<PAGE>

                                                                    Exhibit 4.23


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                               GUARANTEE AGREEMENT

                                     Between

                         Principal Financial Group, Inc.

                                 (as Guarantor)

                                       and

                            Wilmington Trust Company

                                  (as Trustee)

                                   dated as of

                                        -




================================================================================

<PAGE>

                             CROSS-REFERENCE TABLE*

<TABLE>
<CAPTION>


         Section of                                                                     Section of
         Trust Indenture Act                                                            Guarantee
         of 1939, as amended                                                            Agreement
         -------------------                                                            ---------
<S>                                                                                  <C>
         310(a).................................................................        4.1(a)
         310(b).................................................................        4.1(c), 208
         310(c).................................................................        Inapplicable
         311(a).................................................................        2.2(b)
         311(b).................................................................        2.2(b)
         311(c).................................................................        Inapplicable
         312(a).................................................................        2.2(a)
         312(b).................................................................        2.2(b)
         313....................................................................        2.3
         314(a).................................................................        2.4
         314(b).................................................................        Inapplicable
         314(c).................................................................        2.5
         314(d).................................................................        Inapplicable
         314(e).................................................................        1.1, 2.5, 3.2
         314(f).................................................................        2.1, 3.2
         315(a).................................................................        3.1(d)
         315(b).................................................................        2.7
         315(c).................................................................        3.1
         315(d).................................................................        3.1(d)
         316(a).................................................................        1.1, 2.6, 5.4
         316(b).................................................................        5.3
         316(c).................................................................        8.2
         317(a).................................................................        Inapplicable
         317(b).................................................................        Inapplicable
         318(a).................................................................        2.1(b)
         318(b).................................................................        2.1
         318(c).................................................................        2.1(a)

</TABLE>

----------------
*        This Cross-Reference Table does not constitute part of the Guarantee
         Agreement and shall not affect the interpretation of any of its terms
         or provisions.
<PAGE>


                                Table of Contents

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                          <C>
                                                       ARTICLE 1
                                                      DEFINITIONS

SECTION 1.1  Definitions..........................................................................................1

                                                       ARTICLE 2
                                                  TRUST INDENTURE ACT

SECTION 2.1  Trust Indenture Act; Application.....................................................................5
SECTION 2.2  List of Holders......................................................................................5
SECTION 2.3  Reports by the Guarantee Trustee.....................................................................5
SECTION 2.4  Periodic Reports to Guarantee Trustee................................................................5
SECTION 2.5  Evidence of Compliance with Conditions Precedent.....................................................6
SECTION 2.6  Events of Default; Waiver............................................................................6
SECTION 2.7  Event of Default; Notice.............................................................................6
SECTION 2.8  Conflicting Interests................................................................................6

                                                       ARTICLE 3
                                  POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

SECTION 3.1  Powers and Duties of the Guarantee Trustee...........................................................7
SECTION 3.2  Certain Rights of Guarantee Trustee..................................................................8
SECTION 3.3  Indemnity...........................................................................................10

                                                       ARTICLE 4
                                                   GUARANTEE TRUSTEE

SECTION 4.1  Guarantee Trustee; Eligibility......................................................................10
SECTION 4.2  Appointment, Removal and Resignation of the Guarantee Trustee.......................................11

                                                       ARTICLE 5
                                                       GUARANTEE

SECTION 5.1  Guarantee...........................................................................................12
SECTION 5.2  Waiver of Notice and Demand.........................................................................12
SECTION 5.3  Obligations Not Affected............................................................................12
SECTION 5.4  Rights of Holders...................................................................................13
SECTION 5.5  Guarantee of Payment................................................................................13
SECTION 5.6  Subrogation.........................................................................................14
SECTION 5.7  Independent Obligations.............................................................................14
</TABLE>

                                       i
<PAGE>

                                Table of Contents
                                  (continued)
<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                          <C>

                                                       ARTICLE 6
                                              COVENANTS AND SUBORDINATION

SECTION 6.1  Subordination.......................................................................................14
SECTION 6.2  Pari Passu Guarantees...............................................................................14

                                                       ARTICLE 7
                                                      TERMINATION

SECTION 7.1  Termination.........................................................................................15

                                                       ARTICLE 8
                                                     MISCELLANEOUS

SECTION 8.1  Successors and Assigns..............................................................................15
SECTION 8.2  Amendments .........................................................................................15
SECTION 8.3  Notices ............................................................................................16
SECTION 8.4  Benefit ............................................................................................17
SECTION 8.5  Interpretation......................................................................................17
SECTION 8.6  GOVERNING LAW.......................................................................................17

</TABLE>

                                       ii
<PAGE>

                               GUARANTEE AGREEMENT

         This GUARANTEE AGREEMENT, dated as of -, 200-, is executed and
delivered by Principal Financial Group, Inc., a Delaware corporation (the
"Guarantor"), and Wilmington Trust Company, a Delaware banking corporation
organized under the laws of the State of Delaware, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of Principal Capital III, a
Delaware statutory trust (the "Issuer").

         WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of -, 200-, among the Trustees named therein, the
Guarantor, as Depositor, and the Holders from time to time of undivided
beneficial interests in the assets of the Issuer, the Issuer is issuing - of its
-% Preferred Securities, Series A (liquidation preference $25 per preferred
security) (the "Preferred Securities") representing preferred undivided
beneficial interests in the assets of the Issuer and having the terms set forth
in the Trust Agreement;

         WHEREAS, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined below), will be used to purchase the Debentures
(as defined in the Trust Agreement) of the Guarantor which will be deposited
with Wilmington Trust Company, as Property Trustee under the Trust Agreement, as
trust assets; and

         WHEREAS, as incentive for the Holders to purchase Preferred Securities
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.

                                    ARTICLE 1
                                   DEFINITIONS

         SECTION 1.1 Definitions.

         As used in this Guarantee Agreement, the terms set forth below shall,
unless the context otherwise requires, have the following meanings. Capitalized
or otherwise defined terms used but not otherwise defined herein shall have the
meanings assigned to such terms in the Trust Agreement as in effect on the date
hereof.


<PAGE>

         "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person, provided, however, that an Affiliate of the
Guarantor shall not be deemed to include the Issuer. For the purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.

         "Common Securities" means the securities representing common beneficial
interests in the assets of the Issuer.

         "Debt" means, with respect to any Person, whether recourse is to all or
a portion of the assets of such Person and whether or not contingent, (i) every
obligation of such Person for money borrowed; (ii) every obligation of such
Person evidenced by bonds, debentures, notes or other similar instruments,
including obligations incurred in connection with the acquisition of property,
assets or businesses; (iii) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person; (iv) every obligation of such Person issued or
assumed as the deferred purchase price of property or services (but excluding
trade accounts payable or accrued liabilities arising in the ordinary course of
business); (v) every capital lease obligation of such Person; and (vi) every
obligation of the type referred to in clauses (i) through (v) of another Person
and all dividends of another Person the payment of which, in either case, such
Person has guaranteed or is responsible or liable, directly or indirectly, as
obligor or otherwise.

         "Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement; provided, however,
that, except with respect to a default in payment of any Guarantee Payments, the
Guarantor shall have received notice of default and shall not have cured such
default within 60 days after receipt of such notice.

         "Expenses" has the meaning specified in Section 3.3.

         "Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Securities, to the extent not
paid or made by or on behalf of the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Trust Agreement) required to be paid on the
Preferred Securities, to the extent the Issuer shall have funds on hand
available therefor, (ii) the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price"), with respect
to the Preferred Securities called for redemption by the Issuer to the extent
the Issuer shall have funds on hand available therefor, and (iii) upon a
voluntary or involuntary termination, winding-up or liquidation of the Issuer,
unless Debentures are distributed to


                                       2
<PAGE>

the Holders, the lesser of (a) the aggregate of the liquidation preference of
$25 per Preferred Security plus accrued and unpaid Distributions on the
Preferred Securities to the date of payment to the extent the Issuer shall have
funds on hand available to make such payment and (b) the amount of assets of the
Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution").

         "Guarantee Trustee" means Wilmington Trust Company (not in its
individual capacity but solely in its trustee capacity), until a Successor
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.

         "Holder" means any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor, the Guarantee Trustee or any Affiliate of the Guarantor
or the Guarantee Trustee.

         "Indenture" means the Junior Subordinated Indenture dated as of -, -,
as supplemented and amended between the Guarantor and Wilmington Trust Company,
as trustee.

         "List of Holders" has the meaning specified in Section 2.2(a).

         "Majority in liquidation preference of the Securities" means, except as
provided by the Trust Indenture Act, a vote by the Holder(s), voting separately
as a class, of more than 50% of the liquidation preference of all then
outstanding Preferred Securities issued by the Issuer.

         "Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, Chief Executive Officer, President or a Vice
President, and by the Treasurer, an Associate Treasurer, an Assistant Treasurer,
the Controller, the Secretary or an Assistant Secretary of such Person, and
delivered to the Guarantee Trustee. Any Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this
Guarantee Agreement shall include:

                  (a) a statement that each officer signing the Officers'
         Certificate has read the covenant or condition and the definitions
         relating thereto;

                  (b) a brief statement of the nature and scope of the
         examination or investigation undertaken by each officer in rendering
         the Officers' Certificate;

                  (c) a statement that each such officer has made such
         examination or investigation as, in such officer's opinion, is
         necessary to enable such officer to


                                       3
<PAGE>

         express an informed opinion as to whether or not such covenant or
         condition has been complied with; and

                  (d) a statement as to whether, in the opinion of each such
         officer, such condition or covenant has been complied with.

         "Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.

         "Responsible Officer" means, with respect to the Guarantee Trustee, any
officer within the Corporate Trust Administration department of the Guarantee
Trustee with direct responsibility for the administration of this Guarantee
Agreement, including any vice-president, any assistant vice president, any
assistant secretary, the treasurer, any assistant treasurer, any trust officer
or other officer of the Corporate Trust Office of the Guarantee Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

         "Senior Debt" means the principal of (and premium, if any) and
interest, if any (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Guarantor whether
or not such claim for post-petition interest is allowed in such proceeding), on
Debt, whether incurred on or prior to the date of this Guarantee or thereafter
incurred, unless, in the instrument creating or evidencing the same or pursuant
to which the same is outstanding, it is provided that such obligations are not
superior in right of payment to the Guarantee or to other Debt which is pari
passu with, or subordinated to, the Guarantee; provided, however, that Senior
Debt shall not be deemed to include (a) any Debt of the Guarantor which when
incurred and without respect to any election under Section 11.11(b) of the
Bankruptcy Reform Act of 1978, was without recourse to the Company, (b) any Debt
of the Guarantor to any of its Subsidiaries, (c) Debt to any employee of the
Guarantor, (d) any liability for taxes, (e) Debt or other monetary obligations
to trade creditors created or assumed by the Guarantor or any of its
Subsidiaries in the ordinary course of business in connection with the obtaining
of goods, materials or services and (f) Debt issued under the Indenture and (g)
the Guarantee.

         "Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as Guarantee Trustee under Section 4.1.

         "Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.



                                       4
<PAGE>

                                   ARTICLE 2
                               TRUST INDENTURE ACT

         SECTION 2.1 Trust Indenture Act; Application.

         (a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions.

         (b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 3.10 to 3.17,
inclusive, of the Trust Indenture Act, such imposed duties shall control.

         SECTION 2.2 List of Holders.

         (a) The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before February 15 and August 15 of
each year, a list, in such form as the Guarantee Trustee may reasonably require,
of the names and addresses of the Holders ("List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the Guarantor and is
not identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

         (b) The Guarantee Trustee shall comply with its obligations under
Section 3.11(a), Section 3.11(b) and Section 3.12(b) of the Trust Indenture Act.

         SECTION 2.3 Reports by the Guarantee Trustee.

         Within 60 days after - of each year, the Guarantee Trustee shall
provide to the Holders such reports as are required by Section 3.13 of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 3.13 of
the Trust Indenture Act. The Guarantee Trustee shall also comply with the
requirements of Section 3.13(d) of the Trust Indenture Act.

         SECTION 2.4 Periodic Reports to Guarantee Trustee.

         The Guarantor shall provide to the Guarantee Trustee, the Securities
and Exchange Commission and the Holders such documents, reports and information,
if any, as required by Section 3.14 of the Trust Indenture Act and the
compliance certificate


                                       5
<PAGE>

required by Section 3.14 of the Trust Indenture Act in the form, in the manner
and at the times required by Section 3.14 of the Trust Indenture Act.

        SECTION 2.5 Evidence of Compliance with Conditions Precedent.

         The Guarantor shall provide to the Guarantee Trustee such evidence of
compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
3.14(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 3.14(c)(1) may be given in the form of
an Officers' Certificate.

         SECTION 2.6 Events of Default; Waiver.

         The Holders of a Majority in liquidation preference of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.

         SECTION 2.7 Event of Default; Notice.

         (a) The Guarantee Trustee shall, within 90 days after the occurrence of
an Event of Default, transmit by mail, first class postage prepaid, to the
Holders, notices of all Events of Default actually known to a Responsible
Officer of the Guarantee Trustee, unless such defaults have been cured before
the giving of such notice, provided, that, except in the case of a default in
the payment of a Guarantee Payment, the Guarantee Trustee shall be protected in
withholding such notice if and so long as the Board of Directors, the executive
committee or a trust committee of directors and/or Responsible Officers of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders.

         (b) The Guarantee Trustee shall not be deemed to have knowledge of any
Event of Default unless a Responsible Officer of the Guarantee Trustee shall
have received written notice of such Event of Default.

         SECTION 2.8 Conflicting Interests.

         The Trust Agreement shall be deemed to be specifically described in
this Guarantee Agreement for the purposes of clause (i) of the first proviso
contained in Section 3.10(b) of the Trust Indenture Act.



                                       6
<PAGE>

                                    ARTICLE 3
               POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE

         SECTION 3.1 Powers and Duties of the Guarantee Trustee.

         (a) This Guarantee Agreement shall be held by the Guarantee Trustee for
the benefit of the Holders, and the Guarantee Trustee shall not transfer this
Guarantee Agreement to any Person except a Holder exercising his or her rights
pursuant to Section 5.04(iv) or to a Successor Guarantee Trustee on acceptance
by such Successor Guarantee Trustee of its appointment to act as Successor
Guarantee Trustee. The right, title and interest of the Guarantee Trustee shall
automatically vest in any Successor Guarantee Trustee, upon acceptance by such
Successor Guarantee Trustee of its appointment hereunder, and such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered pursuant to the appointment of such Successor
Guarantee Trustee.

         (b) If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall, promptly upon receipt of written notice of such Event
of Default, enforce this Guarantee Agreement for the benefit of the Holders.

         (c) The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied duties or covenants shall be read into
this Guarantee Agreement against the Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.6), the Guarantee Trustee shall exercise such of the rights and powers vested
in it by this Guarantee Agreement, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.

         (d) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from liability for its own negligent action, its
own negligent failure to act or its own willful misconduct, except that:

                  (i) prior to the occurrence of any Event of Default and after
         the curing or waiving of all such Events of Default that may have
         occurred:

                           (A) the duties and obligations of the Guarantee
                  Trustee shall be determined solely by the express provisions
                  of this Guarantee Agreement, and the Guarantee Trustee shall
                  not be liable except for the performance of such duties and
                  obligations as are specifically set forth in this Guarantee
                  Agreement; and





                                       7
<PAGE>
                                    (B) in the absence of bad faith on the part
                           of the Guarantee Trustee, the Guarantee Trustee may
                           conclusively rely, as to the truth of the statements
                           and the correctness of the opinions expressed
                           therein, upon any certificates or opinions furnished
                           to the Guarantee Trustee and conforming to the
                           requirements of this Guarantee Agreement; but in the
                           case of any such certificates or opinions that by any
                           provision hereof or of the Trust Indenture Act are
                           specifically required to be furnished to the
                           Guarantee Trustee, the Guarantee Trustee shall be
                           under a duty to examine the same to determine whether
                           or not they conform on their face to the requirements
                           of this Guarantee Agreement;

                           (ii) the Guarantee Trustee shall not be liable for
                  any error of judgment made in good faith by a Responsible
                  Officer of the Guarantee Trustee, unless it shall be proved
                  that the Guarantee Trustee was negligent in ascertaining the
                  pertinent facts upon which such judgment was made;

                           (iii) the Guarantee Trustee shall not be liable with
                  respect to any action taken or omitted to be taken by it in
                  good faith in accordance with the direction of the Holders of
                  not less than a Majority in liquidation preference of the
                  Preferred Securities relating to the time, method and place of
                  conducting any proceeding for any remedy available to the
                  Guarantee Trustee, or exercising any trust or power conferred
                  upon the Guarantee Trustee under this Guarantee Agreement; and


                           (iv) no provision of this Guarantee Agreement shall
                  require the Guarantee Trustee to expend or risk its own funds
                  or otherwise incur personal financial liability in the
                  performance of any of its duties or in the exercise of any of
                  its rights or powers, if the Guarantee Trustee shall have
                  reasonable grounds for believing that the repayment of such
                  funds or liability is not reasonably assured to it under the
                  terms of this Guarantee Agreement or adequate indemnity
                  against such risk or liability is not reasonably assured to
                  it.

         SECTION 3.2 Certain Rights of Guarantee Trustee.

         (a) Subject to the provisions of Section 3.01:

                  (i) The Guarantee Trustee may rely and shall be fully
protected in acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document believed by it to be genuine and to have been signed, sent or presented
by the proper party or parties.



                                       8
<PAGE>

                  (ii) Any direction or act of the Guarantor contemplated by
this Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate unless otherwise prescribed herein.

                  (iii) Whenever, in the administration of this Guarantee
Agreement, the Guarantee Trustee shall deem it desirable that a matter be proved
or established before taking, suffering or omitting to take any action
hereunder, the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and rely upon
an Officers' Certificate which, upon receipt of such request from the Guarantee
Trustee, shall be promptly delivered by the Guarantor.

                  (iv) The Guarantee Trustee may consult with legal counsel, and
the written advice or opinion of such legal counsel with respect to legal
matters shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted to be taken by it hereunder in good faith
and in accordance with such advice or opinion. Such legal counsel may be legal
counsel to the Guarantor or any of its Affiliates and may be one of its
employees. The Guarantee Trustee shall have the right at any time to seek
instructions concerning the administration of this Guarantee Agreement from any
court of competent jurisdiction.

                  (v) The Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Guarantee Agreement at
the request or direction of any Holder, unless such Holder shall have provided
to the Guarantee Trustee such adequate security and indemnity as would satisfy a
reasonable person in the position of the Guarantee Trustee, against the costs,
expenses (including attorneys' fees and expenses) and liabilities that might be
incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee Trustee; provided that,
nothing contained in this Section 3.2(a)(v) shall be taken to relieve the
Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation
to exercise the rights and powers vested in it by this Guarantee Agreement.

                  (vi) The Guarantee Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Guarantee Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit.

                  (vii) The Guarantee Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either directly or by or
through its agents or attorneys, and the Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of, or for the
supervision of, any such agent or attorney appointed with due care by it
hereunder.



                                       9
<PAGE>

                  (viii) Whenever in the administration of this Guarantee
Agreement the Guarantee Trustee shall deem it desirable to receive instructions
with respect to enforcing any remedy or right or taking any other action
hereunder, the Guarantee Trustee (A) may request instructions from the Holders,
(B) may refrain from enforcing such remedy or right or taking such other action
until such instructions are received, and (C) shall be protected in acting in
accordance with such instructions.

         (b) No provision of this Guarantee Agreement shall be deemed to impose
any duty or obligation on the Guarantee Trustee to perform any act or acts or
exercise any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the Guarantee Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

         SECTION 3.3 Indemnity.

         The Guarantor agrees to indemnify the Guarantee Trustee (including in
its individual capacity) and its officers, directors and employees for, and to
hold each harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee, arising out of or
in connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder (collectively, "Expenses"). The Guarantee Trustee will not
claim or exact any lien or charge on any Guarantee Payments as a result of any
amount due to it under this Guarantee Agreement. To the fullest extent permitted
by law, the Expenses (including reasonable attorneys' fees and expenses)
incurred by the Guarantee Trustee referred to above shall be paid by the
Guarantor in advance upon receipt of an undertaking by or on behalf of the
Guarantee Trustee to repay such amount if it shall ultimately be determined that
the Guarantee Trustee is not entitled to be indemnified by the Guarantor as
authorized in this Section 3.3. The obligations of the Guarantor under this
Section 3.3 shall survive termination of this Guarantee Agreement and the
removal or resignation of any Guarantee Trustee.

                                   ARTICLE 4
                                GUARANTEE TRUSTEE

         SECTION 4.1 Guarantee Trustee; Eligibility.

         (a) There shall at all times be a Guarantee Trustee which shall:

                  (i) not be an Affiliate of the Guarantor; and



                                       10
<PAGE>

                  (ii) be a Person that is eligible pursuant to the Trust
         Indenture Act to act as such and has a combined capital and surplus of
         at least 50 million U.S. dollars ($50,000,000), and shall be a
         corporation meeting the requirements of Section 3.10(c) of the Trust
         Indenture Act. If such corporation publishes reports of condition at
         least annually, pursuant to law or to the requirements of the
         supervising or examining authority, then, for the purposes of this
         Section and to the extent permitted by the Trust Indenture Act, the
         combined capital and surplus of such corporation shall be deemed to be
         its combined capital and surplus as set forth in its most recent report
         of condition so published.

         (b) If at any time the Guarantee Trustee shall cease to be eligible to
so act under Section 4.1(a), the Guarantee Trustee shall immediately resign in
the manner and with the effect set out in Section 4.2(c).

         (c) If the Guarantee Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 3.10(b) of the Trust Indenture Act, the
Guarantee Trustee and Guarantor shall in all respects comply with the provisions
of Section 3.10(b) of the Trust Indenture Act.

         SECTION 4.2 Appointment, Removal and Resignation of the Guarantee
                     Trustee.

         (a) Subject to Section 4.2(b), the Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.

         (b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

         (c) The Guarantee Trustee appointed hereunder shall hold office until a
Successor Guarantee Trustee shall have been appointed or until its removal or
resignation. The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an instrument in writing executed by the
Guarantee Trustee and delivered to the Guarantor, which resignation shall not
take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

         (d) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a



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<PAGE>

Successor Guarantee Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper, appoint a Successor Guarantee Trustee.

                                    ARTICLE 5
                                    GUARANTEE

         SECTION 5.1 Guarantee.

         The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by or on behalf of the Issuer), as and when due, regardless of any defense,
right of set-off or counterclaim which the Issuer may have or assert. The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holders or by causing
the Issuer to pay such amounts to the Holders.

         SECTION 5.2 Waiver of Notice and Demand.

         The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

         SECTION 5.3 Obligations Not Affected.

         The obligations, covenants, agreements and duties of the Guarantor
under this Guarantee Agreement shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

                  (a) the release or waiver, by operation of law or otherwise,
         of the performance or observance by the Issuer of any express or
         implied agreement, covenant, term or condition relating to the
         Preferred Securities to be performed or observed by the Issuer;

                  (b) the extension of time for the payment by the Issuer of all
         or any portion of the Distributions (other than an extension of time
         for payment of Distributions that results from the extension of any
         interest payment period on the Debentures as so provided in the
         Indenture), Redemption Price, Liquidation Distribution or any other
         sums payable under the terms of the Preferred Securities or the
         extension of time for the performance of any other obligation under,
         arising out of, or in connection with, the Preferred Securities;



                                       12
<PAGE>

                  (c) any failure, omission, delay or lack of diligence on the
         part of the Holders to enforce, assert or exercise any right,
         privilege, power or remedy conferred on the Holders pursuant to the
         terms of the Preferred Securities, or any action on the part of the
         Issuer granting indulgence or extension of any kind;

                  (d) the voluntary or involuntary liquidation, dissolution,
         sale of any collateral, receivership, insolvency, bankruptcy,
         assignment for the benefit of creditors, reorganization, arrangement,
         composition or readjustment of debt of, or other similar proceedings
         affecting, the Issuer or any of the assets of the Issuer;

                  (e) any invalidity of, or defect or deficiency in, the
         Preferred Securities;

                  (f) the settlement or compromise of any obligation guaranteed
         hereby or hereby incurred; or

                  (g) any other circumstance whatsoever that might otherwise
         constitute a legal or equitable discharge or defense of a guarantor, it
         being the intent of this Section 5.3 that the obligations of the
         Guarantor hereunder shall be absolute and unconditional under any and
         all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.

         SECTION 5.4 Rights of Holders.

         The Guarantor expressly acknowledges that: (i) this Guarantee Agreement
will be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) the Holders of a Majority in
liquidation preference of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; and (iv) any Holder may institute a legal proceeding directly against
the Guarantor to enforce its rights under this Guarantee Agreement, without
first instituting a legal proceeding against the Guarantee Trustee, the Issuer
or any other Person.

         SECTION 5.5 Guarantee of Payment.

         This Guarantee Agreement creates a guarantee of payment and not of
collection. This Guarantee Agreement will not be discharged except by payment of
the Guarantee Payments in full (without duplication of amounts theretofore paid
by the Issuer) or upon distribution of Debentures to Holders as provided in the
Trust Agreement.



                                       13
<PAGE>

         SECTION 5.6 Subrogation.

         The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.

         SECTION 5.7 Independent Obligations.

         The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.

                                    ARTICLE 6
                           COVENANTS AND SUBORDINATION

         SECTION 6.1 Subordination.

         This Guarantee Agreement will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all Senior
Debt of the Guarantor.

         SECTION 6.2 Pari Passu Guarantees.

         This Guarantee Agreement shall rank pari passu with any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
Preferred Securities issued by Principal Capital ___, Principal Capital ___ and
Principal Capital ___.



                                       14
<PAGE>

                                    ARTICLE 7
                                   TERMINATION

         SECTION 7.1 Termination.

         This Guarantee Agreement shall terminate and be of no further force and
effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Debentures to the Holders in exchange for
all of the Preferred Securities or (iii) full payment of the amounts payable in
accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be reinstated, as the case may be, if at any time any Holder
must restore payment of any sums paid with respect to Preferred Securities or
this Guarantee Agreement.

                                    ARTICLE 8
                                  MISCELLANEOUS

         SECTION 8.1 Successors and Assigns.

         All guarantees and agreements contained in this Guarantee Agreement
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with a consolidation, merger
or sale involving the Guarantor that is permitted under Article Eight of the
Indenture and pursuant to which the assignee agrees in writing to perform the
Guarantor's obligations hereunder, the Guarantor shall not assign its
obligations hereunder.

         SECTION 8.2 Amendments.

         Any amendment to this Guarantee Agreement shall be in writing and
executed by the Guarantor and Guarantee Trustee. Except with respect to any
changes which do not adversely affect the rights of the Holders in any material
respect (in which case no consent of the Holders will be required), this
Guarantee Agreement may only be amended with the prior approval of the Holders
of not less than a Majority in liquidation preference of all the outstanding
Preferred Securities. The provisions of Article VI of the Trust Agreement
concerning meetings of the Holders shall apply to the giving of such approval.
The Guarantee Trustee shall not be required to enter into any amendment to this
Guarantee Agreement which affects its own rights, duties or immunities under
this Guarantee Agreement. The Guarantee Trustee shall be entitled to receive and
conclusively rely on an Opinion of Counsel and an Officer's Certificate stating
that any amendment to this Guarantee Agreement is in compliance with this
Guarantee Agreement.



                                       15
<PAGE>

         SECTION 8.3 Notices.

         Any notice, request or other communication required or permitted to be
given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:

                  (a) if given to the Guarantor, to the address set forth below
         or such other address as the Guarantor may give notice of to the
         Holders:

                           Principal Financial Group, Inc.
                           711 High Street
                           Des Moines, Iowa  50392
                           Facsimile No.:  (515) [               ]
                           Attention:  [Treasurer]

                  (b) if given to the Issuer, in care of the Guarantee Trustee,
         at the Issuer's (and the Guarantee Trustee's) address set forth below
         or such other address as the Guarantee Trustee on behalf of the Issuer
         may give notice to the Holders:

                           Principal Capital III
                           c/o Principal Financial Group, Inc.
                           711 High Street
                           Des Moines, Iowa  50392
                           Facsimile No.:  (515) [               ]
                           Attention:  [Treasurer]

                           with a copy to:

                           Wilmington Trust Company
                           Rodney Square North
                           1100 N. Market Street
                           Wilmington, Delaware 19890
                           Facsimile No.: (302) 636-4141
                           Attention: Corporate Trust Administration

                  (c) if given to any Holder, at the address set forth on the
         books and records of the Issuer.

         All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other




                                       16
<PAGE>

document shall be deemed to have been delivered on the date of such refusal or
inability to deliver.

         SECTION 8.4 Benefit.

         This Guarantee Agreement is solely for the benefit of the Holders and
is not separately transferable from the Preferred Securities.

         SECTION 8.5 Interpretation.

         In this Guarantee Agreement, unless the context otherwise requires:

                  (a) capitalized terms used in this Guarantee Agreement but not
         defined in the preamble hereto have the respective meanings assigned to
         them in Section 1.1;

                  (b) a term defined anywhere in this Guarantee Agreement has
         the same meaning throughout;

                  (c) all references to "the Guarantee Agreement" or "this
         Guarantee Agreement" are to this Guarantee Agreement as modified,
         supplemented or amended from time to time;

                  (d) all references in this Guarantee Agreement to Articles and
         Sections are to Articles and Sections of this Guarantee Agreement
         unless otherwise specified;

                  (e) a term defined in the Trust Indenture Act has the same
         meaning when used in this Guarantee Agreement unless otherwise defined
         in this Guarantee Agreement or unless the context otherwise requires;

                  (f) a reference to the singular includes the plural and vice
         versa; and

                  (g) the masculine, feminine or neuter genders used herein
         shall include the masculine, feminine and neuter genders.

                  SECTION 8.6 GOVERNING LAW.

         THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO THE CONFLICT OF LAW PRINCIPLES THEREOF.



                                       17
<PAGE>

         This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.




                                       18
<PAGE>





         THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.

                                                 PRINCIPAL FINANCIAL GROUP, INC.


                                                 By: ___________________________
                                                     Name:
                                                     Title:


                                                 WILMINGTON TRUST COMPANY, as
                                                     Guarantee Trustee


                                                 By: ___________________________
                                                     Name:
                                                     Title: