SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: JUNE 7, 2004
(Date of earliest event reported)
PRINCIPAL FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-16725 42-1520346
(State or other jurisdiction Commission file number (I.R.S. Employer
of incorporation) Identification Number)
711 HIGH STREET, DES MOINES, IOWA 50392
(Address of principal executive offices)
(515) 247-5111
(Registrant's telephone number, including area code)
------------------
ITEM 7. EXHIBITS
99 Select Historical Financial Information, Reclassified to Account for
Mortgage Banking as Discontinued Operations
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On May 12, 2004, Principal Financial Group, Inc. ("The Principal") announced a
definitive agreement for the sale of its entire mortgage banking business to
Citigroup. Under the terms of the agreement, Citigroup will acquire the stock of
Principal Residential Mortgage, Inc. The transaction has been approved by the
Principal Financial Group board of directors and is expected to close in third
quarter, 2004, subject to regulatory approval. Estimated proceeds from the
transaction of approximately $1.26 billion include $290 million of value in
excess of the U.S. GAAP net book value of assets and liabilities transferred of
approximately $970 million. Proceeds from the transaction are based on a
formula, a portion of which is sensitive to interest rates. The Principal will
attempt to hedge this portion of the formula. U.S. GAAP book value of assets and
liabilities transferred equals the sum of the U.S. GAAP equity allocated to the
mortgage banking business of approximately $527 million plus approximately $443
million of income tax liability retained. All figures are as of April 30, 2004.
The following pages include certain selected historical financial information of
The Principal , which reclassifies the results related to the mortgage banking
business to discontinued operations. We are providing this information as an aid
to investors who seek to understand the effect of the sale on our historical
results.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINCIPAL FINANCIAL GROUP, INC.
By: /s/ THOMAS GRAF
-----------------------------------
Name: Thomas Graf
Title: Senior Vice President - Investor
Relations
Date: June 15, 2004
2
EXHIBIT 99
On May 12, 2004, Principal Financial Group, Inc. ("The Principal") announced a
definitive agreement for the sale of its entire mortgage banking business to
Citigroup. Under the terms of the agreement, Citigroup will acquire the stock of
Principal Residential Mortgage, Inc. The transaction has been approved by the
Principal Financial Group board of directors and is expected to close in third
quarter, 2004, subject to regulatory approval. Estimated proceeds from the
transaction of approximately $1.26 billion include $290 million of value in
excess of the U.S. GAAP net book value of assets and liabilities transferred of
approximately $970 million. Proceeds from the transaction are based on a
formula, a portion of which is sensitive to interest rates. The Principal will
attempt to hedge this portion of the formula. U.S. GAAP book value of assets and
liabilities transferred equals the sum of the U.S. GAAP equity allocated to the
mortgage banking business of approximately $527 million plus approximately $443
million of income tax liability retained. All figures are as of April 30, 2004.
When the definitive agreement was signed, we met the criteria for discontinued
operations under SFAS 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets". The following pages include certain selected historical
financial information of The Principal, which reclassifies the results related
to the mortgage banking business to discontinued operations. The restated
financial information represents our preliminary assessment of the impact of the
sale on our historical results, prepared in accordance with U.S. GAAP. We
continue to study the classification of certain income and expense items for
potential inclusion and/or exclusion as discontinued operations. The ultimate
resolution of these decisions may change the classification of certain amounts
presented herein.
We are providing this information as an aid to investors who seek to understand
the effect of the sale on our historical results. While we believe that the
following selected preliminary financial information represents our best current
estimate of the effect of the sale, we caution investors that it may not be
indicative of the results that actually would have occurred if the sale had been
in effect on the dates indicated or indicative of results which may be achieved
in the future.
The selected preliminary financial information is unaudited and should be read
in conjunction with our annual audited financial statements as of December 31
2003, included in our Form 10-K for the year ended December 31, 2003, and our
interim unaudited consolidated financial statements, included in our Form 10-Q
for the three months ended March 31, 2004, filed with the United States
Securities and Exchange Commission.
3
Table of Contents
Summary Financial Highlights 5-6
Consolidated Segment
Income Statement Time Series
Principal Financial Group Consolidated 7
U.S. Asset Management and Accumulation Segment 7
International Asset Management and Accumulation Segment 8
Life and Health Insurance Segment 8
Mortgage Banking Segment 9
Corporate and Other Segment 9
Quarterly Consolidated Balance Sheet 10
Non-GAAP Financial Measure Reconciliations 11-12
Use of non-GAAP financial measures A non-GAAP financial measure is defined as a
numerical measure of our performance, financial position, or cash flows that
includes adjustments from a comparable financial measure presented in accordance
with U.S. GAAP.
We use a number of non-GAAP financial measures that management believes are
useful to investors because they illustrate the performance of our normal,
ongoing operations, which is important in understanding and evaluating our
financial condition and results of operations. While such measures are also
consistent with measures utilized by investors to evaluate performance, they are
not a substitute for U.S. GAAP financial measures. Therefore, we have provided
reconciliations of the non-GAAP financial measures to the most directly
comparable U.S. GAAP financial measure, see Non-GAAP Financial Measures
Reconciliations located on pages 11 and 12. We adjust U.S. GAAP financial
measures for items not directly related to ongoing operations. However, it is
possible that these adjusting items have occurred in the past and could recur in
the future. Management also uses non-GAAP financial measures for goal setting,
to determine employee and senior management awards and compensation, and to
evaluate performance on a basis comparable to that used by securities analysts.
We also use a variety of other operational measures that do not have U.S. GAAP
counterparts, and therefore do not fit the definition of non-GAAP financial
measures. Assets under management is an example of an operational measure that
is not considered a non-GAAP financial measure.
4
PRINCIPAL FINANCIAL GROUP, INC.
Summary Financial and Market Highlights
(per share*, except as indicated)
Three Months Ended, Twelve Months Ended,
-------------------------------------------------------------------------------------------------
31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
----------- ------------ ----------- ---------- ------------ ----------- ----------- -----------
Basic Earnings Per Share
Operating Earnings $ 0.58 $ 0.57 $ 0.52 $ 0.51 $ 0.46 $ 2.05 $ 1.65 $ 1.59
Net Unrealized/Realized Capital
Gains/(Losses) (0.07) 0.05 0.01 (0.05) (0.17) (0.16) (0.69) (0.89)
Other After-Tax Adjustments 0.09 0.01 0.04 0.16 0.18 0.40 (0.55) 0.29
----------- ------------ ----------- ----------- ------------ ----------- ----------- -----------
Net Income $ 0.60 $ 0.63 $ 0.57 $ 0.62 $ 0.47 $ 2.29 $ 0.41 $ 0.99
Weighted Average Shares =========== ============ =========== =========== ============ =========== =========== ===========
Outstanding (in millions) 320.8 322.2 323.5 326.9 331.4 326.0 350.2 362.4
Diluted Earnings Per Share
Operating Earnings $ 0.58 $ 0.57 $ 0.52 $ 0.51 $ 0.46 $ 2.04 $ 1.65 $ 1.59
Net Unrealized/Realized Capital
Gains/Losses) (0.07) 0.05 0.01 (0.05) (0.16) (0.16) (0.69) (0.89)
Other After-Tax Adjustments 0.09 0.01 0.04 0.16 0.17 0.40 (0.55) 0.29
----------- ------------ ----------- ----------- ------------ ----------- ----------- -----------
Net Income $ 0.60 $ 0.63 $ 0.57 $ 0.62 $ 0.47 $ 2.28 $ 0.41 $ 0.99
=========== ============ =========== =========== ============ =========== =========== ===========
Weighted Average Shares
Outstanding (in millions) 322.0 323.3 324.1 327.4 331.7 326.8 350.7 362.4
Book Value
Including OCI $ 24.90 $ 23.07 $ 23.04 $ 23.19 $ 20.84 $ 23.07 $ 19.91 $ 18.94
Excluding OCI $ 20.10 $ 19.42 $ 19.31 $ 18.82 $ 18.28 $ 19.42 $ 18.01 $ 18.53
End of Period Common Shares
Outstanding (in millions) 320.8 320.7 322.8 325.1 328.0 320.7 334.4 360.1
Return on Average Equity
(trailing twelve months)
Operating Earnings
Including OCI 9.5% 9.5% 8.9% 8.3% 8.7% 9.5% 8.6% 8.8%
Excluding OCI 11.3% 10.9% 10.1% 9.4% 9.2% 10.9% 9.1% 8.9%
Net Income
Including OCI 10.6% 10.6% 10.8% 5.8% 5.0% 10.6% 2.1% 5.5%
Excluding OCI 12.6% 12.2% 12.3% 6.6% 5.3% 12.2% 2.2% 5.5%
Share Repurchase Data
Shares repurchased (in millions) - 2.31 2.38 3.76 6.53 14.98 26.99 15.30
Cost of shares repurchased (in
millions) $ - $ 75.00 $ 78.04 $ 115.94 $ 184.06 $ 453.04 $ 750.42 $ 367.72
Average price per share
repurchased $ - $ 32.53 $ 32.83 $ 30.83 $ 28.17 $ 30.25 $ 27.80 $ 24.03
Trading Statistics
High $ 37.36 $ 34.36 $ 34.10 $ 34.67 $ 31.20 $ 34.67 $ 31.50 $ 24.75
Low $ 32.13 $ 30.70 $ 30.13 $ 27.03 $ 25.21 $ 25.21 $ 22.00 $ 20.40
Close $ 35.63 $ 33.07 $ 30.99 $ 32.25 $ 27.14 $ 33.07 $ 30.13 $ 24.00
Volume 56.30 54.24 55.40 61.98 75.87 247.49 453.62 116.06
Valuation Data (Closing Prices)
Market Capitalization (millions) $11,430.10 $10,605.55 $10,003.57 $10,484.48 $ 8,901.92 $10,605.55 $10,075.47 $ 8,642.40
Price to Earnings Multiple 16.34 16.05 16.23 18.22 15.96 16.05 18.26 15.09
Price to Book Value Multiple 1.77 1.70 1.60 1.71 1.48 1.70 1.67 1.30
* - Pro forma prior to fourth quarter 2001.
5
PRINCIPAL FINANCIAL GROUP, INC.
Summary Financial Highlights
(in millions)
Three Months Ended, Twelve Months Ended,
-----------------------------------------------------------------------------------------------------
31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
------------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Operating Revenues
U.S. Asset Management and
Accumulation 893.3 1,015.7 864.8 862.0 879.9 3,622.4 3,750.0 3,781.0
International Asset Management
and Accumulation 115.5 122.4 99.9 113.0 76.8 412.1 357.9 508.4
Life and Health Insurance 1,035.3 1,004.5 995.7 1,001.8 1,012.3 4,014.3 3,946.8 3,946.4
Mortgage Banking - - - - - - - -
Corporate and Other 1.6 6.9 18.9 (2.0) 3.0 26.8 1.7 101.9
------------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Total 2,045.7 2,149.5 1,979.3 1,974.8 1,972.0 8,075.6 8,056.4 8,337.7
============= =========== =========== =========== =========== =========== ============ ============
After-tax Operating
Earnings / (Losses)
U.S. Asset Management and
Accumulation 119.5 114.1 107.9 105.7 94.9 422.6 360.7 349.1
International Asset Management
and Accumulation 8.7 8.2 8.0 12.1 6.6 34.9 19.5 2.3
Life and Health Insurance 74.8 66.4 52.8 62.9 59.1 241.2 233.1 201.2
Mortgage Banking (4.9) (4.7) (5.0) (4.5) (3.9) (18.1) (16.7) (14.1)
Corporate and Other (11.5) (0.9) 3.8 (10.4) (5.0) (12.5) (17.0) 38.1
------------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Total 186.6 183.1 167.5 165.8 151.7 668.1 579.6 576.6
============= =========== =========== =========== =========== =========== ============ ============
Net Income (Loss)
U.S. Asset Management and
Accumulation 83.3 115.3 89.1 79.2 66.4 350.0 120.4 178.3
International Asset Management
and Accumulation 9.0 24.3 24.0 9.4 1.5 59.2 (441.1) (38.1)
Life and Health Insurance 72.0 61.3 51.7 61.8 49.8 224.6 178.5 167.5
Mortgage Banking 28.6 (42.8) (11.4) 45.1 52.3 43.2 142.9 126.7
Corporate and Other 0.7 45.8 31.1 6.7 (14.3) 69.3 141.6 (75.6)
------------- ----------- ----------- ----------- ----------- ----------- ------------ ------------
Total 193.6 203.9 184.5 202.2 155.7 746.3 142.3 358.8
============= =========== =========== =========== =========== =========== ============ ============
Operating Return on
Average Equity Excluding OCI
(trailing twelve months)
U.S. Asset Management and
Accumulation 19.3% 19.2% 17.7% 16.7% 16.4% 19.2% 17.6% 16.9%
International Asset Management
and Accumulation 4.8% 4.7% 3.1% 2.7% 2.1% 4.7% 1.5% 0.1%
Life and Health Insurance 14.0% 13.4% 13.4% 13.7% 13.8% 13.4% 13.7% 11.6%
Mortgage Banking -3.5% -3.8% -3.6% -3.6% -3.6% -3.8% -3.8% -3.7%
Corporate and Other N/M N/M N/M N/M N/M N/M N/M N/M
Total 11.3% 10.9% 10.1% 9.4% 9.2% 10.9% 9.1% 8.9%
Assets Under Management 149,800.0 144,900.0 134,800.0 128,000.0 116,300.0 144,900.0 111,100.0 120,200.0
6
PRINCIPAL FINANCIAL GROUP, INC.
Consolidated Segment Income Statement Time Series
(in millions)
PRINCIPAL FINANCIAL GROUP, INC.
Three Months Ended, Twelve Months Ended,
--------------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Premiums and other considerations 921.8 983.2 868.8 876.6 905.5 3,634.1 3,881.8 4,122.3
Fees and other revenues 337.1 355.5 288.5 289.0 272.8 1,205.8 1,000.0 888.0
Net investment income 786.8 810.8 822.0 809.2 793.7 3,235.7 3,174.6 3,327.4
Total operating revenues 2,045.7 2,149.5 1,979.3 1,974.8 1,972.0 8,075.6 8,056.4 8,337.7
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Benefits, claims, and settlement
expenses 1,187.5 1,302.5 1,175.6 1,186.3 1,195.8 4,860.2 5,202.7 5,482.1
Dividends to policyholders 73.3 75.2 78.7 73.9 80.1 307.9 316.6 313.7
Commissions 121.8 114.2 100.4 100.1 99.5 414.2 379.5 369.9
Capitalization of DPAC (97.3) (96.7) (86.6) (80.7) (85.8) (349.8) (323.4) (261.7)
Amortization of DPAC 38.3 2.6 40.2 50.0 55.1 147.9 179.9 178.5
Depreciation and amortization 18.9 28.8 18.1 18.0 16.7 81.6 73.4 81.9
Interest expense on corporate debt 20.3 20.7 20.2 20.5 20.8 82.2 77.6 76.2
Other expenses 428.5 462.9 401.2 384.5 384.7 1,633.3 1,393.5 1,328.9
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Total expenses 1,791.3 1,910.2 1,747.8 1,752.6 1,766.9 7,177.5 7,299.8 7,569.5
=========== ========== ========== ========= ========== =========== =========== =============
Operating earnings (losses) before tax 254.4 239.3 231.5 222.2 205.1 898.1 756.6 768.2
Income tax 67.8 56.2 64.0 56.4 53.4 230.0 177.0 191.6
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Operating earnings (losses) after tax 186.6 183.1 167.5 165.8 151.7 668.1 579.6 576.6
Net-unrealized/realized cap gains/(losses) (23.3) 16.0 1.8 (15.3) (54.1) (51.6) (243.9) (321.0)
Other after-tax adjustments 30.3 4.8 15.2 51.7 58.1 129.8 (193.4) 103.2
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Net Income (Loss) 193.6 203.9 184.5 202.2 155.7 746.3 142.3 358.8
=========== ========== ========== ========= ========== =========== =========== =============
U.S. ASSET MANAGEMENT AND ACCUMULATION SEGMENT
Three Months Ended, Twelve Months Ended,
--------------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Premiums and other considerations 88.9 160.3 71.5 74.4 113.8 420.0 746.5 766.3
Fees and other revenues 229.8 260.3 195.1 193.5 184.8 833.7 681.2 633.1
Net investment income 574.6 595.1 598.2 594.1 581.3 2,368.7 2,322.3 2,381.6
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Total operating revenues 893.3 1,015.7 864.8 862.0 879.9 3,622.4 3,750.0 3,781.0
Benefits, claims, and settlement expenses 497.3 595.4 504.0 509.3 531.0 2,139.7 2,530.3 2,583.1
Dividends to policyholders 1.3 0.7 2.3 (0.7) 4.6 6.9 9.6 6.7
Commissions 54.4 54.1 44.7 45.0 42.8 186.6 158.4 138.9
Capitalization of DPAC (55.5) (60.5) (57.7) (53.9) (53.8) (225.9) (189.7) (132.5)
Amortization of DPAC 23.1 17.5 15.2 21.4 29.7 83.8 75.7 73.4
Depreciation and amortization 7.3 7.0 7.3 7.0 6.7 28.0 27.3 33.6
Interest expense on corporate debt - 0.1 0.1 - - 0.2 - 0.2
Other expenses 209.1 252.3 203.5 197.4 197.5 850.7 688.1 649.5
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Total expenses 737.0 866.6 719.4 725.5 758.5 3,070.0 3,299.7 3,352.9
=========== ========== ========== ========= ========== =========== =========== =============
Operating earnings (losses) before tax 156.3 149.1 145.4 136.5 121.4 552.4 450.3 428.1
Income tax 36.8 35.0 37.5 30.8 26.5 129.8 89.6 79.0
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Operating earnings (losses) after tax 119.5 114.1 107.9 105.7 94.9 422.6 360.7 349.1
Net-unrealized/realized cap gains/(losses) (37.2) (2.3) (19.7) (29.0) (31.1) (82.1) (250.5) (164.7)
Other after-tax adjustments 1.0 3.5 0.9 2.5 2.6 9.5 10.2 (6.1)
----------- ---------- ---------- --------- ---------- ----------- ----------- -------------
Net Income (Loss) 83.3 115.3 89.1 79.2 66.4 350.0 120.4 178.3
=========== ========== ========== ========= ========== =========== =========== =============
7
PRINCIPAL FINANCIAL GROUP, INC.
Consolidated Segment Income Statement Time Serides
(in millions)
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION SEGMENT
Three Months Ended, Twelve Months Ended,
--------------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Premiums and other considerations 60.2 62.9 50.0 51.5 30.7 195.1 161.9 344.9
Fees and other revenues 21.5 20.5 19.6 22.4 14.8 77.3 56.4 46.1
Net investment income 33.8 39.0 30.3 39.1 31.3 139.7 139.6 117.4
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Total operating revenues 115.5 122.4 99.9 113.0 76.8 412.1 357.9 508.4
Benefits, claims, and settlement expenses 75.7 80.9 65.6 73.4 48.1 268.0 243.8 407.5
Dividends to policyholders - - - - - - - -
Commissions 5.8 6.3 4.8 5.3 3.7 20.1 15.2 26.2
Capitalization of DPAC (3.0) (3.8) (2.9) (3.4) (2.3) (12.4) (8.6) (16.7)
Amortization of DPAC 0.7 (5.6) (0.8) 4.2 1.0 (1.2) 3.4 3.1
Depreciation and amortization 3.0 13.3 2.0 1.9 1.4 18.6 8.3 8.6
Interest expense on corporate debt 0.2 0.5 0.1 0.1 0.3 1.0 0.7 0.6
Other expenses 19.8 22.7 22.0 16.8 16.5 78.0 68.5 79.4
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Total expenses 102.2 114.3 90.8 98.3 68.7 372.1 331.3 508.7
=========== =========== ========== ========== =========== ========== ========== ============
Operating earnings (losses) before tax 13.3 8.1 9.1 14.7 8.1 40.0 26.6 (0.3)
Income tax 4.6 (0.1) 1.1 2.6 1.5 5.1 7.1 (2.6)
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Operating earnings (losses) after tax 8.7 8.2 8.0 12.1 6.6 34.9 19.5 2.3
Net-unrealized/realized cap gains/(losses) 3.6 5.6 3.6 (2.3) (4.4) 2.5 12.4 (29.2)
Other after-tax adjustments (3.3) 10.5 12.4 (0.4) (0.7) 21.8 (473.0) (11.2)
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Net Income (Loss) 9.0 24.3 24.0 9.4 1.5 59.2 (441.1) (38.1)
=========== =========== ========== ========== =========== ========== ========== ============
LIFE AND HEALTH INSURANCE SEGMENT
Three Months Ended, Twelve Months Ended,
--------------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Premiums and other considerations 772.7 760.0 747.3 750.7 761.0 3,019.0 2,973.4 3,011.1
Fees and other revenues 97.6 85.9 85.0 83.6 84.4 338.9 313.2 256.7
Net investment income 165.0 158.6 163.4 167.5 166.9 656.4 660.2 678.6
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Total operating revenues 1,035.3 1,004.5 995.7 1,001.8 1,012.3 4,014.3 3,946.8 3,946.4
Benefits, claims, and settlement expenses 616.1 628.1 607.1 604.7 617.8 2,457.7 2,433.4 2,491.0
Dividends to policyholders 72.0 74.5 76.4 74.6 75.5 301.0 307.0 307.0
Commissions 66.4 59.1 56.0 55.6 59.4 230.1 234.0 226.5
Capitalization of DPAC (38.8) (32.4) (26.0) (23.4) (29.7) (111.5) (125.1) (112.5)
Amortization of DPAC 14.5 (9.3) 25.8 24.4 24.4 65.3 100.8 102.0
Depreciation and amortization 6.8 6.5 6.8 6.9 6.6 26.8 30.9 31.5
Interest expense on corporate debt - - - - - - - -
Other expenses 184.7 177.6 170.3 163.8 169.4 681.1 610.6 595.2
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Total expenses 921.7 904.1 916.4 906.6 923.4 3,650.5 3,591.6 3,640.7
=========== =========== ========== ========== =========== ========== ========== ============
Operating earnings (losses) before tax 113.6 100.4 79.3 95.2 88.9 363.8 355.2 305.7
Income tax 38.8 34.0 26.5 32.3 29.8 122.6 122.1 104.5
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Operating earnings (losses) after tax 74.8 66.4 52.8 62.9 59.1 241.2 233.1 201.2
Net-unrealized/realized cap gains/(losses) (1.9) (5.1) (1.1) (1.1) (9.3) (16.6) (50.0) (33.8)
Other after-tax adjustments (0.9) - - - - - (4.6) 0.1
----------- ----------- ---------- ---------- ----------- ---------- ---------- ------------
Net Income (Loss) 72.0 61.3 51.7 61.8 49.8 224.6 178.5 167.5
=========== =========== ========== ========== =========== ========== ========== ============
8
PRINCIPAL FINANCIAL GROUP, INC.
Consolidated Segment Income Statement Time Series
(in millions)
MORTGAGE BANKING SEGMENT
Three Months Ended, Twelve Months Ended,
------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
---------- ---------- --------- ---------- --------- --------- --------- ----------
Premiums and other considerations - - - - - - - -
Fees and other revenues - - - - - - - -
Net investment income - - - - - - - -
---------- ---------- --------- ---------- --------- --------- --------- ----------
Total operating revenues - - - - - - - -
Benefits, claims, and settlement expenses - - - - - - - -
Dividends to policyholders - - - - - - - -
Commissions - - - - - - - -
Capitalization of DPAC - - - - - - - -
Amortization of DPAC - - - - - - - -
Depreciation and amortization - - - - - - - -
Interest expense on corporate debt - - - - - - - -
Other expenses 7.9 7.7 7.9 7.4 6.3 29.3 27.0 22.8
---------- ---------- --------- ---------- --------- --------- --------- ----------
Total expenses 7.9 7.7 7.9 7.4 6.3 29.3 27.0 22.8
========== ========== ========= ========== ========= ========= ========= ==========
Operating earnings (losses) before tax (7.9) (7.7) (7.9) (7.4) (6.3) (29.3) (27.0) (22.8)
Income tax (3.0) (3.0) (2.9) (2.9) (2.4) (11.2) (10.3) (8.7)
---------- ---------- --------- ---------- --------- --------- --------- ----------
Operating earnings (losses) after tax (4.9) (4.7) (5.0) (4.5) (3.9) (18.1) (16.7) (14.1)
Net-unrealized/realized cap gains/(losses) - - - - - - - -
Other after-tax adjustments 33.5 (38.1) (6.4) 49.6 56.2 61.3 159.6 140.8
---------- ---------- --------- ---------- --------- --------- --------- ----------
Net Income (Loss) 28.6 (42.8) (11.4) 45.1 52.3 43.2 142.9 126.7
========== ========== ========= ========== ========= ========= ========= ==========
CORPORATE AND OTHER SEGMENT
Three Months Ended, Twelve Months Ended,
------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
Premiums and other considerations - - - - - - - -
Fees and other revenues (11.8) (11.2) (11.2) (10.5) (11.2) (44.1) (50.8) (47.9)
Net investment income 13.4 18.1 30.1 8.5 14.2 70.9 52.5 149.8
---------- ---------- --------- ---------- --------- --------- --------- ----------
Total operating revenues 1.6 6.9 18.9 (2.0) 3.0 26.8 1.7 101.9
========== ========== ========= ========== ========= ========= ========= ==========
Benefits, claims, and settlement expenses (1.6) (1.9) (1.1) (1.1) (1.1) (5.2) (4.8) 0.5
Dividends to policyholders - - - - - - - -
Commissions (4.8) (5.3) (5.1) (5.8) (6.4) (22.6) (28.1) (21.7)
Capitalization of DPAC - - - - - - - -
Amortization of DPAC - - - - - - - -
Depreciation and amortization 1.8 2.0 2.0 2.2 2.0 8.2 6.9 8.2
Interest expense on corporate debt 20.1 20.1 20.0 20.4 20.5 81.0 76.9 75.4
Other expenses 7.0 2.6 (2.5) (0.9) (5.0) (5.8) (0.7) (18.0)
---------- ---------- --------- ---------- --------- --------- --------- ----------
Total expenses 22.5 17.5 13.3 14.8 10.0 55.6 50.2 44.4
========== ========== ========= ========== ========= ========= ========= ==========
Operating earnings (losses) before tax (20.9) (10.6) 5.6 (16.8) (7.0) (28.8) (48.5) 57.5
Income tax (9.4) (9.7) 1.8 (6.4) (2.0) (16.3) (31.5) 19.4
---------- ---------- --------- ---------- --------- --------- --------- ----------
Operating earnings (losses) after tax (11.5) (0.9) 3.8 (10.4) (5.0) (12.5) (17.0) 38.1
Net-unrealized/realized cap gains/(losses) 12.2 17.8 19.0 17.1 (9.3) 44.6 44.2 (93.3)
Other after-tax adjustments - 28.9 8.3 - - 37.2 114.4 (20.4)
---------- ---------- --------- ---------- --------- --------- --------- ----------
Net Income (Loss) 0.7 45.8 31.1 6.7 (14.3) 69.3 141.6 (75.6)
========== ========== ========= ========== ========= ========= ========= ==========
9
PRINCIPAL FINANCIAL GROUP, INC.
Consolidated Balance Sheet
(in millions)
Period Ended,
--------------------------------------------------------------------------------------------------
Line Item 31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-02 30-Sep-02 30-Jun-02 31-Mar-02 31-Dec-01
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Assets
Fixed maturities, afs 38,641.7 37,449.7 36,898.0 37,400.2 35,690.4 34,185.7 33,057.2 31,584.6 30,841.9 30,012.3
Fixed maturities, trading 103.4 102.9 103.5 104.3 101.1 101.7 92.7 59.6 30.8 17.8
Equity securities, afs 732.6 699.2 386.1 399.3 381.1 378.7 379.5 817.3 903.3 837.2
Mortgage loans 11,240.3 11,251.6 11,429.3 11,020.5 10,576.7 10,565.9 10,801.4 10,562.2 10,516.3 10,609.9
Real estate 1,459.8 1,526.1 1,504.2 1,403.5 1,322.4 1,223.7 1,162.2 1,188.1 1,259.7 1,177.9
Policy loans 804.5 804.1 805.8 808.1 810.9 818.5 822.9 824.7 823.2 831.9
Other investments 1,277.4 1,412.1 1,171.6 1,233.1 1,043.6 1,167.0 1,081.4 818.7 665.1 810.2
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total investments 54,259.7 53,245.7 52,298.5 52,369.0 49,926.2 48,441.2 47,397.3 45,855.2 45,040.3 44,297.2
Cash and cash equivalents 715.0 1,194.2 619.5 1,197.6 801.7 737.0 627.4 1,154.4 480.2 561.2
Accrued investment income 608.2 656.8 634.1 644.3 618.9 645.5 584.6 605.7 580.6 589.4
Deferred policy acquisition
costs 1,552.4 1,571.7 1,445.6 1,340.5 1,400.4 1,414.4 1,399.0 1,427.4 1,463.2 1,372.5
Property and equipment 440.9 445.5 448.1 456.7 467.8 479.3 481.4 489.1 489.0 491.9
Goodwill 241.7 175.8 145.9 149.0 113.3 98.1 117.6 109.4 91.2 95.6
Other intangibles 156.4 121.4 123.4 118.5 110.9 88.8 55.8 53.7 59.9 61.5
Premiums due and other
receivables 543.7 719.8 792.2 438.8 543.7 459.7 786.6 1,060.8 459.3 489.0
Separate account assets 46,186.6 43,407.8 39,443.5 37,495.8 33,906.7 33,501.4 30,872.5 33,541.7 34,324.5 34,376.0
Assets of discontinued
operations~ 5,236.1 5,382.9 7,292.4 4,047.0 3,557.2 3,633.1 5,732.0 5,650.3 5,414.9 5,689.4
Other assets 872.1 832.8 471.4 364.5 413.4 372.1 216.5 245.7 355.6 326.8
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Assets 110,812.8 107,754.4 103,714.6 98,621.7 91,860.2 89,870.6 88,270.7 90,193.4 88,758.7 88,350.5
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
Liabilities
Contractholder funds 28,913.7 28,902.5 28,086.1 28,179.4 27,366.8 26,315.0 26,470.5 26,013.4 25,115.6 24,684.4
Future policy benefits and
claims 15,525.8 15,474.7 15,159.9 15,009.1 14,838.6 14,736.4 14,484.3 14,440.6 14,116.6 14,034.6
Other policyholder funds 769.2 710.2 730.6 755.0 671.1 642.9 608.9 589.6 603.7 589.1
Short-term debt 586.3 702.8 550.8 565.4 658.6 564.8 474.3 400.2 693.2 511.6
Long-term debt 1,162.1 1,374.3 1,352.9 1,360.2 1,335.6 1,332.5 1,303.7 1,342.2 1,343.5 1,378.4
Income taxes currently payable 151.2 113.9 102.7 162.1 - - 326.6 205.7 37.2 35.1
Deferred income taxes 1,385.6 1,198.9 1,235.1 1,251.0 998.8 788.0 513.8 485.9 451.7 512.9
Separate account liabilities 46,186.6 43,407.8 39,443.5 37,495.8 33,906.7 33,501.4 30,872.5 33,541.7 34,324.5 34,376.0
Liabilities of discontinued
operations~ 4,340.4 4,542.1 5,989.0 2,912.9 2,354.4 2,419.9 3,447.3 3,099.8 2,785.6 3,030.9
Other liabilities 3,804.9 3,927.6 3,627.7 3,391.8 2,892.8 2,912.5 3,134.8 3,404.2 2,689.1 2,377.2
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Liabilities 102,825.8 100,354.8 96,278.3 91,082.7 85,023.4 83,213.4 81,636.7 83,523.3 82,160.7 81,530.2
Stockholders' Equity
Common stock, at par 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8 3.8
Paid-in capital 7,179.1 7,153.2 7,142.4 7,133.4 7,108.6 7,106.3 7,099.0 7,088.6 7,083.5 7,072.5
Retained earnings (deficit) 824.0 630.4 571.8 387.3 185.1 29.4 (102.2) 56.2 (64.0) (29.1)
Treasury stock (1,559.5) (1,559.1) (1,484.1) 1,406.1)(1,302.2) (1,118.1) (874.5) (641.5) (397.7) (374.4)
Accumulated other comprehensive
income:
Net unrealized gains on afs
securities 1,655.8 1,291.4 1,353.1 1,570.6 1,036.9 822.0 685.0 430.0 233.7 420.3
Net foreign currency
translations adjustment (113.7) (117.6) (150.7) (150.0) (195.4) (186.2) (177.1) (267.0) (261.3) (272.8)
Minimum pension liability (2.5) (2.5) - - - - - - - -
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Stockholders' Equity 7,987.0 7,399.6 7,436.3 7,539.0 6,836.8 6,657.2 6,634.0 6,670.1 6,598.0 6,820.3
--------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
Total Liabilities and
Stockholders' Equity 110,812.8 107,754.4 103,714.6 98,621.7 91,860.2 89,870.6 88,270.7 90,193.4 88,758.7 88,350.5
========= ========= ========= ========= ========= ========= ========= ========= ========= =========
~ Increase in the third quarter of 2003 was due to our implementation of FIN 46.
10
Exhibit 1
PRINCIPAL FINANCIAL GROUP, INC.
Non-GAAP Financial Measures
(in millions, except as indicated)
Three Months Ended, Twelve Months Ended,
------------------------------------------------------------------------------------------
31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Stockholders' Equity x-OCI
USAMA $ 2,381.8 $ 2,343.4 $ 2,240.3 $ 2,308.9 $ 2,263.8 $ 2,343.4 $2,050.4 $ 2,043.3
IAMA 816.7 811.4 782.8 768.5 711.1 811.4 679.2 1,920.0
Life and Health 1,900.7 1,823.5 1,806.1 1,819.0 1,776.3 1,823.5 1,769.3 1,630.6
Mortgage Banking 561.2 472.4 520.9 550.7 522.1 472.4 486.3 392.3
Corporate and Other 787.0 777.6 883.8 671.3 722.0 777.6 1,036.2 686.6
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Total stockholders' equity x-OCI 6,447.4 6,228.3 6,233.9 6,118.4 5,995.3 6,228.3 6,021.4 6,672.8
Net unrealized capital gains (losses) 1,657.2 1,291.4 1,353.1 1,570.6 1,036.9 1,291.4 822.0 420.3
Foreign currency translation (113.7) (117.6) (150.7) (150.0) (195.4) (117.6) (186.2) (272.8)
Minimum pension liability (3.9) (2.5) - - - (2.5) - -
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Total stockholders' equity $ 7,987.0 $ 7,399.6 $ 7,436.3 $ 7,539.0 $ 6,836.8 $ 7,399.6 $6,657.2 $ 6,820.3
========== =========== ========== ========= ============ ========== ========= ===========
Book Value x-OCI:
Book value x-OCI $ 20.10 $ 19.42 $ 19.31 $ 18.82 $ 18.28 $ 19.42 $ 18.01 $ 18.53
Net unrealized capital gains (losses) 5.17 4.03 4.19 4.83 3.16 4.03 2.46 1.17
Foreign currency translation (0.36) (0.37) (0.46) (0.46) (0.60) (0.37) (0.56) (0.76)
Minimum pension liability (0.01) (0.01) - - - (0.01) - -
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Book value including OCI $ 24.90 $ 23.07 $ 23.04 $ 23.19 $ 20.84 $ 23.07 $ 19.91 $ 18.94
========== =========== ========== ========= ============ ========== ========= ===========
Operating Earnings ROE (x-OCI)
USAMA 19.3% 19.2% 17.7% 16.7% 16.4% 19.2% 17.6% 16.9%
IAMA 4.8% 4.7% 3.1% 2.7% 2.1% 4.7% 1.5% 0.1%
Life and Health 14.0% 13.4% 13.4% 13.7% 13.8% 13.4% 13.7% 11.6%
Mortgage Banking -3.5% -3.8% -3.6% -3.6% -3.6% -3.8% -3.8% -3.7%
Corporate and Other -2.5% -1.4% -3.1% -4.1% -3.0% -1.4% -2.0% 10.0%
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Total operating earnings ROE (x-OCI) 11.3% 10.9% 10.1% 9.4% 9.2% 10.9% 9.1% 8.9%
Net realized/unrealized capital gains
(losses) -0.3% -0.8% -2.6% -4.8% -5.7% -0.8% -3.8% -4.8%
Other after-tax adjustments 1.6% 2.1% 4.8% 2.0% 1.8% 2.1% -3.1% 1.4%
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Net income ROE (x-OCI) 12.6% 12.2% 12.3% 6.6% 5.3% 12.2% 2.2% 5.5%
Net unrealized capital gains (losses) -2.2% -2.0% -1.9% -1.0% -0.5% -1.8% -0.2% -0.2%
Foreign currency translation 0.2% 0.4% 0.4% 0.2% 0.2% 0.2% 0.1% 0.2%
Minimum pension liability 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Net income ROE (including OCI) 10.6% 10.6% 10.8% 5.8% 5.0% 10.6% 2.1% 5.5%
========== =========== ========== ========= ============ ========== ========= ===========
Operating Earnings:
USAMA $ 119.5 $ 114.1 $ 107.9 $ 105.7 $ 94.9 $ 422.6 $ 360.7 $ 349.1
IAMA 8.7 8.2 8.0 12.1 6.6 34.9 19.5 2.3
Life and Health 74.8 66.4 52.8 62.9 59.1 241.2 233.1 201.2
Mortgage Banking (4.9) (4.7) (5.0) (4.5) (3.9) (18.1) (16.7) (14.1)
Corporate and Other (11.5) (0.9) 3.8 (10.4) (5.0) (12.5) (17.0) 38.1
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Total operating earnings 186.6 183.1 167.5 165.8 151.7 668.1 579.6 576.6
Net realized/unrealized capital gains
(losses) (23.3) 16.0 1.8 (15.3) (54.1) (51.6) (243.9) (321.0)
Other after-tax adjustments 30.3 4.8 15.2 51.7 58.1 129.8 (193.4) 103.2
---------- ----------- ---------- --------- ------------ ---------- --------- -----------
Net income $ 193.6 $ 203.9 $ 184.5 $ 202.2 $ 155.7 $ 746.3 $ 142.3 $ 358.8
========== =========== ========== ========= ============ ========== ========= ===========
11
EXHIBIT 2
PRINCIPAL FINANCIAL GROUP, INC.
Non-GAAP Financial Measures
(in millions, except as indicated)
Three Months Ended, Twelve Months Ended,
---------------------------------------------------------------------------------------
31-Mar-04 31-Dec-03 30-Sep-03 30-Jun-03 31-Mar-03 31-Dec-03 31-Dec-02 31-Dec-01
---------- ---------- ---------- --------- ------------ ---------- ---------- ---------
Net Realized/Unrealized Capital Gains
(Losses):
Total net realized/unrealized capital
gains (losses) $ (23.3) $ 16.0 $ 1.8 $ (15.3) $ (54.1) $ (51.6) $ (243.9) $ (321.0)
Add:
Amortization of deferred policy
acquistion and sale inducement costs (2.1) (2.1) 0.3 0.4 (3.7) (5.1) (35.4) 18.6)
Capital gains distributed 2.0 1.5 1.1 3.5 (1.6) 4.5 12.7 -
Minority interest capital gains 0.1 0.5 (0.1) (0.4) 0.1 0.1 - -
Tax impacts (23.5) 10.0 (8.0) (5.9) (22.8) (26.7) (134.0) (187.8)
Less:
Unearned front-end fee income (1.1) (0.5) 0.8 (0.1) 4.4 4.6 (14.0) 1.5
Certain market value adjustments to fee
revenues (2.9) (1.2) - (6.7) (9.8) (17.7) (31.8) (14.9)
---------- ----------- --------- --------- ------------ ---------- --------- ---------
GAAP net realized/unrealized capital
gains (losses) $ (42.8) $ 27.6 $ (5.7) $ (10.9) $ (76.7) $ (65.7) $ (354.8) $ (514.0)
========== =========== ========= ========= ============ ========== ========= =========
Other After Tax Adjustments:
IRS audit issue $ - $ 28.9 $ - $ - $ - $ 28.9 $ 138.0 $ -
Demutualization expenses - - - - - - (2.0) (18.6)
Loss contingency reserve - - - - - - (21.6) (5.9)
IPO proceeds - - - - - - - 4.1
FIN 46 implementation - - (3.4) - - (3.4) - -
SFAS 142 implementation - - - - - - (280.9) -
SFAS 133 implementation - - - - - - - (10.7)
SOP 03-1 implementation (5.7) - - - - - - -
Discontinued operations - MB 36.0 (34.6) 6.2 52.1 58.8 82.5 169.8 145.5
Discontinued operations - BT - 10.5 12.4 (0.4) (0.7) 21.8 (196.7) (11.2)
---------- ----------- ---------- --------- ------------ ---------- --------- --------
Total other after tax adjustments $ 30.3 $ 4.8 $ 15.2 $ 51.7 $ 58.1 $ 129.8 $ (193.4) $ 103.2
========== =========== ========= ========= ============ ========== ========= =========
Operating Revenues:
USAMA $ 893.3 $1,015.7 $ 864.8 $ 862.0 $ 879.9 $ 3,622.4 $ 3,750.0 $3,781.0
IAMA 115.5 122.4 99.9 113.0 76.8 412.1 357.9 508.4
Life and Health 1,035.3 1,004.5 995.7 1,001.8 1,012.3 4,014.3 3,946.8 3,946.4
Mortgage Banking - - - - - - - -
Corporate and Other 1.6 6.9 18.9 (2.0) 3.0 26.8 1.7 101.9
---------- ----------- ---------- --------- ------------ ---------- --------- --------
Total operating revenues 2,045.7 2,149.5 1,979.3 1,974.8 1,972.0 8,075.6 8,056.4 8,337.7
Net realized/unrealized capital gains
(losses) and related fee adjustments (46.8) 25.9 (4.9) (17.7) (82.1) (78.8) (400.6) (527.4)
IPO proceeds - - - - - - - 6.3
---------- ----------- ---------- --------- ------------ ---------- --------- --------
Total GAAP revenues $1,998.9 $ 2,175.4 $ 1,974.4 $ 1,957.1 $ 1,889.9 $ 7,996.8 $ 7,655.8 $7,816.6
========== =========== ========= ========= ============ ========== ========= =========
Premium and Deposits:
Universal and Variable Universal Life
Premium and deposits $ 117.5 $ 99.5 $ 84.2 $ 75.9 $ 78.0 $ 337.6 $ 298.1 $ 270.1
Less: deposits 122.2 104.0 87.7 79.4 81.8 352.9 309.5 279.0
---------- ----------- ---------- --------- ------------ ---------- --------- --------
GAAP premiums and other considerations $ (4.7) $ (4.5) $ (3.5) $ (3.5) $ (3.8) $ (15.3) $ (11.4) $ (8.9)
========== =========== ========= ========= ============ ========== ========= =========
Traditional Life Insurance
Premium and deposits $ 171.8 $ 178.5 $ 170.7 $ 181.0 $ 180.7 $ 710.9 $ 737.2 $ 766.2
Less: deposits - - - - - - - -
---------- ----------- ---------- --------- ------------ ---------- --------- --------
GAAP premiums and other considerations $ 171.8 $ 178.5 $ 170.7 $ 181.0 $ 180.7 $ 710.9 $ 737.2 $ 766.2
========== =========== ========= ========= ============ ========== ========= =========
Total Individual Life Insurance
Premium and deposits $ 289.3 $ 278.0 $ 254.9 $ 256.9 $ 258.7 $ 1,048.5 $ 1,035.3 $1,036.3
Less: deposits 122.2 104.0 87.7 79.4 81.8 352.9 309.5 279.0
---------- ----------- ---------- --------- ------------ ---------- --------- --------
GAAP premiums and other considerations $ 167.1 $ 174.0 $ 167.2 $ 177.5 $ 176.9 $ 695.6 $ 725.8 $ 757.3
========== =========== ========= ========= ============ ========== ========= =========
12