Good morning, and welcome to the Principal Financial Group Second Quarter 2010 Financial Results Conference Call. (Operator Instructions) I would now like to turn the conference call over to John Egan, Vice President of Investor Relations.

Thank you, and good morning. Welcome to the Principal Financial Group’s Quarterly Conference Call. As always, our earnings release, financial supplement and additional investment portfolio detail can be found on our website at www.principal.com/investor. Following a reading of the Safe Harbor provision, CEO, Larry Zimpleman and CFO, Terry Lillis will deliver some prepared remarks. Then we’ll open up the call for questions. Others available for the Q&A are Dan Houston, U.S. Asset Accumulation and Life and Health Insurance; Jim McCaughan, Global Asset Management; Norman Sorensen, International Asset Management and Accumulation; and Julia Lawler, our Chief Investment Officer. Some of the comments made during the conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. The company does not revise or update them to reflect new information, subsequent events or changes in strategy. Risks 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, and quarterly report on Form 10-Q filed by the company with the Securities and Exchange Commission. Now I’d like to turn the call over to Larry.

Thanks, John, and welcome to everyone on the call. In my prepared remarks, I’d like to briefly discuss the results for second quarter in 2010 to date, discuss the ongoing implementation of our global strategy and close with a few comments about the future. Terry, will cover the results in more detail following my comments. Let’s start with second quarter results. In view of the slowdown in economic growth and negative returns for the equity market in second quarter, we view the operating results of $204 million or $0.63 per share as solid. If you adjust results for both the second quarter 2010 and 2009, for DAC amortization true-ups associated with equity market returns, we see second quarter 2010 results of $215 million against second quarter 2009 results of $186 million, an increase of 16%. Looking at the results for our growth engines, Principal International, Principal Global Investors, and Principal Funds all had reported double digit earnings growth, improving 33% on a combined basis. If you adjust the performance of full service accumulation or the impact of equity market true-ups on DAC amortization, you see operating earnings up 21%. In terms of other financial metrics, book value per share including AOCI ended the quarter at $26.23 up 4.6% from last quarter and up 62% from a year ago. We also moved in to a net unrealized capital gain position as of June 30th, from a $4.8 billion net unrealized capital loss position a year ago. This improvement in financial metrics reflects the ongoing improvement in credit markets as the economy recovers. It also demonstrates the value of our strong asset liability management, the quality and diversification of our investment portfolio and our liquidity management. All of which allows us to weather even extended periods of market stress and dislocation. As…

Thanks, Larry. This morning I’ll focus on operating earnings, including continued strong expense management, net income including continued solid performance of the investment portfolio and I’ll also comment further on our strong and flexible capital position. Starting with total company results, second quarter 2010 operating earnings at $204 million, were up 1.5% compared to a year ago quarter. There were a number of items impacting comparability between periods. The two largest were higher DAC amortization expense in the current quarter due to equity market true-ups totaling $26 million after tax between individual annuities, full service accumulation and individual life, and $7 million of lower after tax earnings from investment only reflecting the absence of earnings this quarter from early redemptions of medium term notes. Excluding these items, total company earnings improved 20% on 17% higher average assets under management. Let me quickly quantify a couple of the larger items impacting our reported earnings per share of $0.63. DAC true-ups for market performance and the U.S. asset accumulation segment as well as the individual life division, dampened second quarter earnings by $0.04 per share in total. Life and health segment earnings were also dampened earnings were also dampened by $0.03 per share primarily due to reserved development and strengthening in the health division. As Larry indicated, our asset management and accumulation growth engines continued to deliver strong performance and we continue to benefit from our ongoing discipline around expense management. Through midyear, we held operating expenses essentially flat against 13% growth in average assets under management. We’ve strategically reduced expenses in the guaranteed businesses and in the life and health segment. This has enabled us to increase investment in our asset management and accumulation growth engines in the areas of distribution resources, product development and technology to drive productivity gains. Though…

(Operator Instructions) The first question comes from Steven Schwartz of Raymond James & Associates. Steven Schwartz – Raymond James & Associates: Hey, good morning, everybody. Just a quick couple, Larry. You were kind of going in and out at least on my phone, you mentioned FSA sales that you expected them to be up, if you could reiterate that. And then I was wondering on the health business, you had good results on the health business on the group side. There was an article recently, I think it was the New York Times talking about people not going to the doctors despite having insurance because of economic reasons and then I was wondering if you could also possible touch on 401-K matching, what’s going on there in light of the kind of mixed article on today’s Wall Street Journal.

Okay. Good morning, Steven. Good to hear from you. Sorry, if my comments were cutting in and out during the early part. What I said there to sort of summarize our view for the year, Steven, is that we expect the 2010 full service accumulation sales to be up approximately – I think we said 15 to 20% over 2009. Again, we are seeing generally positive trends albeit it’s still a bit early, but we’re seeing positive trends in sales pipeline. We’re seeing positive trends in close rates and as I said, our investment performance from PGI, other affiliates as well as some of our other sub-advisers, generally I would say remains good. I’ll make a couple of quick comments on the health and 401-K matching and Dan Houston may want to add a little bit more. In terms of the health business, we have seen some sort of favorable reserve development there. To your point as to whether that’s from people not going to the doctor or what all the factors maybe, I don’t really have that at my hands other than there has been favorable reserve developments, so there does seem to be some trends along the line you indicate. And as far as 401-K, it’s interesting there had been a number of articles here in the last week or so, and I think that by and large those article seem to square pretty well with our experience. Many of our plans are written with a discretionary match, so it’s a little hard to know whether it’s really been “suspend” or whether it’s just – it’s a match that can be discretionary. But having said that, we think that somewhere between 20 and 25% matches have been restored. I think that’s not completely inconsistent with what was in the Wall Street Journal or what I think was in some of the Hewitt Information a week ago, but Dan might want to comment.

Yes. Thanks, Larry. Just a couple of quick comments, Larry is correct. If you look at the experience for Principal, our smaller plan sponsors are the ones that dialed back there or suspended their matches within the last 18 months and again, they’re probably the slower ones who put the matches back in place. The larger plans, we’ve seen about 20 to 25% of our existing customers with the matches back up to where they were previously for our … Steven Schwartz – Raymond James & Associates: Okay. Thank you, guys.

[Inaudible].

Okay. Thanks, Steven.

Your next question is from the line of Jeff Schuman with KBW. Jeffrey Schuman – Keefe, Bruyette, & Woods: Good morning. Just to quickly follow up on that. I think Danny said the 20 to 25% of the larger plans have restored and what’s the percentage on the smaller plans?

Something less than 20 to 25%. So, the small to medium size have been slower than the larger plans to add back their matches.

One thing, Jeff. This is Larry. If I could just throw in one additional comment though, I think that it is telling or and it is again it’s a slight positive in a sense that the matches, kind of by the nature, the way we account for things, the matches are in the recurring deposits. So, second quarter was actually the first quarter we commented in the earlier remarks, is the first quarter in I think seven quarters where we’ve seen an actual increase quarter over quarter in recurring deposits, so that’s some positive indication as it relates both to matches and the participation and to participant deferrals. Jeffrey Schuman – Keefe, Bruyette, & Woods: Yes. Well, I guess the million dollar question is if those – you’ve given us a percentage that had been restored, but I guess what are the implications? I mean are we optimistic that most of that comes back or all of it comes back or not so much of it comes back? I mean where do you think we are in a couple of years from now?

Well, I think this is again as I said – this is Larry, Jeff. Is this is an improving picture overtime, okay. So, again, I would emphasize that for the small employers and even frankly today for many of the medium size and large employers, the only retirement benefit they offer is a 401-K plan. And again, I thought it was interesting and telling in the sense of the Wall Street Journal article this morning that you heard specific mention of individual who actually left their place of employment because their employer had not yet reinstated their 401-K match. So, that again from my perspective is a very positive indicator because it does say that employees like 401-K matches, they value that and that will increasingly become a point of consideration as they think about where they want to work going forward. So, I think there will be a lot of – that this will be slow, will be somewhat gradual but there are positive trends developing here. Jeffrey Schuman – Keefe, Bruyette, & Woods: Okay. The one other thing I wanted to ask you about – there was a court decision recently Tibble versus Edison and the point was that plan sponsors maybe need to be sensitive to the cost structure of the funds in their 401-Ks and where they shouldn’t retail funds when institutional type funds are available. What is your exposure to that issue both in terms of the 401-K business and then in terms of your fund business?

I’ll just make a couple of comments. This is Larry, Jeff. I’m not familiar with that particular case, so I can’t really comment on that one. I would say by and large that we believe for a long time that this market in terms the 401-K defined contribution market is going to move towards more sophisticated investment options, more sophisticated pricing is going to move toward institutional fees and that’s where we’ve been for many, many, many years. So, I think again this is all positive, and I think probably the bigger driver in this beyond any particular decision by court is going to be the Department of Labor’s effort to put more transparency around fees and I’ll let Dan comment on that.

Yes, maybe just a couple of quick comment on the structures that we have today. The retail share clusters are actually the least used inside our 401-K plans, separate accounts, which were originally designed to be institutional nature is very common. We have institutional share class of registered products. We also have CITs made available for our largest clients and of course, we’ve got our own institutional share classes available to our clients. So, again, it gets back to suitability. The clients work with their investment advisers and again, there’s full disclosure on the fees for not only the plan administration record keeping but also for investment manager phase. Jeffrey Schuman – Keefe, Bruyette, & Woods: Okay. Thanks a lot.

Thanks, Jeff.

You’re next question is from the line of Darin Arita with Deutsche Bank. Darin Arita – Deutsche Bank: Thank you. Good morning. On the international segment, the withdrawals have been declining for some time. Can you provide some color on that?

Sure. I’ll let Norman comment on that, Darin. Thank you by the way for picking up coverage this quarter, we appreciate that.

We’ve seen cash flow – is that what your question was Darin? Darin Arita – Deutsche Bank: That’s right. The withdrawals or –

Yes, consecutively net cash flows have been increasing significantly over the past year. The quarter was $1.5 billion up and the deposits obviously exceeded withdrawals. We’ve seen net cash flow at $1.5 billion, but we have seen of that about a foreign exchange impact of 500 million negative. But we have seen investment performance in the range of 700 million and obviously, we’ve seen year-to-date 3.4 billion and net cash flow improvement.

Some of that withdrawal, Darin, if you go back into prior periods, at one point, we had a fair amount of money markets in India and in our Indian mutual fund family and those were amounts that by the nature of money markets tend to be sort of cycle in and out. And so as we’ve focus that operation more on through long-term funds that’s another of the factors along with what Norman’s explaining around withdrawals. Darin Arita – Deutsche Bank: Okay, that’s helpful. And then turning to Principal Bank, can we get a little more color on the side of it and the size of the home equity loan portfolio?

Sure. The home equity loan portfolio, I think, is in the range of $850 million. It includes I think somewhere around 16,000 loans. These are primarily loans that were put on the books in sort of the 2005 or ‘06 to 2007 period. They are pretty well diversified geographically, so they’re not concentrated necessarily in the states that have been particularly problematical. We have been monitoring this portfolio all along, so again we continue to do a lot of analysis around that. Maybe I’ll have Terry or if Terry wants to comment further.

Yes, just to let you know the size of the bank it’s about a $2.4 billion asset under management. As Larry said, it’s around $800 million of the HELOC for the home equity loans and so the concentration is not in any particular one state, it is as Larry mentioned diversified and we are monitoring it, modeling it, and looking at the portfolio with a fine view.

So, I think our expectation going forward, Darin, is we probably lots of all that portfolio probably in the range of 8 to 10 million a quarter, which would be offset by operating earnings for the bank. So, we expect that to be about a breakeven situation going forward. Darin Arita – Deutsche Bank: Okay, that’s helpful. If I could just follow-up on that, do you have the total reserves and write-downs in that portfolio?

Yes. Darin, this is Terry. The reserve that we have set against that portfolio is about $32 million after against the HELOC loans. In total we have about $40 million of reserves against the entire portfolio, but we think that that 4%, we feel that that’s an appropriate reserve at this point. Darin Arita – Deutsche Bank: All right. Thanks very much.

Thanks, Darin.

Your next question is from Thomas Gallagher with Credit Suisse. Thomas Gallagher – Credit Suisse AG: Good morning. First question I had is on that you’d mentioned on full service accumulation flows. You lost a large plan, can you comment on the AUM associated with the plan and broadly speaking, are you seeing intensive price competition particularly in the larger end of the market?

I’ll just kick that off and have Dan comment on. First of all, in terms of overall price competition, again this is a business that has always been competitive and as I’ve said to many of you, our responsibility really is to manage the business in such a way that it produces a desired profitability. And I think again you’re seeing in terms of the profitability both in the second quarter and sort of on a rolling basis that it continues to perform very much in line with our expectations. So, again, that’s part of the thing that we manage and I don’t know that I would necessarily say that large cases or somehow more price competitive than small cases. It really just – every part of the market is competitive, but I think we’ve demonstrated we have the ability to manage through that and I’ll let Dan comment on the one particular case.

Sure. The one case was roughly a quarter of a billion dollars, $250 to 300 million. This is a piece of business that actually had come over in one of our endorse transfers, five years ago. It’s been a very price sensitive sort of customer during that entire period of time that finally reached a point – if we look at it from a profitability perspective, we weren’t pleased with it from a profitability perspective – took it out to bid and they went with who I would’ve describe as a very low cost, no frills provider of the marketplace. There wasn’t [inaudible] you placed on a total retirement sweep approach, it was a standalone 401-K and they certainly wouldn’t have put value on the Retire Secure Worksite sort of solution. So, again, not a good match post-acquisition some five years ago.

Just a couple of final comments, Tom. If we look at the lapse rates on full service accumulation through midyear, they run on a little bit under 3.5%, and if you look at 2009, they run about 7.4% for the year. So, again, these are – it’s actually running a little bit better than it did in 2009 and what is interesting is that the larger case end of that – the lapse rates are closer to 2% instead of that 3.5, so that differential really reflects more plan terminations and very small employers going out of business. So, the lapse rates here continue to be very much under control. Thomas Gallagher – Credit Suisse AG: And Larry or Dan, just to follow-up. So, as we look to the back half of the year, do you expect flows to turn positive n FSA for both 3 and 4Q or is it going to be lumpy or how should we be thinking about that?

I think the best way to think of it is it always could be lumpy, but we anticipate by year end, we will be positive. We’re positive today and we fully intend that we’ll finish positive for the year. And again, just maybe to reiterate maybe my confidence around the full service line, when you go back and adjust for the one large plan that we had in the first quarter of 2009, which again was $1.4 billion. If you look at our increased closed ratios, if you look at the average size plan excluding that large one, large plan a year ago, and the average size plan is up 45%. If we look at sales with plans of less than 10 million, so kind of that back to that core sweet spot of small to medium size business year-to-date that business is up 38% and as Larry cited earlier, our created pipeline is 12%. So, we go into this cautiously optimistic around the second half of the year, feel good about the quality of the pipeline and feel good that we can reach our stated objectives. Thomas Gallagher – Credit Suisse AG: Okay. And then just one for Julia, on the – I noticed the CMBS delinquencies continue to move up and just a question on I think your stress, your moderate stress scenario for CMBS and CMBS CDOs is now 387 million. Can you talk about what you have already taken on those and the way, and I guess it breaks out over what period of time, you would expect to recognize those, but how much have you already taken of that 387?

Okay. Good morning, Tom. We have taken about 30%. And remember when we started doing these stress analysis and scenarios, we said this is how actual losses were more likely to emerge and when I tell you what we’ve done, it’s more an impairment basis. So, we haven’t actually experienced the actual losses yet, but we have impaired about 30 to 40% of this total. Thomas Gallagher – Credit Suisse AG: And Julia of those that you compared, how much have you actually absorbed in terms of real losses versus impairment accounting recognition?

Virtually none.

Right. And I think this is a key point, Tom, and something that does sometimes kind of get loss in the understanding around this particular issue. Again, Julia and her team do continuous stress modeling, looking for future losses and then are taking impairments against that. So, we’re already taking impairments for losses that won’t occur in many cases for another one or two years. And I think in the case of many investors, they get confused between the timing for impairment as compared to when the actual the bond losses occur and by the time the bond losses occur, we’ve done our work well and Julia’s team is as good as it gets. We’ve already taken those impairments, so that’s have already been front loaded into our financials, and I think investors need to have a sort of better understanding and appreciation for that. Thomas Gallagher – Credit Suisse AG: Okay, but –

And Tom, if you want to comment on the delinquencies because as you mentioned, they have increased quarter over quarter that was anticipated. That’s really in our stress modeling scenarios, so all of it is in line with what we expected and we’re actually seeing a slowdown in the increase. So, again, all in line with our expectations toward scenarios. Thomas Gallagher – Credit Suisse AG: Okay, thanks.

Thanks, Tom.

Your next question is from Randy Binner with FBR Capital. Randy Binner – FBR Capital Markets & Co.: Hi, thanks. I guess I’m following up on Tom Gallagher’s questions on – a little bit different, but back to FSA on fees. So, fee is the total fund value, we’re a little bit better than they have been running. So, I guess Larry from your commentary, it doesn’t sound like there’s too much competition that’s destructive there. So, can we expect kind of stabilization on fees relative to account values and maybe another way to hit this is could we think about Principal being able to maintain kind of 30% ROA in the FSA business going forward?

Well, a couple of comments, Randy. Again, I think its 30 basis points ROA, which has been sort of the historical range that we’ve talked about, and I would say sort of yes with one caveat and then I’ll let Dan comment as well. The one caveat is that again as we have said before, Randy, there is a mix of business issue that’s involved here. So, for example, on our ESOP [ph] business, employer securities provide little if any in the way of fee revenue. Our proprietary investment options generate a higher degree of fee revenue. So, there is very much a mix of business issue here. And so the caveat, in terms of maintaining fees, the answer is yes with the caveat that we’re assuming there’s not a substantial shift or change in mix of business, so that will be the only thing that you’ll need to watch and you can see that in the financial supplement. You can track that quarter by quarter and kind of see how does various buckets are trending and I’ll let Dan add his comments.

Yes, that’s exactly right. And the only other comment I’d make about fees and fee disclosures, the Department of Labor has handed down a requirement that by July of next year 2011, we’ll have to comply with the standard approach in terms of disclosing fees for recordkeeping, administration, asset management fee, trust fees and advisory fees were already – feel very good about our current disclosure. We’ve been at it for many years and so to the extent that it’s raised out there in the marketplace we feel like ours, we will compete very well with the competition. Randy Binner – FBR Capital Markets & Co.: Okay, great. And then there’s one more if I could, also just on the CMBS. I guess maybe this is for Terry or Julia, but would you characterized the CMBS charges, this quarter is kind of a catch up. I mean certainly it seems that way for the home equity products, but I mean it was a little bit higher than the run rate has been and so was there something in the squirt [ph] that cause you to kind of take out a lump of impairments that may not be recurring going forward.

Well, I think certainly – this is Larry, Randy. On the home equity piece, so it’s definitely. I mean when I say catch up, what I mean is that we started to see delinquencies and severities increase in the last quarter or two. So, I don’t know if that’s catch up, but certainly we felt it was appropriate to increase the loss recognition around that portfolio. I think on the CMBS, I’ll let Julia comment on that.

Yes. No, actually what we’re seeing is from third quarter ‘09, really second quarter ‘09, we started to see impairments because we actually started to see forecast for a loss of that point in time. So, again, remember we’re impairing long before the losses actually emerge. First quarter was the peak. We’ve actually seen it trends down on CMBS losses impairment. The first quarter was really our peak number and we’re trending downward. So, no, I guess the answer is no. There’s no catch up. We’re really impairing as we see in forecast losses and severity of those losses and we’re seeing the trends sort of play out as we would have anticipated and first quarter was kind of our peak. Randy Binner – FBR Capital Markets & Co.: All right, very good. Thank you.

Thank you, Randy.

Your next question is from Ed Spehar with Bank of America. Edward Spehar – BofA Merrill Lynch: Thank you. Good morning, everyone.

Hi, Ed. Edward Spehar – BofA Merrill Lynch: I have two questions. The first is on capital, when you talk about the $2 billion excess number and you talk about you want to hold $1 billion cushion, so I think you’re saying there’s a billion dollars that you could do something with in the near-term, is that a correct interpretation?

Well, I think, Ed – this is Larry, Ed. I mean I think – generally speaking, but I’ll say it back to you. We again have, if you use the 350 RBC and we could – people might have different lines, but just to have a common measuring stick, there’s about $2 billion of excess capital. And our thinking right now is that as we look both to higher capital requirements that I alluded to in my remarks, plus we’re very sensitive also around sort of near-term obligations of the holding company. We probably be of a mind today, that we would want to hold somewhere around $1 to 1.2 billion. The higher amount does not necessarily mean, however, that we have a desire to go out in the next quarter or two and spend down the remaining amount. As I said, I think that the rating agencies, two of the four have moved the industry to neutral, so there are some again some signs that are positive. And so I think as we go forward, as we keep adding to our excess capital position, as the economy and the markets normalize, I think that sort of 750 million number will grow and we will and we’re currently working on lots of plans and ideas around ways to deploy it. Edward Spehar – BofA Merrill Lynch: Yes. I guess, Larry, just a follow-up on that. I mean I understand the desire to hold a cushion, but I guess the question is you’re stock is below book value and I think when you think about the prospects for this business and when you think about the marginal return on capital that you expect, I find it hard to see any other alternative use for capital being compelling other than buying your stock. And when you talk about funding growth for me, it doesn’t seem like you need to hold capital fund growth at least significant amounts considering the mixed shift. When you talk about M&A, it’s again it seems impossible, almost impossible to find something that’s more compelling than your stock below book. So, can you just give us some sense of how you’re thinking about timing, of deploying capital because this is – I’m not so sure that this is an opportunity that stays forever?

Right. I mean I think there’s a general agreement with many of the points, Ed, that you were talking about and it’s really more I would say a matter of timing more than anything else. As you said and again you’ve written and commented on this, which I appreciate, we have made conscious decisions here to pullback on some of the more capital intensive businesses particularly the IO business and that has very positive implications going forward. We used to talk about needing 50% of operating earnings to support the growth of the businesses. We haven’t really retested that in detail to give you a new number today, but clearly because of the pullback of IO, we would need less than that sort of that 50% number going forward. So, we will be generating higher amounts of free cash flow. We will be adding to our excess capital position. And again as we go forward and through the rest of 2010 into 2011, we will need to have and we have been working and continue to have a plan for capital deployment, but again I think it’s a little bit early to be pulling the trigger on that. So, for now, it’s a very nice position to be in. we want to continue to watch the things that are going on. We have the opportunity to be very opportunistic both in global asset management, in international and U.S. retirement that’s where the capital will go to, and so we just like the position we’re in and we’ll see how it works out over the next quarter or two. Edward Spehar – BofA Merrill Lynch: Okay, and then one quick follow-up, just for some clarification on International. The $35 million that you earned this quarter, there was about a $3 or 4 million impact from the change in the JV ownership. When we’re thinking forward over the next couple quarters, we have earnings that should come down from that level by something in the neighborhood of $9 million. Is that correct?

Well, on a quarterly – this is Norman. On a quarterly basis, we have indicated that we expect earnings to drop by about between $10 and 12 million per quarter after tax.

But given we have one quarter, we should be in the 27 to 28 million per quarter basically, Ed.

That’s right. Edward Spehar – BofA Merrill Lynch: And then how quickly – now, is it going to grow still off of that as the start of your 15% or is there a faster growth rate recovery because of what you see as sort of near-term opportunities.

We anticipate growth between 15 and 20%. Obviously, the 23-year agreement with Banco do Brasil gives us tremendous opportunity in that market as well as the other market, so roughly between 15 and 20% growth going forward. Okay? Edward Spehar – BofA Merrill Lynch: Thank you.

Thanks, Ed.

Your next question is from Colin Devine with Citi. Colin Devine – Citigroup Inc: Good morning.

Hey, Colin. Colin Devine – Citigroup Inc: I just got a couple of quick questions just to make sure that I’m sort of getting the message that I think you’re trying to convey. And first is in terms of capital redeployment, the way that Principal used to do it, buybacks and such, but nobody should be holding their breath for awhile, and that the ROE that we’re looking at today in this sort of 10.5% range is going to be here for awhile or actually maybe go down as you continue to build [inaudible], so that’s question number one. Question number two, as I look at the FSA business again, the number of plans your managing continues to decline and is that just really a reflection of the overall shrinkage you alluded to in the 401-K market more than a problem at Principal? And then three, can you just confirm the home equity lines and the bank are those loans you originated yourselves, right, or portfolios that you purchased? Then finally, if you could just confirm – one more time for me at least on the DAC with the life business, exactly what happened there with this sort of what gen [ph] worth ad where there’s sort of been because of lower rates, some of them are more permanent impairment or against their original pricing assumptions or was it more market driven? I know you’ve written a bunch secondary guarantee, Universal Life and I didn’t know if we were seeing somebody as [inaudible] class experience come through.

Okay. I’ll try to take them quickly, Colin, and Terry will want to comment on a couple of these as well. But in terms of ROE growth, the fact that we’re holding higher capital, we think probably impacts ROE around 56 to 60 basis points. But having said that, I think our current ROE of about 10.6, I think is still reasonably competitive within the industry. Having said that, I guess we still believe that we have the opportunity to grow that ROE even at these higher levels of capital, we’ll continue to grow that ROE about 50 basis points a year, so there’s really been no change around that because of the fee nature of our growth businesses. We see opportunities to continue to grow from this kind of 10.5 to 10.6% levels. In terms of numbers of plans, that’s really a combination of two things. Number one, there’s fewer startup plans, so we’re not writing quite as many plans in this kind of an environment and number two, of course, there are a few more terminations of plans meaning very small employers who go out of business. So, again, we think those are trends that will normalize and reverse themselves overtime. Quickly on the HELOC, I would just comment that is basically a portfolio that was purchased through a few different sources, but basically those are all correspondents. We don’t necessarily have a basis to originate those, and again that activity was ceased as of a number of years ago, so we’re not having to be adding any of those home equity loans in the portfolio over the last couple of last years. And I’ll let Terry comment very quickly on the Individual Life DAC issue.

Yes, Colin. As we had two large claims that generated losses in the current period, they were offset by reinsurance. So, the economic impact of it, this quarter was about $2 million. However, accounting practice does not allow you to recognize the reinsurance reimbursement during the current period and you have to spread that over the life of the portfolio, which could be 75 years plus and so there’s going to be very little impact. The net effect of this in several different lines through geography was a $5 million tax impact of the underwriting of the reinsurance amortization or impact. As a result, we said that at $2 million economic impact versus a $5 million gap impact generated lower earnings in the life line by about $3 million after tax this quarter. Therefore, we feel that that was an appropriate adjustment to make to our EPS in the current period. Colin Devine – Citigroup Inc: Thank you very much.

Thanks, Colin.

Your next question is from Mark Finkelstein with Macquarie. Mark Finkelstein – Macquarie Research: Hi, good morning. Just to talk a little bit about the health business. Premium continues to go down at a fairly rapid clip. I guess what is your premium outlook and when do we start to really kind of have more meaningful expense ratio issues, particularly when we start thinking about healthcare reform and minimum loss ratios, that’s my first question.

Okay. Well, this is Larry. I’ll make a quick comment on that, Dan may want to comment as well. I don’t that there’s necessarily such as thin as bright line, Mark, where that becomes an issue and clearly we’re well aware of the membership decline, which again is a combination of in plans shrink as well as lapses exceeding new sales. And again, you see these across most of the commercial blocks of pretty much of all the carrier, so there’s not a magic point. I would say that we are looking at in regard to minimum loss ratios, we are looking at the potential impact of that and again, that’s just something that we’ll have to manage towards. But I don’t know Danny, do you have any comment?

Yes, maybe just two real quick ones. As you know we’ve talked about previously the build out of our Pen [ph] networks, which are our proprietary network development going on and roughly six or seven cities around the country to get better discounts from hospitals and physicians and clinics et cetera. So, it does require some investment to build out that capability. We’re also making a modest investment in distribution as well as back office to comply with healthcare reforms. So, we’re going to have some pressure on expenses, we continue to manage that very aggressively and at the same time, you can see a nice improvement in overall loss ratios, and again, those two areas are certainly driving cost up for our overhead administrative expenses. Mark Finkelstein – Macquarie Research: Okay. And then just secondly on the PGI unaffiliated flow, I think you attributed some of the issues in the quarter to a rebalancing where you’re not as competitive in those strategies or even have them in some instances. I guess one has that rebalancing essentially ended and did I hear you correctly in suggesting that you expect those – that particular area to show positive flows in the third and fourth quarters.

Sure. I’ll have Jim comment on that. Jim?

Yes. I mean it’s so much differs by client that it’s hard to generalize. You can point or one can point to two or three clients who rebalance in particular ways and therefore that cost us flows during the quarter. But it’s very hard to generalize about a process that goes across a lot of client, and I will not hesitate to do that. I think really is the way to look at is that not only as Larry mentioned quoting Siruly [ph] the DC industry in an outflow, but the DB industry also industry also is or the DB funds across the country are also in that outflows. So to have – was it 1.6 billion of net outflow, 2% of the total non-affiliate book of business, it’s actually not a particularly bad result given the influence of the economy on the funds. And really the key towards turning positive is that clients start allocating both U.S. and international clients to the active strategies we’re in, and we see signs of that as coming and we’d be disappointed to see continued negative flows through the next two quarters, but it’s very difficult to predict client movement. We do have participation in quite few searches at the moment and our search competitive in the number of popular investment choices, but I do think that it’s very hard to predict at this point whether it will actually turn positive in the next two quarters. So, for the next two or three years, it will remain very positive. Mark Finkelstein – Macquarie Research: Okay. Thanks, Jim.

Thanks, Mark.

We have reached the end of our Q&A. Mr. Zimpleman, your closing comments please.

Well, again, I want to thank all of you for joining us this morning and for your continuing interest in the Principal. As we’ve mentioned in our call today, we do see increasing evidence that the economy in the small and medium sector are now at the beginning of what we hope to be a growth cycle going forward. Although we’re going to focus on challenges that remain, we also believe we are well-positioned as we go forward for the next few quarters, and we look forward to speaking with many of you about the opportunities that we believe will continue to differentiate Principal Financial Group from our peers. Thank you and have a great day.

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