The Principal Financial Group Offers New Executive Benefit Funding Option.

Business Editors

DES MOINES, Iowa--(BUSINESS WIRE)--June 11, 2002

A Valuable Financing Alternative For Business Owners

To Provide A Key Benefit For Employees

The Principal Financial Group(R), the nation's 401(k) leader and premier provider of employee benefits, today introduced its Principal Executive Variable Universal Life(4) (VUL) product to support owners of growing businesses. Principal Executive VUL offers business owners a valuable strategy to help their key employees save for retirement, while offsetting the owners' liability in financing nonqualified retirement benefits.

As a financing vehicle for nonqualified deferred compensation plans, Principal Executive VUL offers various investment options similar to those found in qualified retirement plans. Business owners who finance their nonqualified plans with Principal Executive VUL may choose from 73 investment divisions from 27 investment advisors. Because the product is life insurance based, business owners can also take advantage of tax deferred growth and tax-free withdrawals and loans for the life of the policy.

"Most key employees fall into the retirement income gap, or the space between the maximum retirement income they can receive from Social Security and their qualified retirement plan in comparison to their personal income replacement goal," said Mark West, director of Advanced Markets, the Principal Financial Group. "Executive VUL is cost-effective and provides owners with greater flexibility in offsetting the liability of financing their nonqualified plans. It addresses this retirement gap issue in a way that is beneficial for both the owner and employee."

Principal Executive VUL is part of the company's turnkey nonqualified executive benefit plan management platform, which integrates everything from the initial stages of plan design through financial modeling to administrative support services. The Principal provides a unique nonqualified plan system that includes marketing, sales support, financing options, implementation and administrative support services.

"The Principal recognizes that selecting services a la carte from an insurance company, third-party administrator or producer group is not an efficient or effective planning strategy for advisors or business owners," said West. "By pulling in related resources under one roof, we're better equipped to manage an executive compensation plan."

This announcement comes on the heals of results of the 2002 Small Employer Retirement Survey (SERS), which states that 31 percent of business owners are more likely to seriously consider offering a retirement plan for employees if the plan allowed key executives to save more.

While 35 percent of business owners who participated in the SERS study stated offering a retirement plan has had a major impact on the company's ability to retain good employees, 31 percent of these owners said that offering a plan to employees has had a major impact on their own ability to prepare financially for retirement.

"This demonstrates the importance for business owners in finding a solution for their employees' retirement plans that provides solid growth potential, without taking away from their own objectives," said West. "Attracting and retaining key employees is vital, however, the business owner must keep his or her retirement in perspective, as well."

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.

About SERS

The annual Small Employer Retirement Survey (SERS), now in its fifth year, was designed to gauge the views and attitudes of America's small employers (with five to 100 full-time workers) regarding retirement plans and related issues. The survey was conducted within the United States between January and February 2002, through 15-minute telephone interviews with 300 companies with a retirement plan and 300 companies without a retirement plan. Over samples of companies with 21-50 and 51-100 employees were obtained to allow separate analysis of these groups. Within each sample, 2002 data are weighted by size of business to reflect the universe of small employers with and without retirement plans.

In theory, each sample of 300 yields a statistical precision of plus or minus 6 percentage points (with 95 percent certainty) of what the results would be if all businesses with five to 100 full-time workers were surveyed with complete accuracy. There are other possible sources of error in all surveys, however, that may be more serious than theoretical calculations of sampling error. These include refusals to be interviewed and other forms of nonresponse, the effects of question wording and question order, and screening. While attempts are made to minimize these factors, it is difficult or impossible to quantify the errors that may result from them.

Founded in 1978, EBRI's mission is to contribute to, to encourage, and to enhance the development of sound employee benefit programs and sound public policy through objective research and education. EBRI is a private, nonprofit, nonpartisan public policy research organization based in Washington, DC. EBRI does not lobby and does not take positions on legislative proposals.

ASEC is a coalition of private- and public-sector institutions that undertakes initiatives to raise public awareness about what is needed to ensure long-term personal financial independence. ASEC works through its partners to educate Americans on all aspects of personal finance and wealth development, including credit management, college savings, home purchase, and retirement planning. ASEC develops and distributes educational materials, all of which are available in hard copy and on the ASEC Web sites: www.asec.org and www.choosetosave.org ASEC is a program of the EBRI Education and Research Fund.

Mathew Greenwald & Associates, Inc. is a full-service market research company with expertise in financial services research. Founded in 1985, Mathew Greenwald & Associates has conducted public opinion and customer-oriented research for more than 100 organizations, including many of the nation's largest companies and foremost associations. The 2002 SERS data collection was funded by grants from eight organizations, with staff time donated by EBRI, ASEC, and Mathew Greenwald & Associates. SERS materials and a list of underwriters may be accessed at the EBRI Web site: www.ebri.org/sers

(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 2002, based on total plans served in 2001 by insurance companies, banks and investment firms.

(3) As of March 31, 2002.

(4) For more complete information about EVUL insurance, including charges and expenses, contact your registered representative for a prospectus. Read the prospectus carefully before your invest or send money. Insurance issued by Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, 800/247-4123, member SIPC. Principal Life and Princor are members of the Principal Financial Group, Des Moines, IA 50392.