Give Clients a Legacy Edge with Life Insurance Filling in the Market Gap for Wealth Transfer WE ’ LL GIVE YOU AN EDGE  For producer and internal information only. Not for use in sales situations. (Before continuing, right click and select “full screen” to enable viewing materials.)

In This Presentation Learn about the need. Get an overview of the sales tools available. Learn about our new streamlined underwriting process. For producer and internal information only. Not for use in sales situations.

The Blueprint of a Dream Many people have earmarked a portion of their assets they won ’ t use during their lifetime to leave as a legacy to their heirs. They may not have a plan for this money, but they do have a dream. They want to have a legacy providing for their: –Children –Grandchildren –Charity For producer and internal information only. Not for use in sales situations.

How Do Your Clients Get There? These individuals may have some assets invested in mutual funds, stocks, bonds, or real estate. However, the value of that legacy may now be in question. Do you have clients that fit this profile who are looking for a strategy to help restore their legacy for their heirs and decrease the exposure of market volatility? Giving them a legacy edge with life insurance may be the answer. For producer and internal information only. Not for use in sales situations.

The Timeline Compound interest can help turn a small amount into a large amount over time. Rule of 72 Today ’ s economic environment provides a challenge to the Rule of 72. For producer and internal information only. Not for use in sales situations.

The Timeline Hypothetical Situation: Consider Dave, a 65-year-old male. He has a wife, Mary, also age 65, and two children. Their portfolio consists of significant amounts of stocks, bonds, and mutual funds. At the end of 2008, their holdings dropped by 30 percent representing a $1 million loss. Using the rule of 72, it would take 18 years to replace the $1 million assuming a 4 percent rate of return (72/4 = 18). For producer and internal information only. Not for use in sales situations.

The Timeline But the rule of 72 isn ’ t the whole story. If your client is in a high tax bracket, the gap can take much longer to fill. For producer and internal information only. Not for use in sales situations. Consider a $2 million estate is now worth $1 million. How long will it take to recover the lost value? RETURN 0% TAX RATE RECOVERY YEAR 30% TAX RATE RECOVERY YEAR 5% % % % % %

Questions About the Dream 2008 and 2009 are great examples of the unpredictable nature of markets. Negativity surrounding the economy and its aftermath may have clients asking questions like: –Do I have a legacy plan for my family? –Is my portfolio diversified to handle an up and down market? –Does that plan look at the government uncertainty on taxes on myself and my estate? –What would happen to my family if I were to pass away tomorrow? –What do I do? For producer and internal information only. Not for use in sales situations.

Fill in the Gaps Life insurance can strengthen legacies by helping clients: Provide a hedge against market fluctuation and provide stability to the value of their estate Increase and enhance the values received by their heirs Provide stability and diversify their current portfolio Provide a benefit that is income tax free For producer and internal information only. Not for use in sales situations.

Who May Benefit and How The Principal  Can Help Clients who: –Are age 55 and older –Want to provide for their loved ones after their lifetime –Have sufficient net worth for the death benefit amount requested –Have not yet looked at or fulfilled their maximum life insurance needs For producer and internal information only. Not for use in sales situations.

Life Insurance as a Market Gap Closer Let ’ s focus on our prior example of Dave (age 65, Standard, Non-Tobacco), his wife, Mary (age 65, Standard, Non- Tobacco), and their two children. With their account dropping by 30 percent (representing a $1 million loss), how would they go about trying to restore that value? Life insurance might be the answer. What would happen if Dave passed away next year? How would his family be made whole? Let ’ s take a look at an example showing the client purchasing life insurance on a 20-pay basis. For producer and internal information only. Not for use in sales situations.

Life Insurance as a Market Gap Closer Refer to Life Insurance as a Market Gap Closer (BB 9858), which goes into more detail on this concept. For producer and internal information only. Not for use in sales situations. PolicyAnnual Premium 20-Year Cost 20-Year Cash Available 20-Year Net Cost 1 20-Year Internal Rate of Return Principal Universal Life Protector III SM $26,763$535,247$47,155$488, % Principal Universal Life Protector III (DBO III) 2 $39,989$799,775$70,808$728, % Principal Universal Life Flex SM 3 $29,330$586,583$578,109$8, % Principal Universal Life Flex (DBO III) 4 $51,412$1,028,234$1,171,921($143,687)6.10% 1 Net cost is derived by subtracting 20-year cash available from 20-year cost. 2 DBO III refers to Death Benefit Option 3, which is available on some products. It refers to adding premiums back into the death benefit. Death benefit is guaranteed to age 100 with premiums ending at age Death benefit offers protection to age 100 (based on current interest crediting rates) with premiums ending at age Assumes the same interest crediting rate and no changes to the policy. Guarantees are based on the claims paying ability of the issuing insurance company. This example shows how two insurance products can help restore the $1 million Dave and Mary lost from their portfolio in Death Benefit Option 3 may give them an edge in restoring their legacy.

Why Life Insurance? Why Now? Think about the internal rate of return (IRR) on life insurance and how it compares to other assets right now in both short- and long-term scenarios. How does the IRR on life insurance compare to market performance over a certain time period? Consider our hypothetical couple, Dave and Mary (age 65, Standard, Non-Tobacco), and the life insurance they decided to purchased on Dave. How would the life insurance IRR look over time? Let ’ s take a look at an example. For producer and internal information only. Not for use in sales situations.

Why Life Insurance? Why Now? Assumptions include running Protector III and SUL Protector to age 100 with guarantees to age 100 using male, female, standard non-tobacco with death benefit option 3. The figures used represent rates and policies in effect on 5/13/2009 and are for illustrative purposes only. These figures should not be viewed as an offer or promise of any specific return. Please see full basic product illustration for more complete information. 1 Internal rates of return (IRR) represent the rate needed to be earned to equal the values in the policy. 2 IRR on Net Death Benefit is determined using a hypothetical tax rate of 25%. A lower tax rate would make the IRR on Net Death Benefit less favorable, reducing the difference in performance between the accounts shown. You should consider your income tax bracket, both current and anticipated, when making a decision as this may impact the results of any comparison. 3 Life expectancy (LE) for age 65 using the 2001 Valuation Basic Table is age 81. Investment on premiums paid must have earned 11.12% after tax to match the return to beneficiaries on death proceeds paid to them. LE tables show the average age of death based on your current age. Your actual experience will likely be different as LE tables don’t reflect individual characteristics. LEs are based on averages and are used to provide a general idea of ages at death. For producer and internal information only. Not for use in sales situations. Policy yearEnd of Year AgeAnnual Premium Net Death Benefit IRR 1 on Net Death Benefit 2 Before-Tax IRR Equivalent 166$35,682$1,035,6822,802.51%3,736.68% 570$35,682$1,178, %95.05% 1580$35,682$1,535, %16.45% 16 LE 3 81$35,682$1,570, %14.83% 2590$35,682$1,892, %7.18% 35100$35,682$2,248, %4.08% Take a look at Dave’s life insurance policy from an IRR perspective. Would 14.83% be considered a good IRR for him? Refer to Why Life Insurance? Why Now? (BB 9841), which goes into more detail on this concept.

Life Insurance as a Way to Diversify Let ’ s continue to look at our hypothetical couple, Dave and Mary. How do you add stability to their portfolio when markets are uncertain? How do you help protect their portfolio when market values are tumbling? The death benefit that life insurance provides may be the answer since it is not impacted by the ups and downs of the market. By using a small portion of Dave and Mary ’ s existing assets to buy life insurance, they can diversify their portfolio. The example on the next slide illustrates this concept. For producer and internal information only. Not for use in sales situations.

Life Insurance as a Way to Diversify If Dave and Mary use 5 percent of their portfolio to buy a life insurance policy, they would help diversify their overall portfolio to help protect against market declines. For producer and internal information only. Not for use in sales situations. Hypothetical Portfolio 5% Life Insurance Policy Heirs Refer to Filling in the Asset Gap for Wealth Transfer (BB 9881), which goes into more detail on this concept.

New Streamlined Underwriting Process Choose from two options: 1.Complete a TeleApp interview for Part B of the life insurance application, resulting in fewer financial underwriting requirements. This can produce competitive offers with quicker turnaround time and up to $2.5 million in coverage. You complete Part A and get signatures for Part C. 2.Submit a traditional paper application with part B completed. No copy of the trust is needed unless it is less than two years old and the client is 65 or older. You complete Parts A, B, and C with this option. Help underwrite life insurance policies faster with limited financial information and a streamlined process to capture this market. For producer and internal information only. Not for use in sales situations.

NEW! No financial supplement is needed for option 1 or 2 up to $2.5 million in death benefit. Net worth must be between $1 million and $10 million (excluding primary residence). Routine age and amount medical requirements apply. Refer to Give Clients a Legacy Edge with Life Insurance (BZ 1512) for more information on eligibility and specific requirements. For producer and internal information only. Not for use in sales situations. New Streamlined Underwriting Process

Which Product Works Best? For producer and internal information only. Not for use in sales situations. TYPETARGET CLIENTPRODUCT Survivorship universal life insurance with secondary guarantees Works well for estate planning needs. This type offers joint guaranteed death benefits but very little cash value. There is no stock market exposure. Principal Survivorship Universal Life Protector Sweet Spots: Ages Universal life insurance with secondary guarantees Works well with clients who want guaranteed death benefits. This type is not as flexible as current assumption products and offers little cash value. There is no stock market exposure. Principal Universal Life Protector III Sweet Spots: Ages Current assumption universal life insurance Works well with clients who want flexibility and cash value, but who are not as concerned about guarantees. There is no exposure to stock market. Principal Universal Life Flex SM Sweet Spots: Ages 55-70

Things to Consider There may be tax implications as a result of selling assets within an investment portfolio. It is important to understand that life insurance is a long-term strategy for meeting particular needs; therefore, liquidity may be impacted. We recommend you consult with a client ’ s tax and legal advisor to discuss their specific situation. Clients should also consider that life insurance policies contain fees and expenses, including cost of insurance, administrative fees, premium loads, surrender charges, and other charges or fees that will impact policy values. All guarantees within the policy are based on the claims-paying ability of the issuing company. Death benefit protection offered through life insurance can be a key component of an overall financial strategy. For producer and internal information only. Not for use in sales situations.

Help Fulfill the Dream Clients need help in these uncertain economic times. They need stability and value in a time of imbalance and expense. The Principal Financial Group  and its stable life insurance products can help you and your clients get a legacy edge in these tough economic times! Call your Regional Vice President or Life Wholesaler to get more information on how The Principal  can help you! For producer and internal information only. Not for use in sales situations.

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. Your clients should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, or accounting obligations and requirements. No part of this presentation may be reproduced or used in any form or by any means, electronic or mechanical, including photocopying or recording, or by any information storage and retrieval system, without prior written permission from the Principal Financial Group ®. Thank You! Insurance products from the Principal Financial Group (The Principal ® ) are issued by Principal National Life Insurance Company (except in New York) and Principal Life Insurance Company. Securities offered through Princor Financial Services Corporation, , member SIPC. Principal National, Principal, Life, and Princor ® are members of the Principal Financial Group ®, Des Moines, IA For producer and internal information only. Not for use in sales situations. BZ 1511 | 5/2009 | # | Do not use after 4/2011 Copyright © 2009 Principal Financial Services, Inc.