Benefits Increase, Not Decrease, for American Workers.

Business Editors

DES MOINES, Iowa--(BUSINESS WIRE)--June 5, 2002

The Principal Financial Well-Being Index(SM) Reveals Strong Benefits

Produce Loyal Employees; Job Security Remains Growing Concern

Despite continual news of layoffs and cost-cutting, employee benefits appear to be on the rise, especially benefits identified as most important to American workers including health insurance, retirement plans and life insurance.

The Second Quarter 2002 Principal Financial Well-Being Index(SM) just released revealed the fourth consecutive quarterly increase in the number of firms that offer health insurance, defined contribution plans, life insurance and disability insurance. These four benefits are also ranked as the four most important benefits among workers.

This latest national survey of 1,500 employees of growing businesses showed 70 percent of all respondents agreed that a good benefit plan encourages them to work harder and perform better. This figure increased nearly 9% from the First Quarter 2002 Index.

"Despite headlines announcing employee cutbacks, growing businesses appear to be increasing their employee benefits, especially those most important to their staff," noted Daniel J. Houston, senior vice president of the Principal Financial Group(R). "This is especially interesting considering that last quarter's index revealed that one in three employees expected their benefits to decrease as a result of the slumping economy."

"This Well-Being Index clearly suggests a link between solid benefits and happier, more productive, and loyal employees. Improving benefits, especially core ones, helps firms recruit and retain talent and enhance performance," continued Houston.

Job Security and Long-Term Financial Future Concerns

The Index confirmed that job security continues to be a source of major apprehension for the American workforce, with 52 percent of respondents ranking it as their top concern. This statistic has increased steadily over the past four quarters. Meanwhile, 78 percent of employees are very concerned about their long-term financial futures, down slightly from one year ago.

"Not surprising, the tight economy and layoffs around the nation have American workers concerned for their jobs," Houston commented. "But even as short-term considerations are paramount, they continue to worry about how they will prepare for retirement and secure their financial futures."

The Index revealed that only 58 percent of respondents are planning for retirement. Yet, a surprising 44 percent said they are confident in their ability to effectively transition their retirement savings into a dependable stream of retirement income.

"There is a distinct gap between those who are concerned about their financial futures and those who feel prepared to tackle the challenge, which is why investor education and guidance is more important now than ever in the past," explained Houston. "The role of employers is particularly important as the American workforce ages and looks to workplace benefits to help them save for the future and turn their nest eggs into a secure source of monthly income when their working days are over."

Financial Planning and Strategy

Despite highly publicized situations like Enron where employees lost their retirement savings as their companies faltered, 62 percent of respondents do not include any of their firm's stock in their retirement plans. A mere one percent reported having more than 25 percent of their retirement investments savings invested in their employer's company stock.

"These statistics confirm the situations at Enron and Global Crossing are unfortunate exceptions and not the rule," offered Houston. "Yet they're poignant reminders of why retirement investors should maintain invested in well-balanced, diverse portfolios."

Of the 80 percent of survey respondents who expect a tax return from their April filings, most plan to use their returns to pay down their short-term debt or deposit the amount in their savings or checking accounts.

The Principal Financial Well-Being Index

The Principal Financial Well-Being Index is a quarterly study that identifies and tracks trends in consumer financial well-being, retirement planning, employee benefits and workplace trends. It is conducted by Harris Interactive and commissioned by the Principal Financial Group, the nation's 401(k) leader. The second quarter survey was conducted among a representative national sample of employees of growing businesses (10 to 1,000 employees). The study has a 95 percent confidence level and a range of error of +/- 2.5 percent.

The Principal Financial Group(R) (The Principal (R))(1) is a leader in offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement and investment services, life and health insurance and mortgage banking through its diverse family of financial services companies. More employers choose the Principal Financial Group for their 401(k) plans than any other bank, mutual fund, or insurance company in the United States(2). A member of the Fortune 500, the Principal Financial Group has $120.2 billion in assets under management(3) and serves some 13 million customers worldwide from offices in Asia, Australia, Europe, Latin America and the United States. Principal Financial Group, Inc. is traded on the New York Stock Exchange under the ticker symbol PFG. For more information, visit www.principal.com.

(1) "The Principal Financial Group" and "The Principal" are registered trademarks of Principal Financial Services, Inc., a member of the Principal Financial Group.

(2) CFO Magazine, April/May 2001, based on total plans served in 2000 by insurance companies, banks and investment firms.

(3) As of March 31, 2002.