SecProbe.io

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<TYPE>CORRESP
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July 7, 2006

BY EDGAR AND HAND DELIVERY

Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.E.
Washington, D.C.  20549-0309
Attention:  Mr. Jim B. Rosenberg, Mail Stop 6010

Re:      Principal Financial Group, Inc.
         Form 10-K for the Fiscal Year Ended December 31, 2005
         File No. 1-16725

Dear Mr. Rosenberg:

On behalf of  Principal  Financial  Group,  Inc.  (the  "Company"),  this letter
responds to the comments of the Division of Corporation Finance (the "Staff") of
the  Securities  and Exchange  Commission  (the  "Commission")  contained in the
letter dated June 23, 2006,  concerning  the  above-referenced  Annual Report on
Form 10-K.  For  convenience,  we have  repeated  your comments in bold and have
provided the Company's response in plain text.

FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2005

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

CRITICAL ACCOUNTING POLICIES AND ESTIMATES, PAGE 31

1.   THE SENSITIVITY  ANALYSES YOU PROVIDE REGARDING THE POSSIBLE  VARIATIONS IN
     THE VALUE OF YOUR  AVAILABLE-FOR-SALE  FIXED  MATURITY  SECURITIES AND YOUR
     DEFERRED  POLICY  ACQUISITION  COSTS  APPEAR  TO BE BASED  ON  HYPOTHETICAL
     CHANGES IN INTEREST  RATES AND LONG-TERM  EXPECTED  INVESTMENT  PERFORMANCE
     RATES, RESPECTIVELY. PLEASE TELL US WHETHER YOU BELIEVE THE RATES OF CHANGE
     YOU DISCLOSE ARE  REASONABLY  LIKELY TO OCCUR AS REQUIRED BY FR-72,  AND IF
     SO, PROVIDE US PROPOSED REVISED DISCLOSURE ACCORDINGLY.  OTHERWISE,  PLEASE
     PROVIDE TO US IN A DISCLOSURE-TYPE FORMAT REVISED DISCUSSIONS THAT INDICATE
     THE IMPACT OF  REASONABLY  LIKELY  CHANGES IN INTEREST  RATES AND LONG-TERM
     EXPECTED INVESTMENT PERFORMANCE RATE.

<PAGE>

REGISTRANT'S RESPONSE

The Company  respectively  advises the Staff that  changes to interest  rate and
long-term   expected   investment   performance   rates,  as  disclosed  in  our
available-for-sale fixed maturity securities and our deferred policy acquisition
costs  disclosures,  respectfully,  are reasonably  likely to occur based on our
historical experience.

Our available-for-sale fixed maturity securities portfolio held by the Principal
Life general  account has an approximate  weighted  average life of 7 years.  An
analysis of historical  changes in the 7-year  Treasury rate supports our belief
that a 20 to 100 basis point change in interest rates is reasonably likely.

Since a long-term  view of investment  performance  is used in deriving the DPAC
model assumption,  we believe judgment of the reasonably likely changes in rates
of return  should be considered in the context of the long term. We have changed
the long-term view of investment performance by 1% within the last 5 years.

The following revised  disclosures  clarify our beliefs regarding the reasonably
likely future interest rate and long-term  investment  performance rate changes.
We propose to include  disclosures similar to these in our future annual reports
on Form 10-K.

VALUATION  OF  INVESTED  ASSETS  (Replacing  the  last  sentence  of  the  first
paragraph)

An interest rate increase in the range of 20 to 100 basis points,  while holding
credit  spreads  constant,  produces  total values ranging from $37.7 billion to
$36.2 billion,  as compared to the recorded  amount of $38.1 billion  related to
our fixed maturity, available-for-sale assets held by the Principal Life general
account. Based on our historical  experience,  we believe a rate change of 20 to
100 basis points is reasonably likely.

DEFERRED POLICY ACQUISITION COSTS ("DPAC")  (Replacing the last paragraph)

The total DPAC asset balance as of December 31, 2005, was $2.2 billion. Based on
historical  experience,  we  believe  a 1% change  in the  long-term  investment
performance  rate  assumption  on  separate  accounts  in  our  DPAC  models  is
reasonably likely. Such a change would cause an estimated $9.6 million change in
the DPAC asset as of  December  31,  2005.  Also,  removing  the mean  reversion
methodology from the DPAC asset  calculation  would reduce the December 31, 2005
DPAC balance by $2.8 million.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS, PAGE 63

2.   IT APPEARS THAT THE EXPECTED PAYMENTS DUE FOR YOUR CONTRACTHOLDER FUNDS AND
     FUTURE POLICY  BENEFITS AND CLAIMS  LIABILITIES  ARE PRESENTED IN THE TABLE
     NET OF PRESENT VALUE  DISCOUNTS AND PRESENT VALUE OF FUTURE NET PREMIUMS AS
     THESE AMOUNTS  AGREE TO THE  RESPECTIVE  BALANCE  SHEET LINE ITEMS.  PLEASE
     PROVIDE US IN A  DISCLOSURE-TYPE  FORMAT A REVISED  CONTRACTUAL  OBLIGATION
     TABLE THAT  INCLUDES THE  ESTIMATED  TIMING OF PAYMENT OF YOUR GROSS POLICY

                                       2
<PAGE>

     LIABILITIES.  TO THE EXTENT YOU FEEL IT IS NECESSARY TO EXPLAIN TO A READER
     WHY THESE AMOUNTS DO NOT AGREE TO YOUR BALANCE SHEET  LIABILITIES,  YOU MAY
     INCLUDE AN EXPLANATION IN THE HEADNOTE OR IN A FOOTNOTE TO THE TABLE.

REGISTRANT'S RESPONSE

The  Company  respectfully  advises the Staff  that,  beginning  with our Annual
Report on Form 10-K for the year ended  December 31, 2006,  we will disclose the
gross  payments   expected  for  our  contractual   obligations  and  commercial
commitments.  In addition to revising the gross policy  liabilities  values,  we
have also revised the  Certificates of deposits and Other long-term  liabilities
values in the attached table to reflect additional  interest that is expected to
be paid on these obligations in future years.  Included below is a revised table
as of December 31, 2005.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following  table presents  payments due by period for long-term  contractual
obligations as of December 31, 2005:

<TABLE>
<CAPTION>
                                                                               PAYMENTS DUE BY PERIOD
                                                                 --------------------------------------------------
                 CONTRACTUAL                       TOTAL                         2007-       2009-      2011 AND
                OBLIGATIONS(1)                   PAYMENTS           2006         2008        2010      THEREAFTER
--------------------------------------------  -----------------  ----------  -----------  ------------ ------------
  <S>                                             <C>             <C>          <C>          <C>         <C>
  Contractholder funds(2)                         $ 56,079.4      $ 6,793.0    $ 9,493.2    $ 7,156.9   $ 32,636.3
   Future policy benefits and claims(3)             41,201.6        2,397.6      4,097.8      3,838.6     30,867.6
  Long-term debt(4)                                  1,430.5          111.4        297.9        518.7        502.5
   Certificates of deposit(5)                          795.6          321.1        234.7        233.5          6.3
   Other long-term liabilities(6)                      582.8          405.6          -            -          177.2
   Operating leases(7)                                 165.5           48.5         60.5         29.5         27.0
   Purchase obligations(8)                             970.3          950.3         20.0          -            -
  Total contractual obligations                   $101,225.7      $11,027.5    $14,204.1    $11,777.2   $ 64,216.9

</TABLE>

------------------------------

(1)  Excludes  short-term  liabilities,  other  policyholder  funds,  taxes  and
     short-term  debt as these  are not  long-term  and/or  not  contractual  in
     nature.   Also   excludes   obligations   under  our   pension   and  other
     postretirement  benefit  plans as  benefit  payments  will be made  under a
     funded plan and will not require Company contributions or payments within a
     five-year period. In addition,  separate account  liabilities are excluded.
     Separate account liabilities  represent the fair market value of funds that
     are separately administered by the Company. Generally, the separate account
     contract owner, rather than the Company, bears the investment risk of these
     funds. The separate account  liabilities are legally segregated and are not
     subject to claims that arise out of any other business of the Company.  Net
     deposits,  net investment income and realized and unrealized  capital gains
     and losses on the separate  accounts are not reflected in the  consolidated
     statement of operations.  The separate  account  obligations  will be fully
     funded by cash flows from the separate account assets.

(2)  Includes GICs,  funding  agreements  (described  below),  individual  fixed
     annuities, universal life insurance, and other investment-type contracts.

                                       3
<PAGE>

     Our  guaranteed   investment   contracts  and  funding  agreements  contain
     provisions limiting early surrenders, which typically include penalties for
     early  surrenders,  minimum notice  requirements or, in the case of funding
     agreements with survivor  options,  minimum  pre-death  holding periods and
     specific maximum amounts.

     Funding   agreements   include  those  issued   directly  to   nonqualified
     institutional  investors,  as well as to three separate  programs where the
     funding   agreements   have  been   issued   directly  or   indirectly   to
     unconsolidated special purpose entities.  Claims for principal and interest
     under  funding  agreements  are afforded  equal  priority to claims of life
     insurance and annuity  policyholders  under  insolvency  provisions of Iowa
     Insurance Laws.

     We are authorized to issue up to $4.0 billion of funding agreements under a
     program  established  in  1998  to  support  the  prospective  issuance  of
     medium-term  notes by an  unaffiliated  entity in non-U.S.  markets.  As of
     December  31,  2005  and  2004,  $3,203.6  million  and  $3,867.0  million,
     respectively,  of liabilities  were being held with respect to the issuance
     outstanding under this program.

     In  addition,  we are  authorized  to issue up to $7.0  billion  of funding
     agreements  under a program  established in 2001 to support the prospective
     issuance of medium-term  notes by an  unaffiliated  entity in both domestic
     and  international  markets.  As of December  31,  2005 and 2004,  $4,744.5
     million and $5,462.3 million,  respectively, of liabilities were being held
     with  respect to the issuance  outstanding  under this  program.  We do not
     anticipate any new issuance activity under this program, given our December
     2005 termination of the dealership  agreement for the program and the March
     2004  establishment  of the  SEC-registered  program  described in the next
     paragraph.

     We are authorized to issue up to $4.0 billion of funding agreements under a
     program  established in March 2004 to support the  prospective  issuance of
     medium-term   notes  by   unaffiliated   entities  to  both   domestic  and
     international  investors.  Under  this  program,  both  the  notes  and the
     supporting  funding  agreements are registered with the SEC. As of December
     31, 2005,  $3,667.9  million of liabilities  are being held with respect to
     the  issuance  outstanding  under this  program.  In  contrast  with direct
     funding   agreements,   GIC   issuances   and   the   other   two   funding
     agreement-backed  medium  term note  programs  described  above,  Principal
     Life's  payment  obligations  on each funding  agreement  issued under this
     SEC-registered  program are guaranteed by Principal  Financial Group,  Inc.
     This program was amended in February 2006 to authorize issuance of up to an
     additional $5.0 billion of medium-term notes.

     Amounts included in the  contractholder  funds line item reflect  estimated
     cash  payments to be made to  policyholders.  The sum of the cash  outflows
     shown for all years in the table exceeds the corresponding liability amount
     included in the consolidated  financial statements as of December 31, 2005.
     The liability  amount in our  consolidated  financial  statements  reflects
     estimated cash payments to  policyholders,  reductions for expected  future
     premiums,  assumptions  with  regard  to the  timing of cash  payments  and
     discounting for interest.

(3)  Amounts included in the future policy benefits and claims line item reflect
     estimated  cash payments to be made to  policyholders.  The sum of the cash
     outflows  shown  for all  years  in the  table  exceeds  the  corresponding
     liability  amount included in our consolidated  financial  statements as of
     December 31,  2005.  The  liability  amount in our  consolidated  financial
     statements  reflects  estimated cash payments to policyholders,  reductions
     for expected future premiums, assumptions with regard to the timing of cash
     payments and discounting for interest.

(4)  The following are included in long-term debt:

                                       4
<PAGE>

     On November 3, 2005, Principal  International de Chile S.A., a wholly owned
     indirect  subsidiary,  entered into long-term borrowing agreements with two
     Chilean banks in the amount of US $93.9  million.  This debt is denominated
     in   Unidades   de   Formento   ("UF"),   a   Chilean    inflation-indexed,
     peso-denominated  monetary  unit.  Of this amount,  US $49.0  million of UF
     +4.59% notes and US $44.9  million of UF +4.93% notes mature on November 3,
     2011. Interest on the notes is payable  semi-annually on May 3 and November
     3 each year.  The debt  outstanding  and interest  expense will vary due to
     fluctuations  in the Chilean peso to US dollar  exchange  rates and Chilean
     inflation.

     On August 25, 1999,  Principal  Financial Group  (Australia)  Holdings Pty.
     Limited,  a wholly owned  indirect  subsidiary,  issued  $665.0  million of
     unsecured  redeemable  long-term  debt. Of this amount,  $200.0  million of
     7.95% notes matured on August 15, 2004,  with the remaining  $465.0 million
     in 8.2%  notes due  August 15,  2009.  On  December  28,  2001,  all of the
     long-term  debt  obligations  of  Principal   Financial  Group  (Australia)
     Holdings  Pty.  Limited  were  assumed by its parent,  Principal  Financial
     Services, Inc.

     On March 10, 1994,  Principal  Life issued $300.0 million of surplus notes,
     including  $200.0  million due March 1, 2024, at a 7.875%  annual  interest
     rate and the  remaining  $100.0  million due March 1, 2044, at an 8% annual
     interest rate. None of our affiliates  hold any portion of the notes.  Each
     payment of interest and principal on the notes,  however,  may be made only
     with the prior  approval  of the  Commissioner  and only to the extent that
     Principal Life has sufficient surplus earnings to make such payments.

     After receiving approval from the Commissioner, the surplus notes due March
     1, 2024,  were  optionally  redeemed by Principal Life on March 1, 2004, in
     whole at a redemption price of approximately 103.6% of par. Total cash paid
     for the surplus note redemption on March 1, 2004, was $207.2 million.

     Subject  to  Commissioner  approval,  the notes due March 1,  2044,  may be
     redeemed at Principal  Life's  election on or after March 1, 2014, in whole
     or in part at a  redemption  price  of  approximately  102.3%  of par.  The
     approximate  2.3%  premium is  scheduled  to  gradually  diminish  over the
     following ten years. These notes may be redeemed on or after March 1, 2024,
     at a redemption price of 100% of the principal amount pl