Your daughter is right around the age where kids really start "exploring" themselves. That being said, this type of behavior is pretty normal. Now, that's not to say that it should continue. But I think we should assume that this was pretty innocent, which makes it a good time to talk about it. You said you've had the privacy talk... what did you talk about (i.e. why your private parts are called just that). I don't think you have anything to worry about regarding this incident, but do talk to her she's getting old enough to heat the truth about her body and it's probably best she hear it from mom over some kid at school.