Principal Financial Group® Conference Call April 9, 2019 8:00 a.m. CT Nasdaq: PFG

Call participants Executives Dan Houston: Chairman, President & CEO

Deanna Strable: Executive VP & CFO

Renee Schaaf: President - Retirement & Income Solutions

Michael Garvin: CFO – Group Retirement Plans

John Egan: VP - Investor Relations

Analysts Jimmy Bhullar: J.P. Morgan

John Nadel: UBS

Suneet Kamath: Citi

Humphrey Lee: Dowling & Partners

Tom Gallagher: Evercore ISI

Alex Scott: Goldman Sachs

John Barnidge: Sandler O’Neill & Partners

Erik Bass: Autonomous Research

Scott Frost: State Street Global

Andrew Kligerman: Credit Suisse

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Presentation Operator: Good morning and welcome to the Principal Financial Group

Conference Call, discussing the acquisition announcement. There will be a question-and-answer period, after the speakers have completed their prepared remarks. If you would like to ask a question at this time, simply press star and the number one on your telephone keypad. We would ask that you be respectful of others and limit your questions to one and a follow up. So that we can get everyone into the queue. I would now like to turn the conference call over to John Egan, Vice President of Investor Relations.

John Egan: Thank you for joining us on such short notice and welcome to the Principal Financial Group’s Conference Call to discuss the announcement of our planned acquisition of Wells Fargo's Institutional Retirement and Trust Business. The press release and the detail slide presentation outlining the key details of the transaction are available on our website at principal.com\investor. This acquisition is scheduled to close in the third quarter of 2019. In addition, we are currently reviewing how best to integrate the businesses into our reporting structure and evaluating the information in our financial supplement, following the reading of the safe harbor provision, CEO, Dan Houston will deliver some prepared remarks, then we will open up the call for questions. Others available for the Q&A session include Deanna Strable, our Chief Financial Officer. Renee Schaaf, our new President of Retirement and Income Solutions. And Michael Garvin, CFO of our Group Retirement Plans in Retirement and Income Solutions. Some of the comments made during this conference call, may contain forward looking statements within the meaning of the private securities litigation reform act. The company does not

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revise or update them to reflect new information, subsequent events or changes in strategy, risk and uncertainties that could cause actual results to differ materially from those expressed or implied are discussed in the company's most recent annual report on form 10-K filed by the company with the US Securities and Exchange Commission. Additionally, some of the comments made during this conference call may refer to non-GAAP measures, reconciliations of the non-GAAP financial measures to the most directly comparable US GAAP financial measures may be found in our most recent financial supplement. As previously announced, we plan to release our first quarter 2019 earnings after market close on April 25th. So, we would appreciate questions to be limited to this transaction. I'll now turn the call over to Dan to share some comments on the strategic importance of this acquisition and then we'll open up the call for questions. Dan?

Dan Houston: Thanks John and thanks to everyone for joining us. I'm excited to discuss our announcement that we have signed a definitive agreement to purchase Wells Fargo Institutional Retirement and Trust Businesses. We're bringing together two businesses with deep expertise in helping customers achieve their retirement savings and investment goals. Well Fargo Institutional Retirement and Trust Businesses include defined contribution, defined benefit, executive benefits, institutional trust and custody, and institutional asset advisory. This brings 827 billion dollars of assets under administration and 425 million dollars of run rate revenue to Principal. The Retirement portion of the business generate 80% of the revenue and compliments well are just in businesses. The remaining revenues are generated by the non-retirement trust and custody businesses. This fee-based business primarily serves endowments and other financial institutions.

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With this acquisition, Principal will be a top three retirement leader with added scale, talent and expertise spanning a broad range of retirement, asset management and protection capabilities to better serve our customer needs. When evaluating any acquisition we keep three things in mind; Does it fit our strategy? Does it fit our culture? And does it make sense financially? This one struck all three. We're doubling the footprint of our US retirement business, increasing our retirement assets to over 500 billion dollars in participants to approximately 7.5 million. We're adding scale in our defined contribution, define benefit, non-qualified executive benefits and ESOP businesses. And we're bringing onboard a diversified revenue source with an addition of a non-retirement trust in custody offering. Shareholders will benefit from the acquisition that is accretive and strategically critical to our growth for long term, and I want to warmly welcome the Wells Fargo employees joining Principal. We're excited to have you part of the team. Before turning to Q&A, I want to spend a few minutes discussing the financial aspects of the transaction. This upfront purchase price is 1.2 billion dollars scheduled to close in the third quarter, subject to regulatory approvals. The total consideration includes and earn out fee of up to a 150 million dollars paid to Wells Fargo two years post-closing, if existing clients fee revenue retention exceeds our baseline expectations. The economics to us are very attractive, if we don't pay the earn out and even more attractive, if the earn out is paid, it lies in the interest of both parties after closing. This acquisition is anticipated to be accretive to net income and non-GAAP operating earnings per share in 2020. At 2019 is a step year, this has an immaterial impact to earnings per share. We planned to finance a deal through a combination of

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400 million to 500 million dollars of senior debt with the remaining portion finance with available capital at the holding company. We have suspended our share buyback program and plan to resume no later than the first quarter of 2020. Clearly, we're very excited about the opportunity that this acquisition presents for our combined organization. Operator, please open the call for questions.

Operator: At this time, I would like to remind everyone to ask a question press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Jimmy Bhullar with JP Morgan.

Jimmy Bhullar: Hi, Good morning. I had a couple of questions. First, when you talk about accretion for the deal on net and operating income in 2020. Are you talking about accretion in an absolute sense, or are you talking about accretion relative to buybacks as well. Because it seems like versus buybacks it might not necessarily be accretive, but just wanted to get your take on it.

Dan Houston: Yeah Jimmy, thanks for the question. I'll look to Deanna to respond your question.

Deanna Strable: Yeah Jimmy, it is on an absolute basis. Our IRR is actually determined relative to share buybacks but the accretion is on an absolute deal.

Jimmy Bhullar: Okay and then when you give guidance on, you're talking about run, you're paying close to ten times run rate earnings and that's with the cash tax benefit and with the expense savings as well. So it seems like the earnings are close to like a hundred million or so on an annual basis. When do you expect to get to that? And when you're talking and under those conditions would you still pay an earn out or does an earn out assume earning significantly higher than what your base case is?

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Deanna Strable: Yeah, there's a couple of questions there. Yeah, I think you're right on a run rate basis, so it's approximately a 100 million and that's in 2022 and takes into account, you know the revenue dis-synergy and synergies as well as the expense synergies. And then the other part of your question was the earn out.

Jimmy Bhullar: Yeah, under those conditions, would you be paying an earn out?

Deanna Strable: No, our base case scenario actually has no earn out and the earn out comes into play, if we actually exceeded our revenue expectations over the first two-year period.

Jimmy Bhullar: So, you're assuming some loss of business as the block transitions, right?

Deanna Strable: Yeah, typically with this type of business where employers make choices, yes we do have shock lapses built into our revenue forward-looking expectations.

Jimmy Bhullar: And then just the last one is on buybacks, you're suspending them, I guess still of 1Q 2020. Should we assume that activity that it went beyond 1Q 2020 will be at least temporarily somewhat subdued or do you think it will end up doing whatever you would have planned absent this field?

Deanna Strable: Yeah okay, I'll make a couple comments there. You know we actually did purchase in the first quarter. We purchased a 130 million in share buybacks prior to us spending and as you mentioned, we don't plan to activate those share buybacks again until the first quarter of ‘20 at the latest. I think we’re going into ‘20 will build those expectations into our future outlook calls. But at this point in time, I'd say thinking them being fairly normal, it would be a good assumption.

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Dan Houston: Exactly, Hey Jimmy thanks for the question this morning, appreciated.

Operator: Your next question comes from a line of John Nadel with UBS.

John Nadel: Hey, good morning everybody and congratulations on the deal.

Dan Houston: Hi John.

John Nadel: I just wanted to follow up on absolute versus relative accretion. I'm not sure I followed exactly what that means. If we think about you know 2020 let's take consensus EPS estimates which would have already encompassed some amount of buyback assumption for 2019 which of course you're suspending as of this point. Can we think of accretion in 2020 relative to consensus or when you say absolute or do you mean something different?

Deanna Strable: No that's exactly what we would mean. So you're right. Your estimate or consensus estimate and then what we we've talked about is that 2022 kind of run rate revenue of 425 and pre-tax margin range of 28 to 32 would be a good proxy of what to build into your models for those that time period.

John Nadel: Okay. And how does that 425 million of net revenues by 2022. Compared to what the net revenues are currently?

Deanna Strable: I'm going to ask Michael Garvin to respond to that.

Michael Garvin: Yeah John, this is Garv. It's a little bit lower than what it is today and that's really from a couple components. We have both revenue synergies and revenue dis-synergies in there. So, it's important that shock lapse that we talked that's built into our baseline forecast and we can have that kind of work through process and get back kind of a more normal level over time.

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And then on the positive side, we also have revenue positive synergies coming in from rollovers and small amount of 4000 those types of things. So, kind of taken all in post-close you know 30 months into the deal, you're thinking that 425 million dollar run rate of revenue in 28 to 32% margin on top of that.

John Nadel: Got it. And if I could make one more and if I think about the combined expenses of you know your existing retirement business and while this retirement business is grid wiring. How does the 60 million dollars of cost synergies, you know, how does that compare to the total cost based currently?

Michael Garvin: Yeah John, this is Garv again. Taking in total, you'd be looking at about a 7 to 10% impact to our combined controllable cost base.

John Nadel: Thank you very much.

Michael Garvin: Which I would argue John is very reasonable number. Thanks for the question.

Operator: Your next question comes from a line of Suneet Kamath with CITI.

Suneet Kamath: Thanks. My first question is just on the long-term margin guidance of 28 to 32, just curious why we're not seeing margin expansion? You know consolidating these you know one plus one equals more than two kind of concept. Just wondering if you're being conservative there?

Deanna Strable: Yeah a couple things I mentioned there. You know that 28 to 32 is a higher margin than what this business on its own, is there any now so there is expansion there? And as we all know this is a competitive market and we've seen you know revenue pressure in this business. I think the good news of this is, this puts us in a

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better position to maintain those margins as we look forward to into our long-term guidance.

Suneet Kamath: And where is the business now, you said it's lower than 28 to 32?

Deanna Strable: It's around the 22 to 23% range.

Suneet Kamath: Got it. And then one other one just in the deck you talked about you know revenue generating opportunities consistent with your existing business. I think the PGI manages a fair portion of RIS-Fee AUM. So are you assuming in your modeling that PGI represents a similar share of the underlying asset?

Dan Houston: Yeah, these are a really good questions and obviously this was a big part of our discussion in terms of determining value. But more importantly, how we could benefit the Wells Fargo customer with a broadened set of solutions and capabilities, and with that, I'd like to have Renee add some additional color. Renee?

Renee Schaaf: Thank you Suneet. Yeah, when we consider this block of business, we know that today this is predominately recordkeeping only. And when we look at the capabilities that we bring to the table with this acquisition, we know that recordkeeping is incredibly important, and we're very well positioned to offer both plan sponsors and participants a wide range of capabilities and we feel very good about the resulting economics that arise from our recordkeeping platform only. With that being said, we know that a full service offering offers a lot of value to many planned sponsors, but we are not going to require that this block of business convert from a recordkeeping only platform to a more full service. But the last comment that I would make there is that we offer within our franchise some very attractive asset management strategies and we do think there will be some value particularly

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with the IRA rollover market in bringing these to the table. But again when we look forward, we see that the economics are very attractive on a recordkeeping only basis and of course they are very attractive on a full service basis as well.

Dan Houston: That helpful Suneet.

Suneet Kamath: Yeah that's great, thank you.

Dan Houston: Okay thanks.

Operator: Here your next question comes from a line of Humphrey Lee with Dowling & Partners.

Humphrey Lee: Good morning and thank you for taking my questions. Just to follow up on the net revenue kind of outlook, so based on Garv’s comments, it sounds like right now is lower than the 425. So are you anticipating you can add more to the platform to extract more revenue? So that I guess the revenue synergy will outpace the revenue dis-synergies from shock lapses?

Michael Garvin: Yeah, hopefully. This is Garv. Just to clarify my comments, the existing business today is it a higher net revenue, but a lower margin. We expect as we work through the time period of a shock lapse period in the revenue synergies net positive synergy there. We’re going to get to a slightly lower revenue based in order it today, but at a higher margin that's definitely probably expect that to workout. So just to clarify my comments there.

Humphrey Lee: Okay, so like the 425 you assume, right now is actually putting higher than the 425, but then because of all those kind of moving pieces then you kind of get to 425 by 2022.

Michael Garvin: Exactly correct. That's correct.

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Humphrey Lee: Okay got it. And then the other thing about the cash tax benefit like how should we think about the realization of that is more of a straight line or is there like what would be the factors that affect that realization?

Dan Houston: Deanna will take that one.

Deanna Strable: Yeah, so it is straight line over the 15-year period. The 150 million that we quote is a net present value of that cash tax benefit and as you're already aware the reason that we get that is because it's an asset purchase and so that allows us to step up the basis and get the tax benefit. But it is straight line over those 15 year.

Humphrey Lee: Okay, if I can speak one more in. So looking at the purchase price and then the financing, so 400 or 500 million of debt, but then looking at your year-end available capital position, but you could easily form the majority of the purchase price with just available capital and the debt without consuming any free cash flow generation this year. So I guess why stopping buyback now, like you could potentially still do some if not kind of maintaining the similar pace.

Deanna Strable: Yeah a couple of things I would say you know I did already mentioned that we did do a 130 million in the first quarter and you know obviously as you know, we want to make sure that we have sufficient capital on hand, not just a time of close, but to meet our obligations as we go forward, so, we think it's prudent. Obviously, we will continue to evaluate that. What we did say is we would begin those for sure but no later than first quarter of 2020. But we will continue to evaluate that as we go through the year.

Dan Houston: I think it's also very consistent while we've been do in the last three years which is to reduce our debt equity ratio give us far more financial flexibility, today the credit market is a very

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favorable for this sort of transactions. So, we think it is the highest and best use of capital management to pursue this structure, allowing us a lot of flexibility moving forward, so appreciate the question.

Humphrey Lee: Thank you.

Operator: Your next question comes from a line of Tom Gallagher with Evercore.

Tom Gallagher: Hi, my first question is for Dan. I would say this is the first deal at least that I'm aware of that you've done that I would describe this integration oriented transaction. I think most of the other M&A deals you've done a bit bolt-on. Can you talk a bit about your thoughts on the risk and the skillsets of working on it integration acquisition and how you think this plays out and this will impact your core business at all, if you feel good but the process will be tight when you’re well prepared for this?

Dan Houston: Yeah, it's a great question Tom. And I really appreciate that I'll take the top end of that and then ask for Renee to add some additional color. I was reflecting back as we were working on this, how similar it was to KeyCorp years ago, and ABN-AMRO and again what you find out in those sorts of transactions? How important the local sales and service representatives are. And we're so fortunate in the case of Wells Fargo, they have just an outstanding local service team. These relationship managers have worked with these you know 1000 plus life and players for some time. They’re seasoned executives. They're well known in the industry. They have a great reputation. So first and foremost, I think the integration starts with people on both sides and I can tell you if the future is any indication of how the due diligence went? Then I am incredibly optimistic about our ability to align our respective interest.

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The second thing, I would tell you like in the case of these prior transactions, we weren't looking to make substantive changes right out of the gates. It is an intended model that allows them to continue with the servicing models that they have today over the course of the next 18 months, we’ll introduce new ideas, thoughts, solutions and capabilities that they may very well find interest in. And in terms of synergies that we’re decided earlier by Garv that 7 to kind of 9% expense savings. Frankly, whether we did this transaction or not would be still looking for those sorts of opportunities. This is just a regular part of the process, but when you have this sort of transaction, it just lend itself to being more aggressive and leveraging. The last comment I'll make is when you think about disruption, they have really nice operations in places like Minnesota and North Carolina. They have operations in Waco that we've had a chance to do due diligence and feel really good about the ability for them to attract talent. So, integration will truly be Principal wide, not just nearly focused on the locations of the 2500 associates that will be part of principal. With that let me throw it over to Renee to add some additional color.

Renee Schaaf: Thank you Dan. Again and then set it very well, the thing that maybe I would add on to his comments. When we think about this integration, we've identified three very important principles. I'm the first principle is keeping customers first. And making sure that we do not disrupt service to customers and that we keep the offering consistent. And so that is the number one guiding principle. And then closely associated with that, as we work through the integration process one of the very first things that will do is to do a deep analysis of capabilities on both sides. To determine what is best of the best? And to combine those capabilities to bring things that are truly unique and add value to the marketplace. And then

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last of all of course is the talent. And talent is very important to us and it's of course critical that we take care of talent. And the thing that we know and working through the due diligence process is that the service teams that are in place today with Wells Fargo keep their clients near and dear. They consider client service number one. And so there's a tremendous fit there in terms of how each organization approaches their customer base. So, I feel very optimistic about the integration process and I think that we by keeping the customer at the center, we will minimize disruption and shock lapses.

Dan Houston: Tom did you have a follow up?

Tom Gallagher: Yeah thanks Dan that was helpful. My follow-up is, can you give a little more color for the revenue split between full service and recordkeeping. The reason I ask, I think we've seen a couple of other deals recently where there was a recordkeeping portion and that was a pretty substantial fall off of recordkeeping assets and revenues in a short period of time, so kind of a multi-part question, but what your thoughts on that and specifically as it relates to the recordkeeping revenues?

Dan Houston: Renee, you want to take that one?

Renee Schaaf: Yeah absolutely. When we look at this block of business, it's clearly recordkeeping driven. And the percentage of assets under administration that our proprietary manage other proprietary basis by Wells is very small. And so when we know that the value here is in making sure that we continue to enhance the value of the recordkeeping platform and we look at the economics around this. We feel very comfortable with the margins that it creates and its very attractive economics at the end of the day.

Dan Houston: You know I think Tom just to add some additional color here, that this market, we know the last ten years continues to evolve. The

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good news is the advisor supporting plan sponsors, they're making two critical decisions. Who can provide the best recordkeeping administrative support for the plan sponsor or the participant, and then independently they make a decision around who can provide the best investment management. And the good news is they're not making any sort of sacrifice when they buy asset management capabilities from Principal with some of the top rated target date funds and outcome based solutions and so in spite of the fact these are independent decisions. If you have a great asset management company providing competitive return to competitive prices, we can win in those situations. The last thing I would say is part of the economics as we shared in the past has to do with the rollover markets in the future and when you think about doubling the number of participants here 56,000 plans moving our number of participants around the world individual customers to 24 million. It's a game changer in terms of how you think about amortizing costs associated with technology, customer service and all the other things that go into being a truly great financial services company. So, thanks for the question.

Tom Gallagher: Okay thanks.

Operator: Our next question comes from a line of Alex Scott with Goldman Sachs.

Alex Scott: Hi thanks for taking this question. Yeah, I was wondering if you could kind of dimension the revenue number you threw out there, because I guess you put a ranged around margins that the revenue number is pretty specific. So could you help us think about like how much revenue synergies contribute to the net revenue number you're expecting and sort of what percentage of AUM you have dropping off in your base case and anyway to think about a range of outcomes there?

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Dan Houston: Yeah, I will ask Garv to take that and then the other thing I was just cautioned here at this point and that is to get these things in some respects we've all over the course of the next 12 months, I think sort out or of course be given you updates along the way, but at a high level of Garv would be happy to take that.

Michael Garvin: Yeah, so as we mentioned here, we do have a shock lapse built into the underlying roll forward to this business. Obviously, within line with our expectations and historical standards for these two transactions that's the revenue dis-synergies has built in on the opposite side that we have positive revenue synergies built in. That’s coming from the rollover, that's coming from the small work out to the bank. It's due from a little bit target date captured. The key thing is about all of the key related, they just read all these we have today in their existing in our business line. They're kind of in the run rate line performance of where we’re currently achieving those types of results, I think taken in total. There's a little bit revenue positive, a little bit of revenue negatives. In total you know year three 30 months post-close, you will get to 425 million dollars of net revenue coming from the business taken as total.

Deanna Strable: But also has a market assumption ---

Michael Garvin: This common economic market assumption that we would always use for although remind that's a good point I'll probably be wrong on that particular assumption, but that is built into our baseline like we do all of our modeling.

Dan Houston: Alex you have follow up?

Alex Scott: Yeah, the follow up would just be you know can you frame like the timeline and how quickly you'd expect the different moving pieces

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in that revenue to sort of revenue in the margin and expense saves to manifest itself over the next couple of years?

Dan Houston: I think that's a good assumption over the course of the next couple of years. You know quarter-to-quarter, there's bound to be volatility. There is always a shake-out in these sorts of processes. But again we're trying to run this organization based on what's in the best interest of our customers and shareholders for a long-period of time. So I can assure you we’ll be very aware of the importance of maintaining outstanding customer service as we go through this transition and these economics will evolve and we'll be sure to update you on a quarterly basis on the progress.

Alex Scott: Thank you.

Operator: Your next question comes from a line of John Barnidge with Sandler O'neill.

John Barnidge: Thanks, maybe a question more strategy longer term and I get the low hanging fruit on cross-selling from the transactions probably more in the retirement and asset management side. Can you talk about how you see this benefit USIS long-term please?

Dan Houston: Yeah I think it's a good question and at the end of the day, when you think about John the branding, advertising, you think about the number small to medium sized employers that we support again to your point on USIS over a hundred thousand additional customers there. I have no doubt as we continue to evolve our capabilities and we execute on our digital strategy, making these kinds of solutions more readily available to our USIS clients will be beneficial. The other thing, and we talked about it in other forums that's the annuity business. There are a lot of these customers coming out of these qualified retirement plans that are looking for a lifetime income and retirement. We think that has a lot of synergies for

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the organization in addition to asset management. And one area frankly that we haven't hit on yet today, but it was in the press release, the impact this has on non-qualified deferred compensation again back to USIS and how life insurance can be used to funding vehicle that really is cost efficient, tax efficient for plan sponsors. Number one in ESOP, number one in deferred comp, number one defined benefit, number three in defined contribution. It's hard not to look at this from a strategic perspective and not appreciate the value to shareholders. Now, there's a lot of work that has to occur over the course of the next couple of years for integration. But I think every aspect of our company is going to benefit ironically. I've just writing emails this morning with Luis Valdez who was down in Chile, doing town hall meetings, and you know he was so excited about the transaction because again it just cements our positioning as truly one of the leaders in global retirement and it helps us in Brazil, Mexico, Chile, China and all the other places we do business. So strategy wise, we feel very good about the acquisition John.

John Barnidge: Well my follow-up kind of dove tails on the internationally, you have a trust and custody business you're acquiring, is there thought that over time you can take that business internationally?

Dan Houston: Yeah I think that is certainly one of the options. I think you're not only have to look at that trust business, but I think you'd have to look more closely to our USIS and over the years, we've had those sorts of discussions, but there's never a time when we're not working with our partners or when we're going solo out in the international markets that we don't think about this. But one of our resident experts who just came from a seven year stent

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internationals here and I will ask Renee to add some additional comments.

Renee Schaaf: Thank you Dan. Yes, we clearly are always looking for opportunities to extend our expertise from the US into the markets that we serve on international basis and I think trust and custody services would absolutely fall in one of the very logical expansion areas that we might consider for the future. And how that would play out in any given country would depend on the products and services that we offer there. And how it would help to enhance our overall offering. But certainly Trust and custody services are core to Principal. We've been providing the services for 75 years in the United States. We're very comfortable with this block of business and with these capabilities and certainly we keep that in mind for global expansion as well.

Dan Houston: Thanks for the question John. I will try to move into a little bit of a lightning round here the interest of time to the operator we’ll just take one question from each of the next callers, thank you.

Operator: Hi, your next question comes from a line of Erik Bass with Autonomous.

Dan Houston: Hi Erik.

Erik Bass Hi Dan. Thank you and good morning. My question is obviously understand the shock lapse impact, but is it think about impact on new business? Is there any impact with your relationship with consultants or anything else that could change the dynamics in terms of competing for new business in the short term?

Dan Houston: It's a great question, because we actually do tap into a nice new flow of consultants and Renee you wanted some additional color?

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Renee Schaaf: Yeah absolutely. Thank you for that question and I think I would approach this in a couple of different ways. One of the things that we’re extremely excited about with this purchase is that this block of business really rounds out the middle market presence. And when we talk about the middle market the mid-market client very often those are served with the consultant channel. And so one of the capabilities that we're very excited about is having the opportunity to work more closely with the consulting channel then perhaps we have in the past to bring offerings and to expand our footprint in that important channel. One of the things that would become very important here of course with the consulting channels often times they bifurcate the buying process between first choosing the record keeper and then taking a close look at the investment lineup to determine who and how that is parsed between the various investment and asset managers. This acquisition gives us the economies of scale and the resulting economics to be attractive both ways, both of the record keeper and a full service provider.

Dan Houston: Thanks Erik appreciates your question.

Operator: Our next question comes from a line of Scott Frost with State Street Global.

Scott Frost: Yes, thanks. Just as far as the mechanics of the debt portion of the transaction, should we expect you to utilize the high street p-caps or just as you straight and issue debt in our markets later, or do you plan to come to markets with a senior secured issuance to fund the deal and leave the p-caps undrawn?

Dan Houston: Yeah thanks Scott. I'll ask Deanna to take that.

Deanna Strable: Yeah, so our current plans would be to leave the p-caps untapped the only caveat to that would be of market disruption, would come into play that obviously gives us an opportunity as a bridge

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to the time when the markets are more favorable, but our current plans are not to use the P-caps as a funding mechanism for this transaction.

Dan Houston: That help Scott? Okay.

Operator: Your next question comes from the line of Andrew Kligerman with Credit Sussie.

Andrew Kligerman:

Hey good morning, I'm going to try and make this in sort of one question. So, just to add points and then I'll lead into the question, what percent of these 5000 plans are on a fee per participant basis and to what percent of these plans have Wells Fargo doing the asset management and now what I'm leading into is the competitive environment? You know I was talking to an executive and recordkeeping who indicated you know he sees a day when fees could actually go negative in the recordkeeping market. So I want to get a sense of how you see the fees moving overtime?

Dan Houston: Yeah, so let me just make a high level comment, then I’ll ask Garv or Renee away in. The first thing I would say these sites plans you know roughly on average a thousand average for defined contribution. This has been a competitive space for a long time and we know that some of those fee levels have come down and yet yeoman's effort on the part of the industry and organizations like principal to maintain reasonable margins which again through cost synergies and through scale and capabilities which frankly gets into one of the rationales on why you do this transaction. Wells Fargo's percentage of proprietary funds is certainly lower than ours, but they frankly their average size is larger than ours. Having said all of that, I don't think we're going to find ourselves in a negative fee structure for recordkeeping and we know that from our customer councils talking to our customers. They put a great deal of value on our ability to help their employees, preparing adequately for retirement. These are important,

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fiduciary responsibilities important, fund lineup is important all of that can sort it out in the market place, but there is still a very strong demand for high-quality service providers and we know who those are and there is a bit of an arms raised to make sure you've got appropriate scale and capabilities, but we're certainly in that company. Now on the specifics, I’ll ask Garv to way on your question.

Michael Garvin: Yeah, you know through due diligence, we didn’t look at pricing and obviously it's customized for each individual client. What we found was really wanted adjusting precise service model and add-ons. We actually have very similar prices on their market. Our market probably the only distinction is they have a better balance after the fees per plan fees and per participant fees and what we do we're a little bit more waited to asset based fees and has a little bit to do with that this segment of the market that we participated in it as well. So really from a pricing standpoint balanced across in terms of what we would see we know it is repetitive market, so our clients are priced very similar just more the collection methodology being a little bit more balanced in our asset weighted focus.

Andrew Kligerman:

And they're predominantly per participant or almost all is that?

Michael Garvin: No, I would say over half of the revenue does come from asset based fees, it's just lower than our 80% to 85% that comes from asset based fees they just have more balance –

Dan Houston: And larger ever size plan.

Michael Garvin: Yep.

Dan Houston: Andrew thanks for the question this morning, appreciated.

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Operator: And we have reached end of our Q&A. Mr. Houston your closing comments please.

Dan Houston: Well, first and foremost, thanks for taking the time this morning on such short notice to join the call. I'm sure we've been working on this for some time we’re excited for the shareholders we’re excited for the customers and frankly we're excited for our employees as you might expect these things don't come without a lot of hard work. This is a topic we debated with our board and enjoy their support. As we debated the strategy, so again back to the last question. These decisions aren’t made lightly. They're made with the idea that they're going to be durable for the foreseeable future and add value for our shareholders. As I said in my initial comments, the strategic fit, the cultural fit and the financial fit all fall well within our ranges. We couldn't be more pleased from that perspective. Closing comment is as it relates to this business of retirement, huge demand in the US that's not going to go away, but it is going to require scale. It is going to require innovative solutions, capabilities and a very strong technology package. And that's what we're building we feel very good about the future and we look forward updating you on future earnings call and as we’re out to visit with you about what this long-term implication is going to be for our shareholders. So thank you and have a wonderful day.

Operator: Okay. Thank you for participating in today's conference call. The call will be available for replay beginning at approximately 12 PM Eastern Time today until the end of the date April 15th 2019. 2085676 is the access code for the replay. The number to dial for the replay is 855-859-2056 for US and Canadian callers or 404-537-3406 for international callers.

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About Principal® 1

Principal helps people and companies around the world build, protect and advance their financial well-being through retirement, insurance and asset management solutions that fit their lives. Our employees are passionate about helping clients of all income and portfolio sizes achieve their goals – offering innovative ideas, investment expertise and real-life solutions to make financial progress possible. To find out more, visit us at principal.com.

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