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Principal Financial Group Annual Report, Year Ended Dec 31, 2002

Filing Date
Filed March 5, 2003
Period End
December 31, 2002
Security
PFG
In the record · 2016–202610-K1110-Q338-K163

PFG filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 163 current reports (8-K) between 2016 and 2026.

  1. FY2016 annual report10-K · Feb ’17Feb ’17
  2. Material agreement8-K · May ’19May ’19
  3. Leadership change8-K · Nov ’21Nov ’21
  4. Leadership change8-K · Aug ’25Aug ’25

01—Abstract

Summary

Summary of the 10-K filed March 5, 2003. Cited figures are marked; the original filing is the authoritative source.

Principal Financial Group, Inc. (PFG) reported $111.1 billiona in assets under management and approximately thirteen million customers worldwide as of December 31, 2002.

The company was organized as an individual life insurer in 1879 and completed its demutualization and initial public offering on October 26, 2001, when it issued 100.0 million shares at $18.50b per share, with net IPO proceeds of $1,753.9 million. The company operates four segments: U.S. Asset Management and Accumulation, International Asset Management and Accumulation, Life and Health Insurance, and Mortgage Banking. Net income fell to $142.3 million in 2002 from $358.8 million in 2001, driven largely by a $280.9 million cumulative effect of accounting changes and a $196.7 million loss from discontinued operations related to the sale of BT Financial Group.

Operating earnings rose to $749.4 millionc from $722.1 million, and total GAAP revenues were $8,822.5 million. Total stockholders' equity was $6,657.2 million at year-end 2002, down from $6,820.3 million, reflecting $1,118.1 million in treasury stock. The company repurchased 27.0 million shares for $750.0 million earlier in 2002 and authorized a further $300.0 million program in November 2002.

Diluted earnings per share were $0.41d on net income, compared with $1.77 from continuing operations. The company paid an annual dividend of $0.25 per share. Mortgage Banking grew substantially, with operating revenues of $1,153.0 million, and the residential mortgage servicing portfolio reached $107,745.3 million.

Principal Life's ratings include A+ from A.M. Best and AA from Fitch and Standard & Poor's, with S&P carrying a negative outlook.

The filing also discloses pending matters, including a reserve for sales practices litigation, a sale of BT Financial Group to Westpac for A$900.0 million with estimated after-tax proceeds of $938.4 million, and a planned sale of retail mortgage lending branches to American Home Mortgage. Management stated that no pending litigation is expected to have a material adverse effect.

02—Key points

Key Highlights

  1. Assets under management of $111.1 billion and approximately thirteen million customers worldwide as of December 31, 2002.
  2. Net income of $142.3 million for 2002, down from $358.8 million in 2001, after a $280.9 million cumulative effect of accounting changes and a $196.7 million loss from discontinued operations.
  3. Operating earnings of $749.4 million for 2002, up from $722.1 million in 2001.
  4. Total GAAP revenues of $8,822.5 million in 2002, compared with $8,592.6 million in 2001.
  5. Sale of substantially all of BT Financial Group to Westpac on October 31, 2002, for A$900.0 million, with estimated after-tax proceeds of $938.4 million excluding contingent amounts.
  6. Repurchase of 27.0 million shares for $750.0 million in 2002 and a new authorization of up to $300.0 million announced November 26, 2002.
  7. Mortgage Banking operating revenues rose to $1,153.0 million from $757.4 million, with the residential loan servicing portfolio reaching $107,745.3 million.

03—Questions

Frequently Asked Questions

  1. What drove the decline in net income in 2002?

    Net income fell to $142.3 million from $358.8 million. The main drivers were a $280.9 million negative cumulative effect of accounting changes, mainly from implementing SFAS 142 on goodwill, and a $196.7 million loss from discontinued operations tied to the sale of BT Financial Group. Operating earnings increased to $749.4 million.

  2. How did the company perform on a per-share basis?

    Basic and diluted net income per share was $0.41 for 2002, compared with $0.99 pro forma for 2001. Income from continuing operations was $1.77 per share in 2002, compared with $1.05 pro forma in 2001.

  3. What were the main sources of revenue growth?

    Fees and other revenues rose $390.1 million, or 24%, to $1,990.8 million, primarily due to a $326.9 million increase from the Mortgage Banking segment. Net investment income declined $78.9 million, or 2%, to $3,304.7 million, mainly because investment yields fell.

  4. What capital actions did the company take in 2002?

    The company repurchased shares totaling $750.0 million across two programs completed in 2002, sold its remaining Coventry Health Care stake for $325.4 million, and paid an annual dividend of $0.25 per share, totaling $83.8 million. Treasury stock rose to $1,118.1 million, and a further $300.0 million repurchase program was authorized in November 2002.

  5. What are the notable risks disclosed in the filing?

    The filing cites the possibility of a ratings downgrade of Principal Life, which could increase policy surrenders and accelerate liabilities. It also notes exposure to sales practices litigation, with a loss reserve established for settled class actions and certain opt-out claims that could exceed estimates. Other risks include investment portfolio losses, interest rate changes, and international operations in Argentina, Mexico, and Brazil.

04—Continue

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