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Principal Financial Group has filed a plan to demutualize with the Iowa Insurance Commissioner.

Principal, based in Des Moines, Iowa, plans to give all eligible policyholders at least 100 shares of stock as it converts itself into a publicly traded company. To be eligible for compensation under state law, a policyholder must own an eligible Principal Life policy or contract from March 31, 2000–or one year prior to the board of directors adoption of the plan–continuously until the effective date of the demutualization.

Most eligible policyholders will have the option of receiving cash or shares.

During the demutualization process, the company, one of the countrys largest 401(k) plan providers, will create a separate account to help small and midsize employers protect the tax-qualified status of their retirement plans and reduce the administrative burden associated with receiving demutualization compensation.

“They will have a number of investment options including this separate account,” says Jeff Rader, a spokesman for Principal. “The separate account will be invested primarily in Principals common shares.”

The separate account will be available in every state but California. “The California insurance departments interpretation of state law does not allow such a separate account,” explains Rader.

Principal expects to mail the proposed plan and related materials to policyholders eligible to vote within the next 30 days. The first public hearing is scheduled for July 5, says Rader.

The company plans its IPO for no later than the first half of 2002.

“As a public company, Principal will continue to pursue the path it has taken so far as a leading provider of 401(k) plans,” says Rader. “The demutualization will enhance our flexibility to raise additional capital and pursue our strategy.”

Rader says the company has no immediate plans for mergers and acquisitions after demutualization.

Principal is the latest insurer to jump on the demutualization bandwagon. Prudential Insurance Company of America, Newark, N.J., and Phoenix Home Life Mutual Insurance Company, Hartford, Conn., also filed plans recently.


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 4, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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