Car Insurance

The eight-hour motorcycle ride through the rolling hills of Amish country in Lancaster County, Pa., was an almost forgotten taste of freedom, which they gave up when they sold their 883 Sportster to buy a house in 1999.

“You could smell everything you know, just, your whole senses take over,” said Kari, a 38-year-old waitress living in Reading, Pa. “I’d say we put three or four hundred miles on that day. We rode all day. It was great.”

“I knew if I took that step to rent, this was going to happen,” Kari said.

The iconic motorcycle maker needs to attract more people like the Schwears as it fights flat domestic sales. Analysts have said that if the company wants to stay successful it must broaden its appeal beyond its traditional base of middle-aged men.

The rental program, which started in 1999, is a tool for Harley- Davidson to hook customers on riding and entice them to commit to buying a motorcycle.

“They’re looking to get the experience of riding a Harley out on the open road,” said Lara Lee, Harley-Davidson’s vice president of enthusiast services. “For a lot of people it’s a great way for them to try out the products before they buy.”

Although the renters are primarily men, Lee said, the program does ease the buying process for people who may have just learned to ride on Harley’s Rider’s Edge program — whose clientele is 40 percent female and about 30 percent under the age of 35.

“There are examples of that — learn, rent and then buy,” Lee said.

Analysts say the program helps sales, but just how much is unclear.

“It’s subtle and not measurable, but sure it’s a plus,” said Bob Simonson, an analyst with William Blair & Co. “But if you look at the retail sales at the dealer level, they’ve been slowing now for two or three years. So it’s not like this has served to either accelerate their business or to prevent it from slowing.”

What is clear is that the rental program has ballooned since starting up six years ago. It has gone from six participating dealerships to 250, including several in the Chicago area and 52 in countries such as France, Italy, Canada, Costa Rica, Australia and Mexico. The motorcycle maker plans to add 20 to 30 participating outlets a year.

Rental days have shot up from 28 in 1999 to 224,134 in 2004.

Harley-Davidson says 32 percent of rental customers they surveyed bought a bike or placed an order after renting, and another 37 percent planned to buy one within a year. About half of the renters spent more than $100 on Harley accessories like T-shirts and gloves.

The program increases dealer inventories, but that’s a boon to dealers who are constantly selling out, Lee said.

Harley-Davidson announced in April it would cut back shipments to dealers because of flat U.S. retail sales, although demand still outstrips supply. Management attributed the cutback to a desire not to have too many 2005 bikes around when the 2006 models came out in June.

Schaeffer’s Harley-Davidson, the Orwigsburg, Pa., dealership where the Schwears rented, has increased its rental fleet to 16 bikes from six bikes just three years ago. More than a dozen renters committed to buying over the last model year, said employee Cherie Schaeffer-Bogotuik.

The rental program boosts the number of bikes it can eventually sell by increasing the number of used bikes in its allocation. Last year, the dealer sold 721 bikes, of which 421 were new and 300 were trade-ins, used, or used by renters.

Increasing inventory is “a great thing,” Shaeffer-Bogotuik said. “It helps us fulfill some peoples’ dreams of getting on a bike.”

Schaeffer’s is not the first dealership to find a long test drive turns shoppers into buyers.

General Motors Corp. ran a 24-hour test drive program from April 2003 to July 2004 to draw in reluctant auto shoppers nationwide. Some 34 percent ended up buying, greater than the 20 percent deal- closing rate on regular test drivers, said GM spokeswoman Susan Garontakos.

“What we were confident in is once they got in that car, their perception would change and we’d have a buyer,” Garontakos said. The program continues at the discretion of individual dealerships, she said.

Harley’s program gives licensed riders a chance to ride for about $135 to $150 a day, with the use of helmets and rain suits thrown in.

For Jim Kloth, a 55-year-old Wauwatosa, Wis., insurance company executive who owns a Road King, the ability to rent meant he could ride with his wife, sister, and brother-in-law in Baton Rouge, La., with little more than some clothes, a suitcase and his riding boots.

“If I travel for a weekend or especially from a climate in the North to the South, I’ll rent every time I go,” Kloth said. “It was that much fun.”

Commercial Auto-Endorsement CA 21 55 04 00 California Uninsured Motorists Coverage Property Damage has been revised to provide an exception under Exclusions 2 (property contained in the covered auto) for the replacement of a child passenger restraint system (with one meeting federal standards) that was in use by the child in an accident.

Commercial Auto-Endorsement CA 22 10 07 00 Florida Personal Injury Protection has been revised for all policies effective on or after July 1, 2000. This change is in response to Florida Statute Section 627.739, Personal Injury Protection (PIP); Optional Limitations; Deductibles (former House Bill 295). The change eliminates the schedule item “Coverage reduced by military benefits for ‘named’ insured…” and removes paragraph D. Limits of Insurance 5. This option to coordinate personal injury benefits with military benefits will no longer be available.

The act survived constitutional tests and a number of changes have already taken effect. This particular change addresses the economic-only uninsured motorists coverage. Introduced for all policies effective on or after March 1, 2000, are the PP 14 05 02 00 Economic Loss Uninsured Motorists Coverage-Louisiana and PP 14 06 04 99 Split Economic Loss Uninsured Motorists Limits– Louisiana. The intent of the new endorsements is to provide coverage only for economic losses such as medical, work loss and funeral expenses. The endorsements specifically exclude non-economic losses such as pain, suffering, inconvenience and mental anguish. The split limit form changes coverage from a single limit-each accident to each person and each accident.

Item J Duties in the Event of Loss or Damage, lists specific items to be included in a signed proof of loss and requires that proof of loss be sent to the insurer within 60 days of request.

In Item K Mortgageholders, mortgagees will now be notified when policy changes are made that result in substantial reductions in coverage on the mortgaged property (substantial is not defined).

Item M subsection B Ordinance or law, paragraph b. has been changed to pay for compliance for the whole building in both a total and constructive total loss. The added word is total.

Under Conditions, Notice, the time period for filing a written report of an accident was reduced from 90 to 30 days.

In CA 22 48 only the words “and on or after December 1, 1977″ have been eliminated from the last sentence in Section 1, Mandatory Personal Injury Protection.

Under Conditions, Proof of Claim: Medical, Work Loss, and Other Necessary Expenses, the time period required to submit a proof of claim for health services complaint was reduced from 180 days to 45 days. In the same section (b), an insured may be reasonably required to submit to an examination under oath.

Principal Global Investors, LLC, a leading global asset manager and a member of the Principal Financial Group([R]) (NYSE:PFG) today announced a definitive agreement to acquire Morley Financial Services, Inc. (”Morley Financial”), a distinguished stable value asset manager with over $14.0 billion in institutional assets under management, from Columbus, Ohio-based Nationwide Mutual Insurance Company.

“The acquisition of Morley Financial represents a strong strategic fit for Principal Global Investors as we continue to strengthen our portfolio of offerings suitable for retirement investing and other long-term investment strategies,” said Jim McCaughan, CEO of Principal Global Investors. “Stable value, at more than 10 percent of the 401(k) market assets, is an important capability - one we believe baby boomers will increasingly demand as they move toward retirement and seek investment options to preserve their capital and generate income. In addition, this acquisition will enhance our ability to offer outcome-based solutions, such as absolute return strategies, which will help us further penetrate the institutional market.” Outcome-based investing, which focuses on achieving a specific return over a cash rate, has begun to displace traditional benchmark-oriented investing.

Commenting on the successful acquisition history of Principal Global Investors, McCaughan added: “We are pleased with the progress of our multi-boutique approach to managing acquisitions. Since acquiring Spectrum Asset Management in 2001, Post Advisory Group in 2003 and Columbus Circle Investors in 2004, assets under management at these firms collectively have tripled. By allowing our affiliated firms autonomy over their investment processes, while providing the marketing, distribution and technology resources they need to grow, we have formulated an approach that has greatly contributed to 150% growth in assets under management for Principal Global Investors in the last five years.”

Morley Financial will continue to be led by Jill Cuniff, who has been Morley’s Managing Director and Chief Investment Officer for the past six years. It will also retain its investment philosophy and process, as well as the company name, organizational structure and headquarters in Portland, Ore.

“The Morley transaction enables us to focus on becoming a more comprehensive leader of financial solutions as we transition to a sub-advised platform,” said John H. Grady, president and chief executive officer of Nationwide Funds Group(SM). “We have enjoyed our successful relationship with Morley Financial Services and look forward to future successes as the firm becomes a sub-adviser to Nationwide Funds.”

Financial Impact

Principal Global Investors is acquiring Morley for approximately $75 million. The transaction is expected to be neutral to 2007 GAAP earnings per diluted share (EPS) and marginally accretive to EPS in 2008.

Forward looking and cautionary statements

This press release contains forward-looking statements, including, without limitation, statements as to sales targets, sales and earnings trends, and management’s beliefs, expectations, goals and opinions. The company does not undertake to update these statements, which are based on a number of assumptions concerning future conditions that may ultimately prove to be inaccurate. Future events and their effects on the company may not be those anticipated, and actual results may differ materially from the results anticipated in these forward-looking statements. The risks, uncertainties and factors that could cause or contribute to such material differences are discussed in the company’s annual report on Form 10-K for the year ended December 31, 2006, filed by the company with the Securities and Exchange Commission. These risks and uncertainties include, without limitation: competitive factors; volatility of financial markets; decrease in ratings; interest rate changes; inability to attract and retain sales representatives; international business risks; foreign currency exchange rate fluctuations; a pandemic, terrorist attack or other catastrophic event; default of the company’s re-insurers; and investment portfolio risks.

About Principal Global Investors

Principal Global Investors is a diversified asset management organization and a member of the Principal Financial Group([R]), with expertise in equities, fixed income and real estate investments, as well as specialized overlay and advisory services. Principal Global Investors manages $213.6 billion in assets primarily for retirement plans and other institutional clients.1

Morley Financial is a leader in the stable value industry. Founded in 1982, today Morley Financial oversees more than $14.0 billion in assets for a diverse group of clients, including leading banks, corporations, Taft-Hartley Funds and investment counselors across the United States.