be significant components in understanding and assessing the consolidated financial performance, management believes the presentation of segment operating earnings enhances the understanding of our results of operations by highlighting earnings attributable to the normal, ongoing operations of the business.

The accounting policies of the segments are consistent with the accounting policies for the consolidated financial statements, with the exception of income tax allocation. The Corporate segment functions to absorb the risk inherent in interpreting and applying tax law. The segments are allocated tax adjustments consistent with the positions we took on tax returns. The Corporate segment results reflect any differences between the tax returns and the estimated resolution of any disputes.

The following tables summarize select financial information by segment and reconcile segment totals to those reported in the consolidated financial statements:

		December 31, 2014		December 31, 2013
		(in millions)
Assets:
Retirement and Investor Services		$	137,822.0	$	128,021.9
Principal Global Investors			928.8		1,025.0
U.S. Insurance Solutions			21,382.2		19,895.6
Corporate			3,781.8		3,838.0
	Total consolidated assets	$	163,914.8	$	152,780.5

285

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

			For the twelve months ended December 31,
			2014		2013		2012
			(in millions)
Operating revenues by segment:
Retirement and Investor Services			$	4,799.7	$	4,212.5	$	4,321.0
Principal Global Investors				668.2		664.1		537.1
U.S. Insurance Solutions				3,257.5		3,097.7		2,983.1
Corporate				(99.9)		(109.9)		(91.7)
	Total segment operating revenues			8,625.5		7,864.4		7,749.5
Net realized capital losses, net of related revenue adjustments				(9.6)		(299.2)		(21.2)
Exited group medical insurance business				0.2		2.0		25.3
	Total revenues per consolidated statements of operations		$	8,616.1	$	7,567.2	$	7,753.6
Operating earnings (loss) by segment, net of
	related income taxes:
Retirement and Investor Services			$	722.7	$	613.3	$	523.4
Principal Global Investors				103.4		87.0		66.9
U.S. Insurance Solutions				230.8		199.9		143.3
Corporate				(12.7)		(35.3)		(24.1)
	Total segment operating earnings, net of related
		income taxes		1,044.2		864.9		709.5
Net realized capital gains (losses), as adjusted (1)				(43.5)		(167.2)		14.8
Other after-tax adjustments (2)				(48.2)		(1.1)		(49.4)
	Net income attributable to PLIC per consolidated statements
		of operations	$	952.5	$	696.6	$	674.9

(1) Net realized capital gains (losses), as adjusted, is derived as follows:

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Net realized capital gains (losses):
Net realized capital gains (losses)		$	62.7	$	(211.3)	$	72.1
Certain derivative and hedging-related adjustments			(73.0)		(87.0)		(92.8)
Certain market value adjustments to fee revenues			—		—		(0.3)
Recognition of front-end fee revenue			0.7		(0.9)		(0.2)
	Net realized capital losses, net of related revenue adjustments		(9.6)		(299.2)		(21.2)
Amortization of deferred acquisition costs and other actuarial balances			(49.6)		47.8		36.8
Capital gains distributed			(10.9)		(24.3)		(11.8)
Certain market value adjustments of embedded derivatives			4.8		18.4		(0.6)
Net realized capital losses associated with exited group
	medical insurance business		—		—		0.2
Noncontrolling interest capital gains			(0.1)		0.1		(8.1)
Income tax effect			21.9		90.0		19.5
	Net realized capital gains (losses), as adjusted	$	(43.5)	$	(167.2)	$	14.8

(2) For the year ended December 31, 2014, other after-tax adjustments included the negative effect resulting from (a) the impact of a court ruling on some uncertain tax positions ($47.5 million) and (b) losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP ($0.7 million).

For the year ended December 31, 2013, other after-tax adjustments included the negative effect resulting from losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP.

286

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

For the year ended December 31, 2012, other after-tax adjustments included the negative effect resulting from (a) a contribution made to The Principal Financial Group Foundation, Inc. ($39.8 million) and (b) losses associated with our exited group medical insurance business that does not qualify for discontinued operations accounting treatment under U.S. GAAP ($9.6 million).

The following is a summary of income tax expense (benefit) allocated to our segments for purposes of determining operating earnings. Segment income taxes are reconciled to income taxes reported on our consolidated statements of operations.

		For the year ended December 31,
		2014		2013		2012
		(in millions)
Income tax expense by segment:
Retirement and Investor Services		$	128.5	$	139.2	$	113.5
Principal Global Investors			56.3		48.3		37.0
U.S. Insurance Solutions			112.5		95.9		64.4
Corporate			(17.5)		(19.6)		(17.3)
Total segment income taxes from operating earnings			279.8		263.8		197.6
	Tax benefit related to net realized capital losses, as adjusted		(21.9)		(90.0)		(19.5)
	Tax expense benefit related to other after-tax adjustments		(14.9)		(0.6)		(26.6)
Total income taxes expense per consolidated statements of
	operations	$	243.0	$	173.2	$	151.5

The following is a summary of depreciation and amortization expense allocated to our segments for purposes of determining operating earnings. Segment depreciation and amortization equates to depreciation and amortization included in our consolidated statements of operations.

			For the year ended December 31,
			2014		2013		2012
			(in millions)
Depreciation and amortization expense by segment:
Retirement and Investor Services			$	27.5	$	23.1	$	21.2
Principal Global Investors				12.9		10.2		11.6
U.S. Insurance Solutions				16.7		13.7		14.1
Corporate				3.3		3.9		5.1
Total segment depreciation and amortization expense included in
	operating earnings			60.4		50.9		52.0
	Depreciation and amortization expense related to other
		after-tax adjustments		—		1.4		6.1
Total depreciation and amortization expense included in our
	consolidated statements of operations		$	60.4	$	52.3	$	58.1

287

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

The following table summarizes operating revenues for our products and services:

		For the years ended December 31,
		2014		2013		2012
		(in millions)
Retirement and Investor Services:
	Full-service accumulation	$	1,559.5	$	1,467.2	$	1,353.7
	Individual annuities		1,488.9		1,366.5		1,162.4
	Bank and trust services		84.2		95.2		101.6
	Eliminations		(13.4)		(12.6)		(11.3)
	Total Accumulation		3,119.2		2,916.3		2,606.4
	Investment only		308.1		341.0		431.6
	Full-service payout		1,372.4		955.2		1,283.0
	Total Guaranteed		1,680.5		1,296.2		1,714.6
	Total Retirement and Investor Services		4,799.7		4,212.5		4,321.0
Principal Global Investors (1)			668.2		664.1		537.1
U.S. Insurance Solutions:
	Individual life insurance		1,532.8		1,480.9		1,421.9
	Specialty benefits insurance		1,724.7		1,616.8		1,561.2
	Total U.S. Insurance Solutions		3,257.5		3,097.7		2,983.1
Corporate			(99.9)		(109.9)		(91.7)
Total operating revenues		$	8,625.5	$	7,864.4	$	7,749.5
Total operating revenues		$	8,625.5	$	7,864.4	$	7,749.5
	Net realized capital losses, net of related revenue adjustments		(9.6)		(299.2)		(21.2)
	Exited group medical insurance business		0.2		2.0		25.3
Total revenues per consolidated statements of
	operations	$	8,616.1	$	7,567.2	$	7,753.6

(1) Reflects inter-segment revenues of $276.5 million, $250.1 million and $214.3 million for the years ended December 31, 2014, December 31, 2013 and December 31, 2012, respectively.

18. Stock‑Based Compensation Plans

As of December 31, 2014, our ultimate parent, PFG, sponsored the 2014 Stock Incentive Plan (approved by PFG shareholders at the May 20, 2014, annual shareholder meeting), the Employee Stock Purchase Plan, the Long-Term Performance Plan, the Amended and Restated 2010 Stock Incentive Plan and the Stock Incentive Plan ("Stock Based Compensation Plans"). As of May 20, 2014, no new grants will be made under the Amended and Restated 2010 Stock Incentive Plan. No grants have been made under the Stock Incentive Plan or the Long-Term Performance Plan since at least 2005. Under the terms of the 2014 Stock Incentive Plan, grants may be nonqualified stock options, incentive stock options qualifying under Section 422 of the Internal Revenue Code, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units or other stock-based awards. To date, PFG has not granted any incentive stock options, restricted stock or performance units. The following Stock-Based Compensation Plans information represents all share based compensation data related to us and our subsidiaries’ employees.

For awards with graded vesting, we use an accelerated expense attribution method. The compensation cost that was charged against income for stock-based awards granted under the Stock-Based Compensation Plans was as follows:

	For the year ended December 31,
	2014		2013		2012
	(in millions)
Compensation cost	$	41.2	$	42.9	$	34.8
Related income tax benefit		14.0		12.8		11.4
Capitalized as part of an asset		2.5		2.6		2.3

288

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Nonqualified Stock Options

Nonqualified stock options were granted to certain employees under the 2014 Stock Incentive Plan, the Amended and Restated 2010 Stock Incentive Plan and the Stock Incentive Plan. Options outstanding were granted at an exercise price equal to the fair market value of PFG common stock on the date of grant, and expire ten years after the grant date. These options have graded vesting over a three-year period, except in the case of approved retirement.

The fair value of stock options is estimated using the Black‑Scholes option pricing model. The following is a summary of the assumptions used in this model for the stock options granted during the period:

	For the year ended December 31,
Options	2014			2013			2012
Expected volatility		53.2	%		53.3	%		70.0	%
Expected term (in years)		6.5			6.5			6.0
Risk-free interest rate		2.0	%		1.1	%		1.1	%
Expected dividend yield		2.50	%		3.00	%		2.55	%
Weighted average estimated fair value	$	18.89		$	11.95		$	13.95

We previously determined expected volatility based on, among other factors, historical volatility using daily price observations. Beginning with nonqualified stock options granted in 2013, we determine expected volatility based on a combination of historical volatility using daily price observations and implied volatility from traded options on PFG common stock. We believe that incorporating both historical and implied volatility into the expected volatility assumption calculation better reflects market expectations. The expected term represents the period of time that options granted are expected to be outstanding. We determine expected term using historical exercise and employee termination data. The risk-free rate for periods within the expected term of the option is based on the U.S. Treasury risk-free interest rate in effect at the time of grant. The dividend yield is based on historical dividend distributions compared to the closing price of PFG common shares on the grant date.

As of December 31, 2014, there was $1.6 million of total unrecognized compensation costs related to nonvested stock options. The cost is expected to be recognized over a weighted‑average service period of approximately 1.9 years.

Performance Share Awards

Performance share awards were granted to certain employees under the 2014 Stock Incentive Plan and the Amended and Restated 2010 Stock Incentive Plan. The performance share awards are treated as an equity award and are paid in shares. Whether the performance shares are earned depends upon the participant's continued employment through the performance period (except in the case of an approved retirement) and PFG’s performance against three-year goals set at the beginning of the performance period. Performance goals based on various PFG factors, including return on common equity, operating income and book value per common share, must be achieved for any of the performance shares to be earned. If the performance requirements are not met, the performance shares will be forfeited, no compensation cost is recognized and any previously recognized compensation cost is reversed. There is no maximum contractual term on these awards. Dividend equivalents are credited on performance shares outstanding as of the record date. These dividend equivalents are only paid on the shares released.

The fair value of performance share awards is determined based on the closing stock price of PFG common shares on the grant date. The weighted‑average grant-date fair value of performance share awards granted during 2014, 2013 and 2012 were $44.88, $30.70 and $27.46, respectively.

As of December 31, 2014, there was $3.2 million of total unrecognized compensation cost related to nonvested performance share awards granted. The cost is expected to be recognized over a weighted‑average service period of approximately 1.7 years.

289

Principal Life Insurance Company
Notes to Consolidated Financial StatementsDecember 31, 2014

Restricted Stock Units

Restricted stock units were granted to certain employees and agents under the 2014 Stock Incentive Plan, the Amended and Restated 2010 Stock Incentive Plan and Stock Incentive Plan. Restricted stock units are treated as equity awards and are paid in shares. Under these plans, awards have graded or cliff vesting over a three-year service period. When service for PFG ceases (except in the case of an approved retirement), all vesting stops and unvested units are forfeited. There is no maximum contractual term on these awards. Dividend equivalents are credited on restricted stock units outstanding as of the record date. These dividend equivalents are only paid on the shares released.

The fair value of restricted stock units is determined based on the closing stock price of PFG common shares on the grant date. The weighted‑average grant-date fair value of restricted stock units granted during 2014, 2013 and 2012 was $45.00, $30.80 and $27.45, respectively.

As of December 31, 2014, there was $31.5 million of total unrecognized compensation cost related to nonvested restricted stock unit awards granted under these plans. The cost is expected to be recognized over a weighted‑average period of approximately 1.7 years.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan, participating employees have the opportunity to purchase shares of PFG common stock on a semi-annual basis. Employees may purchase up to $25,000 worth of PFG common stock each year. Employees may purchase shares of PFG common stock at a price equal to 85% of the shares' fair market value as of the beginning or end of the purchase period, whichever is lower.

We recognize compensation expense for the fair value of the discount granted to employees participating in the employee stock purchase plan in the period of grant. Shares of the Employee Stock Purchase Plan are treated as an equity award. The weighted‑average fair value of the discount on the stock purchased was $8.94, $14.16 and $5.32 during 2014, 2013 and 2012, respectively.

19. Quarterly Results of Operations (Unaudited)

The following is a summary of unaudited quarterly results of operations.

	For the three months ended
	December 31		September 30		June 30		March 31
	(in millions)
2014
Total revenues	$	2,472.5	$	2,042.3	$	2,074.1	$	2,027.2
Total expenses		2,169.7		1,725.3		1,766.7		1,728.9
Net income		240.3		253.2		233.5		255.5
Net income attributable to PLIC		239.7		248.6		229.6		234.6
2013
Total revenues	$	2,197.7	$	1,779.0	$	1,814.3	$	1,776.2
Total expenses		1,971.5		1,531.3		1,587.0		1,590.0
Net income		182.3		195.8		182.4		153.7
Net income attributable to PLIC		175.2		191.5		178.9		151.0

290

PART C

OTHER INFORMATION

Item 24.Financial Statements and Exhibits

(a) Financial Statements included in the Registration Statement

(1) Part A:

Condensed Financial Information for the 8 years ended

December 31, 2014 and the period ended December 31, 2006.

(2) Part B:

Principal Life Insurance Company Separate Account B:

Report of Independent Registered Public Accounting Firm

Statements of Assets and Liabilities, December 31, 2014

Statements of Operations for the year ended December 31, 2014

Statements of Changes in Net Assets for the years ended December 31, 2014 and 2013.

Notes to Financial Statements.

Principal Life Insurance Company:

Report of Independent Registered Public Accounting Firm

Consolidated Statements of Financial Position at December 31, 2014, and 2013.

Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012.

Consolidated Statements of Stockholder's Equity for the years ended December 31, 2014, 2013 and 2012.

Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012.

Notes to Consolidated Financial Statements.

(3) Part C

Principal Life Insurance Company

Report of Independent Registered Public Accounting Firm on Schedules*

Schedule I - Summary of Investments - Other Than Investments in Related Parties As of December 31, 2014*

Schedule III - Supplementary Insurance Information as of December 31, 2014, 2013 and 2012 and for each of the years then ended*

Schedule IV - Reinsurance as of December 31, 2014, 2013 and 2012 and for each of the years then ended*

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

(b) Exhibits

(1) Resolution of Board of Directors of the Depositor - filed with the Commission on filed on 9/02/2005

(3a) Distribution Agreement (filed 6/20/2006)

(4a) Form of Variable Annuity Contract (filed 9/2/2005)

(5) Form of Variable Annuity Application (filed 6/20/2006)

(6a) Articles of Incorporation of the Depositor (filed 9/02/2005)

(6b) Bylaws of Depositor (filed 9/02/2005)

(8a1) American Century Investment Services, Inc. Shareholder Services Agreement dated 04/01/1999 as amended on 05/01/2001, 05/01/2002, 05/01/2004, and 10/13/2005 (filed with the Commission for 333-116220 as Ex-99.8C1 on 05/01/2008 Accession No. 0000950137-08-006515)

(8a2) American Century Investment Services, Inc. Amendment No. 5 to Shareholder Services Agreement dated 06/01/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8a3) American Century Investment Services, Inc. Amendment No. 6 and Joinder to Shareholder Service Agreement dated 11/01/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8a4) American Century Investment Services, Inc. Amendment No. 7 to Shareholder Service Agreement dated 03/20/2014 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8a5) American Century Investment Services, Inc. Rule 22c-2 Agreement (filed with the Commission as Ex-99.8C2 on 05/01/08 Accession No. 0000950137-08-006515)

(8a6) American Century Investment Services, Inc. Amendment No. 1 to Rule 22c-2 Agreement dated 11/01/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8b1) Amended & Restated Participation Agreement with Fidelity Insurance Products Fund (incorporated by reference from file number 333-116220, as filed on May 1, 2008)

(8b2) Distribution Agreement with Fidelity Variable Insurance Products Fund (incorporated by reference from file number 333-116220, as filed on May 1, 2008)

(8b3) Service Agreement dated 8/02/1999 with Fidelity Variable Insurance Products Fund (incorporated by reference from file number 333-116220, as filed on May 1, 2008)

(8b4) Rule 22c-2 Agreement with Fidelity Insurance Products Fund (incorporated by reference from file number 333-116220, as filed on May 1, 2008)

(8c1) Principal Variable Contracts Funds, Inc. Participation Agreement dated 01/05/2007 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c2) Principal Variable Contracts Funds, Inc. Participation Agreement Amendment No. 1 dated 06/01/2007 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c3) Principal Variable Contracts Funds, Inc. Participation Agreement Amendment No. 2 dated 01/01/2010 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c4) Principal Variable Contracts Funds, Inc. Participation Agreement Letter Amendment dated 06/17/2010 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c5) Principal Variable Contracts Funds, Inc. Participation Agreement Amendment No. 3 and Joinder dated 11/01/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c6) Principal Variable Contracts Fund, Inc. Rule 12b-1 Compensation Letter dated 12/30/2009 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c7) Principal Variable Contracts Fund, Inc. Amendment to Rule 12b-1 Compensation Letter dated 11/09/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c8) Principal Variable Contracts Funds, Inc. Rule 22c-2 Agreement dated 04/16/2007 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c9) Principal Variable Contracts Funds, Inc. Rule 22c-2 Agreement Amendment No. 1 and Joinder dated 11/01/2011 (filed with the Commission on 10/07/2014 Accession No. 0000009713-14-000086)

(8c10) Principal Variable Contracts Fund, Inc. Participation Agreement Amendment dated 02/09/2015 *

(9) Opinion of Counsel (filed 6/20/2006)

(10a) Consent of Ernst & Young LLP*

(10b) Powers of Attorney (filed with the Commission on 04/30/2007, 04/27/2011, 04/26/2012; and filed herein) *

(10c) Consent of Counsel *

(11) Financial Statement Schedules*

* Filed herein

** To be filed by amendment

Item 25. Officers and Directors of the Depositor

Principal Life Insurance Company is managed by a Board of Directors which is elected by its policyowners. The directors and executive officers of the Company, their positions with the Company, including Board Committee memberships, and their principal business address, are as follows:

DIRECTORS:

Name and Principal Business Address	Positions and Offices
BETSY J. BERNARD 40 Shalebrook Drive Morristown, NJ 07960	Director Chair, Nominating and Governance Committee Member, Executive and Human Resources Committees
JOCELYN CARTER-MILLER 8701 Banyan Court Tamarac, FL 33321	Director Member, Nominating and Governance Committee
GARY E. COSTLEY 520 Sandhill Ct. Marco Island, FL 34145	Director Member, Audit Committee
MICHAEL T. DAN 495 Rudder Road Naples, FL 34102	Director Chair, Human Resources Committee
DENNIS H. FERRO 21 Sago Palm Road Vero Beach, FL 32963	Director Member, Audit Committee
C. DANIEL GELATT, JR. NMT Corporation 2004 Kramer Street La Crosse, WI 54603	Director Member, Audit and Human Resources Committees
SANDRA L. HELTON 1040 North Lake Shore Drive #26A Chicago, IL 60611	Director Chair, Audit Committee Member, Executive Committee
ROGER C. HOCHSCHILD Discover Financial Services 2500 Lake Cook Road Riverwoods, IL 60015	Director
DANIEL J. HOUSTON The Principal Financial Group Des Moines, IA 50392	Director Principal Life: President and Chief Operating Officer
RICHARD L. KEYSER 5215 Old Orchard Place, Ste. 440 Skokie, IL 60077	Director Member, Nominating and Governance and Human Resources Committees
LUCA MAESTRI Apple Inc. 1 Infinite Loop Cupertino, CA 95014	Director Member, Audit Committee
ELIZABETH E. TALLETT Hunter Partners, LLC 12 Windswept Circle Thornton, NH 03285-6883	Director Member, Executive, Human Resources and Nominating and Governance Committees
LARRY D. ZIMPLEMAN The Principal Financial Group Des Moines, IA 50392	Chairman of the Board and Chair, Executive Committee Principal Life: Chairman and Chief Executive Officer

EXECUTIVE OFFICERS (OTHER THAN DIRECTORS)

Name and Principal Business Address	Positions and Offices
REX AUYEUNG(1)	Senior Vice President and President, Principal Financial Group - Asia
DAVID M. BLAKE(2)	Senior Executive Director and Head Global Fixed Income
ELIZABETH S. BRADY(2)	Senior Vice President and Chief Marketing Officer
NED A. BURMEISTER(2)	Senior Vice President and Chief Operating Officer, Principal International
GREGORY J. BURROWS(2)	Senior Vice President Retirement and Investor Services
TERESA M. BUTTON(2)	Vice President and Treasurer
TIMOTHY M. DUNBAR(2)	Executive Vice President and Chief Investment Officer
GREGORY B. ELMING(2)	Senior Vice President and Chief Risk Officer
NORA M. EVERETT(2)	President Retirement and Investor Services
AMY C. FRIEDRICH(2)	Senior Vice President, Specialty Benefits Division
PATRICK G. HALTER(2)	Senior Executive Director Principal Real Estate Investors
JULIA M. LAWLER(2)	Senior Executive Director - Multi-Asset Allocation
TERRANCE J. LILLIS(2)	Executive Vice President and Chief Financial Officer
GREGORY A. LINDE(2)	Senior Vice President Individual Life
JAMES P. MCCAUGHAN(2)	President - Global Asset Management
BARBARA A. MCKENZIE(2)	Senior Executive Director and Chief Operating Officer - Boutique Operations (PGI)
DENNIS J. MENKEN(2)	Senior Vice President and Chief Investment Officer - Principal Life Insurance Company
TIMOTHY J. MINARD(2)	Senior Executive Director - U.S. Distribution
GERALD W. PATTERSON(2)	Senior Vice President Retirement and Investor Services
ELIZABETH L. RAYMOND(2)	Senior Vice President and Chief Human Resources Officer
ANGELA R. SANDERS(2)	Senior Vice President and Controller
GARY P. SCHOLTEN(2)	Executive Vice President and Chief Information Officer
KAREN E. SHAFF(2)	Executive Vice President, General Counsel and Secretary
ELLEN W. SHUMWAY(2)	Senior Executive Director - Strategy and Boutique Operations (PGI)
DEANNA D. STRABLE(2)	President - U.S. Insurance Solutions
LUIS E. VALDES(2)	President - International Asset Management and Accumulation
ROBERTO WALKER(3)	Senior Vice President and President, Principal Financial Group - Latin America
(1)	Unit 1001-3, Central Plaza
	18 Harbour Road
	Wanchai
	Hong Kong, China
(2)	711 High Street
	Des Moines, IA 50392
(3)	Principal Vida Chile
	Av Apoquindo 3600
	Las Condes
	Santiago, Chile

Item 26. Persons Controlled by or Under Common Control with the Depositor or the Registrant

The Registrant is a separate account of Principal Life Insurance Company (the "Depositor") and is operated as a unit investment trust. Registrant supports benefits payable under Depositor's variable life contracts by investing assets allocated to various investment options in shares of Principal Variable Contracts Funds, Inc. and other mutual funds registered under the Investment Company Act of 1940 as open-end management investment companies of the "series" type. No person is directly or indirectly controlled by the Registrant.

The Depositor is wholly-owned by Principal Financial Services, Inc. Principal Financial Services, Inc. (an Iowa corporation) an intermediate holding company organized pursuant to Section 512A.14 of the Iowa Code. In turn, Principal Financial Services, Inc. is a wholly-owned subsidiary of Principal Financial Group, Inc., a publicly traded company that filed consolidated financial statements with the SEC. A list of persons directly or indirectly controlled by or under common control with Depositor as of January 1, 2015 appears below:

None of the companies listed in such organization chart is a subsidiary of the Registrant; therefore, only the separate financial statements of Registrant and the consolidated financial statements of Depositor are being filed with this Registration Statement.

Principal Life Insurance Company - Organizational Structure
(January 1, 2015)
PRINCIPAL FINANCIAL GROUP, INC.						Delaware	Publicly Held
	-->Principal Financial Services, Inc.*#					Iowa	100
		-->Princor Financial Services Corporation*#				Iowa	100
		-->PFG DO Brasil LTDA*#				Brazil	100
			-->Brasilprev Seguros E Previdencia S.A.*			Brazil	50
			-->Principal Global Investors Participacoes, LTDA*#			Brazil	100
			-->Claritas Investments Ltd.*#			Cayman Islands	66
			-->Claritas Participacoes S.A.*#			Brazil	81
				-->Claritas Administracao de Recursos LTDA *#		Brazil	77
		-->Principal International, Inc.*#				Iowa	100
			-->Principal International (Asia) Limited*#			Hong Kong	100
				-->Principal International (South Asia) SDN, BHD*#		Malaysia	100
				-->Principal Global Investors (Asia) Limited*#		Hong Kong	100
				-->Principal Nominee Company (Hong Kong) Limited*#		Hong Kong	100
				-->Principal Asset Management Company (Asia) Limited*#		Hong Kong	100
				-->Principal Insurance Company (Hong Kong) Limited*#		Hong Kong	100
				-->CIMB - Principal Asset Management Berhad*		Malaysia	40
					-->CIMB Wealth Advisors Berhad*	Malaysia	100
					-->CIMB - Principal Asset Management (S) PTE LTD*#	Singapore	100
					-->CIMB - Principal Asset Management Company Limited*	Thailand	99.99
					-->PT CIMB Principal Asset Management*	Indonesia	99
				-->Principal Trust Company (Asia) Limited*#		Hong Kong	100
				-->Principal Investment & Retirement Services Limited*#		Hong Kong	100
			-->Principal Mexico Servicios, S.A. de C.V.*#			Mexico	100
			-->Distribuidora Principal Mexico, S.A. de C.V.*#			Mexico	100
			-->Principal International Mexico, LLC *#			Delaware	100
			-->Principal Consulting (India) Private Limited*#			India	100
			-->Principal Financial Group, S.A. de C. V. Grupo Financiero.*#			Mexico	100
				-->Principal Afore, S. A. de C.V., Principal Grupo Financiero*#		Mexico	100
				-->Principal Fondos de Inversion S.A. de C.V., Operadora de Fondos de Inversion, Principal Grupo Financiero *#		Mexico	100
				-->Principal Seguros, S.A. de C.V., Principal Grupo Financiero*#		Mexico	100
				-->Principal Pensiones, S.A. de C.V., Principal Grupo Financiero*#		Mexico	100
		-->Principal Global Investors Holding Company, Inc.*#				Delaware	100
			-->Principal Global Investors (Ireland) Limited*#			Ireland	100
			-->Principal Global Investors (Europe) Limited*#			United Kingdom	100
			-->Principal Global Investors (Singapore) Limited*#			Singapore	100
			-->Principal Global Investors (Japan) Limited*#			Japan	100
			-->Principal Global Investors (Hong Kong) Limited*#			Hong Kong	100
			-->CIMB Principal Islamic Asset Management SDN. BHD*#			Malaysia	50
		-->Principal Financial Group (Mauritius) Ltd.*#				Mauritius	100
			-->Principal PNB Asset Management Company Private Limited*#			India	78.6
			-->Principal Trustee Company Private Limited*#			India	70
			-->Principal Retirement Advisors Private Limited*#			India	100
		-->Principal Life Insurance Company +#				Iowa	100
			-->Principal Real Estate Fund Investors, LLC*#<			Delaware	100
			-->Principal Development Investors, LLC*#<			Delaware	100
			-->Principal Real Estate Holding Company, LLC*#<			Delaware	100
				-->GAVI PREHC HC, LLC*#<		Delaware	100
			-->Principal Global Investors, LLC*#<			Delaware	100
				-->Principal Real Estate Investors, LLC*#		Delaware	100
				-->Principal Enterprise Capital, LLC*#		Delaware	100
				-->PGI Origin Holding Company Ltd.*#<		Wales/United Kingdom	100
					-->Origin Asset Management LLP*#<	Wales/United Kingdom	74
				-->PGI Finisterre Holding Company Ltd.		Wales/United Kingdom	100

		-->Finisterre Holdings Limited *							Malta	54
			-->Finisterre Capital UK Limited *						Wales/United Kingdom	100
				-->Finisterre Capital LLP *					Wales/United Kingdom	72
			-->Finisterre Hong Kong Limited *						Hong Kong	100
			-->Finisterre Malta Limited *						Malta	100
			-->Finisterre USA, Inc. *						Delaware	100
		-->Principal Commercial Funding, LLC*#<							Delaware	100
		-->Principal Global Columbus Circle, LLC*#<							Delaware	100
			-->CCI Capital Partners, LLC *#<						Delaware	100
		-->Post Advisory Group, LLC*#<							Delaware	80
			-->Post Advisory Europe Limited *#<						Wales/United Kingdom	100
		-->Principal Global Investors Trust*#<							Delaware	100
		-->Spectrum Asset Management, Inc.*#<							Connecticut	100
		-->CCIP, LLC*#<							Delaware	95
			-->Columbus Circle Investors*#<						Delaware	100
	-->Principal Holding Company, LLC*#<								Iowa	100
		-->Petula Associates, LLC*<							Iowa	100
			-->Principal Real Estate Portfolio, Inc.*#<						Delaware	100
				-->GAVI PREPI HC, LLC *#<					Delaware	100
			-->Petula Prolix Development Company*#<						Iowa	100
			-->Principal Commercial Acceptance, LLC*#<						Delaware	100
		-->Principal Generation Plant, LLC*#<							Delaware	100
		-->Principal Bank*#<							Iowa	100
		-->Equity FC, Ltd.*#<							Iowa	100
		-->Principal Dental Services, Inc.*#<							Arizona	100
			-->Employers Dental Services, Inc.*#<						Arizona	100
		-->First Dental Health *#<							California	100
		-->Delaware Charter Guarantee & Trust Company*#<							Delaware	100
		-->Preferred Product Network, Inc.*#<							Delaware	100
	-->Principal Reinsurance Company of Vermont*#								Vermont	100
	-->Principal Life Insurance Company of Iowa*#<								Iowa	100
		-->Principal Reinsurance Company of Delaware*#<							Delaware	100
-->Principal Financial Services (Australia), Inc.*#									Iowa	100
	-->Principal Global Investors (Australia) Service Company Pty Limited*#								Australia	100
		-->Principal Global Investors (Australia) Limited*#							Australia	100
-->Principal International Holding Company, LLC*#									Delaware	100
-->Principal Management Corporation*#									Iowa	100
	-->Principal Financial Advisors, Inc.*#								Iowa	100
	-->Principal Shareholder Services, Inc.*#								Washington	100
	-->Edge Asset Management, Inc.*#								Washington	100
	-->Principal Funds Distributor, Inc.*#								Washington	100
-->Principal Global Services Private Limited*#									India	100
-->CCB Principal Asset Management Company, Ltd.*									China	25
-->Principal Financial Services I (US), LLC *#									Delaware	100
	-->Principal Financial Services II (US), LLC *#								Delaware	100
	-->Principal Financial Services I (UK) LLP *#								Wales/United Kingdom	100
		-->Principal Financial Services IV (UK) LLP *#							United Kingdom	100
			-->Principal Financial Services V (UK) LTD.*#						United Kingdom	100
		-->Principal Financial Services II (UK) LTD. *#							Wales/United Kingdom	100
			-->Principal Financial Services III (UK) LTD. *#						Wales/United Kingdom	100
				-->Principal Financial Services VI (UK) LTD *#					United Kingdom	100
					-->Principal Global Financial Services (Europe) LTD *#				United Kingdom	100
						-->Liongate Capital Management LLP *			Wales/United Kingdom	59
						-->Liongate Limited *			Malta	55
							-->Liongate Capital Management (Cayman) Limited *		Cayman Islands	100
								-->Liongate Capital Management (UK) Limited *	Wales/United Kingdom	100
								-->Liongate Multi-Strategy GP Limited *	Cayman Islands	100
							-->Liongate Capital Management Limited *		Malta	100

-->Liongate Capital Management (India) Private Limited *

India

100

-->Liongate Capital Management Inc.

Delaware

100

-->Liongate Capital Management (US) LP *

Delaware

100

-->Principal Financial Services Latin America LTD. *#

Wales/United Kingdom

100

-->Principal International Latin America LTD.*#

United Kingdom

100

-->Principal International South America I LTD.*#

Wales/United Kingdom

100

-->Principal International South America II LTD.*#

Wales/United Kingdom

100

-->Principal International South America II LTD., Agencia En Chile *#

Chile/United Kingdom

100

-->Principal International de Chile, S.A.*#

Chile

100

-->Principal Compania de Seguros de Vida Chile S.A.*#

Chile

100

-->Principal Administradora General de Fondos S.A.*#

Chile

100

-->Principal Asset Management Chile S.A.*#

Chile

100

-->Principal Servicios Corporativos Chile LTDA*#

Chile

100

-->Principal Servicios de Administracion S.A.

Chile

100

-->Hipotecaria Cruz Del Sur Principal, S.A *

Chile

49

-->Principal Holding Company Chile S.A.*#

Chile

100

-->Principal Chile Limitada*#

Chile

100

-->Administradora de Fondos de Pensiones Cuprum S.A. *#

Chile

100

-->Inversiones Cuprum Internacional S.A.*#

Chile

100

-->Principal Edge Network Holdings, Inc.*#

Delaware

100

-->Principal Edge Network - Georgia, LLC*#

Delaware

100

-->Principal Edge Network - Dallas Ft. Worth, Inc.*#

Delaware

100

-->Principal National Life Insurance Company+#

Iowa

100

-->Diversified Dental Services, Inc.*#

Nevada

100

-->Morley Financial Services, Inc. *#

Oregon

100

-->Morley Capital Management, Inc.*#

Oregon

100

-->Union Bond and Trust Company*#

Oregon

100

-->Principal Investors Corporation*#

New Jersey

100

+ Consolidated financial statements are filed with the SEC.

* Not required to file financial statements with the SEC.

# Included in the consolidated financial statements of Principal Financial Group, Inc. filed with the SEC.

= Separate Financial statements are filed with SEC.

< Included in the financial statements of Principal Life Insurance Company filed with the SEC.

Item 27. Number of Contractowners - As of March 31, 2015

(1)	(2)
	Number of
Title of Class	Contractowners
BFA Variable Annuity Contracts	6
Pension Builder Contracts	73
Personal Variable Contracts	13
Premier Variable Contracts	22
Flexible Variable Annuity Contract	21,288
Freedom Variable Annuity Contract	899
Freedom 2 Variable Annuity Contract	268
Investment Plus Variable Annuity Contract	53,792
Principal Lifetime Income Solutions	949
Principal Pivot Series Variable Annuity	195

Item 28. Indemnification

Sections 490.851 through 490.859 of the Iowa Business Corporation Act permit corporations to indemnify directors and officers where (A) all of the following apply: the director or officer (i) acted in good faith; (ii) reasonably believed that (a) in the case of conduct in the individual's official capacity, that the individual's conduct was in the best interests of the corporation or (b) in all other cases, that the individual's conduct was at least not opposed to the best interests of the corporation; and (iii) in the case of any criminal proceeding, the individual had no reasonable cause to believe the individual's conduct was unlawful; and (B) the individual engaged in conduct for which broader indemnification has been made permissible or obligatory under a provision of the corporation's articles of incorporation.

Unless ordered by a court pursuant to the Iowa Business Corporation Act, a corporation shall not indemnify a director or officer in either of the following circumstances: (A) in connection with a proceeding by or in the right of the corporation, except for reasonable expenses incurred in connection with the proceeding if it is determined that the director has met the relevant standard of conduct (above) or (B) in connection with any proceeding with respect to conduct for which the director was adjudged liable on the basis that the director receive a financial benefit to which he or she was not entitled, whether or not involving action in the director's official capacity.

Registrant's By-Laws provide that it shall indemnify directors and officers against damages, awards, settlements and costs reasonably incurred or imposed in connection with any suit or proceeding to which such person is or may be made a party by reason of being a director or officer of the Registrant. Such rights of indemnification are in addition to any rights to indemnity to which the person may be entitled under Iowa law and are subject to any limitations imposed by the Board of Directors. The Board has provided that certain procedures must be followed for indemnification of officers, and that there is no indemnity of officers when there is a final adjudication of liability based upon acts which constitute gross negligence or willful misconduct.

Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

Item 29. Principal Underwriters

(a)Other Activity

Princor Financial Services Corporation acts as principal underwriter for variable annuity contracts issued by Principal Life Insurance Company Separate Account B, a registered unit investment trust and for variable life insurance contracts issued by Principal Life Insurance Company Variable Life Separate Account, a registered unit investment trust.

(b)Management

(b1)	(b2)
Name and principal	Positions and offices
business address	with principal underwriter
Deborah J. Barnhart	Director/Distribution (PPN)
The Principal Financial Group(1)
Patricia A. Barry	Assistant Corporate Secretary
The Principal Financial Group(1)
Tracy W. Bollin	Chief Financial Officer
The Principal Financial Group(1)
David J. Brown	Senior Vice President
The Principal Financial Group(1)
Teresa M. Button	Vice President and Treasurer
The Principal Financial Group(1)

(b1)	(b2)
Name and principal	Positions and offices
business address	with principal underwriter
Nicholas M. Cecere	Senior Vice President and Director
The Principal Financial Group(1)
Gregory B. Elming	Director
The Principal Financial Group(1)
Nora M. Everett	Director and Chief Executive Officer
The Principal Financial Group(1)
Stephen G. Gallaher	Assistant General Counsel/Assistant Corporate Secretary
The Principal Financial Group(1)
Curtis Hollebrands	AML Officer
The Principal Financial Group(1)
Kara Hoogensen	Chairman and President
The Principal Financial Group(1)
Julie LeClere	Senior Vice President/Managing Director
The Principal Financial Group(1)
Martin R. Richardson	Vice President - Broker Dealer Operations
The Principal Financial Group(1)
Karen E. Shaff	Executive Vice President/General Counsel/Corporate Secretary
The Principal Financial Group(1)
Deanna D. Strable-Soethout	Director
The Principal Financial Group(1)
Jeffrey A. Van Baale	Chief Information Officer
The Principal Financial Group(1)
Traci L. Weldon	Vice President/Chief Compliance Officer
The Principal Financial Group(1)
Dan L. Westholm	Assistant Vice President - Treasury
The Principal Financial Group(1)
John Wetherell	Private Funds Chief Compliance Officer
The Principal Financial Group(1)
(1)   655 9th Street
Des Moines, IA 50392

(c)Compensation from the Registrant

(1) Name of Principal Underwriter	(2) Net Underwriting Discounts & Commissions	(3) Compensation on Events Occasioning the Deduction of a Deferred Sales Load	(4) Brokerage Commissions	(5) Compensation
Princor Financial Services Corporation	$45,854,616.07	0	0	0

Item 30. Location of Accounts and Records

All accounts, books or other documents of the Registrant are located at the offices of the Depositor, The Principal Financial Group, Des Moines, Iowa 50392.

Item 31. Management Services

N/A

Item 32. Undertakings

The Registrant undertakes that in restricting cash withdrawals from Tax Sheltered Annuities to prohibit cash withdrawals before the Participant attains age 59½, separates from service, dies, or becomes disabled or in the case of hardship, Registrant acts in reliance on SEC No Action Letter addressed to American Counsel of Life Insurance (available November 28, 1988). Registrant further undertakes that:

1. Registrant has included appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in its registration statement, including the prospectus, used in connection with the offer of the contract;

2. Registrant will include appropriate disclosure regarding the redemption restrictions imposed by Section 403(b)(11) in any sales literature used in connection with the offer of the contract;

3. Registrant will instruct sales representatives who solicit Plan Participants to purchase the contract specifically to bring the redemption restrictions imposed by Section 403(b)(11) to the attention of the potential Plan Participants; and

4. Registrant will obtain from each Plan Participant who purchases a Section 403(b) annuity contract, prior to or at the time of such purchase, a signed statement acknowledging the Plan Participant's understanding of (a) the restrictions on redemption imposed by Section 403(b)(11), and (b) the investment alternatives available under the employer's Section 403(b) arrangement, to which the Plan Participant may elect to transfer his contract value.

Fee Representation

Principal Life Insurance Company represents the fees and charges deducted under the Policy, in the aggregate, are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company.

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant, Principal Life Insurance Company Variable Life Separate Account, has duly caused this Amendment to the Registration Statement to be signed on its behalf by the undersigned thereto duly authorized, and its seal to be hereunto affixed and attested, in the City of Des Moines and State of Iowa, on the 29th day of April, 2015.

	PRINCIPAL LIFE INSURANCE COMPANY
	SEPARATE ACCOUNT B
	(Registrant)
	By :	/s/ L. D. Zimpleman
		L. D. Zimpleman
		Chairman and Chief Executive Officer
	PRINCIPAL LIFE INSURANCE COMPANY
	(Depositor)
	By :	/s/ L. D. Zimpleman
		L. D. Zimpleman
		Chairman of the Board
		Chairman and Chief Executive Officer
Attest:
/s/ Clint Woods
Clint Woods
Assistant Corporate Secretary and Governance Officer

Pursuant to the requirements of the Securities Act, this amendment to the registration statement has been signed by the following persons in the capacities and on the date indicated.

Signature	Title	Date
/s/ L. D. Zimpleman	Chairman of the Board	April 29, 2015
L. D. Zimpleman	Chairman and Chief Executive Officer
/s/ A. R. Sanders	Senior Vice President and Controller	April 29, 2015
A. R. Sanders	(Principal Accounting Officer)
/s/ T. J. Lillis	Executive Vice President	April 29, 2015
T. J. Lillis	and Chief Financial Officer
	(Principal Financial Officer)
(B. J. Bernard)*	Director	April 29, 2015
B. J. Bernard
(J. Carter-Miller)*	Director	April 29, 2015
J. Carter-Miller
(G. E. Costley)*	Director	April 29, 2015
G. E. Costley
(M.T. Dan)*	Director	April 29, 2015
M. T. Dan
(D. H. Ferro)*	Director	April 29, 2015
D. H. Ferro
(C. D. Gelatt, Jr.)*	Director	April 29, 2015
C. D. Gelatt, Jr.
(S. L. Helton)*	Director	April 29, 2015
S. L. Helton
(R. C. Hochschild)*	Director	April 29, 2015
R. C. Hochschild
(D. J. Houston)*	Director	April 29, 2015
D. J. Houston	President and Chief Operating Officer
(R. L. Keyser)*	Director	April 29, 2015
R. L. Keyser
(L. Maestri)*	Director	April 29, 2015
L. Maestri
(E. E. Tallett)*	Director	April 29, 2015
E. E. Tallett
*By	/s/ L. D. Zimpleman
	L. D. Zimpleman
	Chairman of the Board
	Chairman and Chief Executive Officer
*	Pursuant to Powers of Attorney ((Previously filed and Incorporated by Reference from Exhibit (10b) to Registrant's Filing on Form N-4 on 04/30/2007 (Accession No. 0000012601-07-000009); on 04/27/2011 (Accession No. 0000898745-11-000205); 04/26/2012 (Accession No. 0000898745-12-000402)); and filed herein