About Us: Newsroom

Our Perspective on Market Uncertainty

Debt Ceiling, Budget Debates & U.S. Credit Rating Implications

Widespread coverage of the debt ceiling deadline, budget debates and threat of downgrades of the U.S. credit rating has increased market uncertainty that will likely contribute to increased market volatility in the near-term.

At the Principal Financial Group^®, we believe we are well-positioned to weather the market's challenges. Our robust capital and liquidity management; disciplined approach to investments; and wise use of our resources enable us to remain strong during difficult conditions:

• We have a high-quality investment portfolio that is well-diversified by industry, geography, property type and individual borrower. We do not forecast significantly greater credit losses in the near term as a result of an economic slowdown.


• Our direct exposure to U.S. government and agency securities is low - representing only 6% of total invested assets as of 6/30/11.


• We are at one of the strongest financial points in our history. Our capital position is strong with an estimated risk based capital ratio of 445 percent and $1.9 billion of excess capital as of 6/30/11.¹ We believe The Principal^® can withstand the possible capital requirements caused by a downgrade of government and agency securities.


• Our active asset and liability management helps immunize us from the economic impact of changes in net unrealized gain or loss due to interest rate movement.


• Our hybrid business model provides a diversified earnings stream, which helps to generate a continuing source of capital.

While no one can predict outcomes of the current situation, The Principal is confident in the strength of our fundamentals and our ability to successfully manage the company in good times and bad.

And, as for the past 130 years, we remain committed to helping clients, financial professionals, shareholders and associates successfully navigate the rapidly changing financial environment.

What Investors Can Do Now - And For The Future

America has endured many economic cycles over time and history shows our economy is resilient. During periods of uncertainty, it's important to remain level-headed:

• Be patient - Historically, the pain of market volatility doesn't last forever. Remember to focus on your long-term goals.


• Focus on the long term - Stock market volatility has occurred in the past; it will occur again in the future. It's important to focus on the long term. Avoid knee-jerk reactions.


• Know your goals and your tolerance to risk - Monitor your portfolio to help ensure:


1. they align with your financial goals and life stage,
2. your holdings are well-diversified and
3. the risk remains within your comfort zone.

¹ Excess capital includes cash at the holding company and capital at the life company above that needed to maintain a 350 percent NAIC risk based capital ratio for the life company.

Insurance products and plan administrative services are provided by Principal Life Insurance Company. Securities are offered through Princor Financial Services Corporation, 1.800.547.7754, member SIPC, and/or independent broker dealers. Principal Life, Princor^® and Principal Global Investors are members of the Principal Financial Group^® (The Principal^®), Des Moines, IA 50392.

Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc.

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To obtain a prospectus, download online or call Customer Service at 1.800.222.5852

While this communication may be used to promote or market a transaction or an idea that is discussed in the publication, it is intended to provide general information about the subject matter covered and is provided with the understanding that The Principal^® is not rendering legal, accounting, or tax advice. It is not a marketed opinion and may not be used to avoid penalties under the Internal Revenue Code. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. For more information about our funds, including their full names, please see the Principal Funds, Inc. prospectus or call Customer Service at 1.800.222.5852.

A mutual fund's share price and investment return will vary with market conditions, and the principal value of an investment when you sell your shares may be more or less than the original cost.

This Web site was created and is maintained by Principal Funds Distributor, Inc. exclusively, and not by the Directors of the funds.

Principal Funds, Inc. is distributed by Principal Funds Distributor, Inc., member of the Principal Financial Group^®. Principal Funds Distributor, Principal Shareholder Services, Principal Management Corporation and its affiliates, and Principal Funds, Inc. are collectively referred to as Principal Funds.

Not FDIC or NCUA/NCUSIF insured - May lose value - No bank guarantee - Not a deposit - Not insured by any federal government agency