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Principal Financial Group Annual Report, Year Ended Dec 31, 2003

Filing Date
Filed March 3, 2004
Period End
December 31, 2003
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 3, 2004. Cited figures are marked; the original filing is the authoritative source.

Principal Financial Group, Inc. (PFG) reports that it was a leading provider of retirement savings, investment and insurance products with $144.9 billiona in assets under management and approximately fifteen million customers worldwide as of December 31, 2003.

Net income rose to $746.3 millionb in 2003 from $142.3 million in 2002, and diluted earnings per share were $2.28 versus $0.41. The increase was driven in part by lower net realized/unrealized capital losses ($65.7 million versus $354.8 million in 2002), a $21.8 million gain from discontinued operations tied to the 2002 sale of BT Financial Group, and the absence of the 2002 cumulative effect of accounting change of $280.9 million. Total revenues increased to $9,404.2 million from $8,822.5 million, while operating expenses rose to $3,281.3 million, reflecting a $141.3 million additional impairment charge on mortgage servicing rights in December 2003.

Balance sheet growth was substantial: total assets were $107,754.4 millionc at year-end 2003 compared with $89,861.3 million a year earlier, and long-term debt rose to $2,767.3 million from $1,332.5 million, largely due to consolidation of variable interest entities under FIN 46, including Principal Residential Mortgage Capital Resources, LLC. Stockholders' equity increased to $7,399.6 million. The company paid a $0.45 per share annual dividend in 2003 (up from $0.25) and repurchased 15.0 million shares for $453.0 million, with $147.0 million remaining under the current authorization.

The filing also highlights ongoing risks, including mortgage servicing rights valuation volatility, the Mortgage Banking segment's exposure to interest rate changes, international operations in Latin America and Asia, a New Zealand indemnification exposure of up to A$250.0 milliond tied to the BT Financial Group sale, and dividend limits imposed by Iowa insurance law on Principal Life. Management states that the outcome of pending litigation is not expected to have a material adverse effect on the business.

02—Key points

Key Highlights

  1. Net income of $746.3 million in 2003, up from $142.3 million in 2002; diluted EPS of $2.28 versus $0.41.
  2. Total revenues of $9,404.2 million, up from $8,822.5 million; assets under management of $144.9 billion.
  3. Net realized/unrealized capital losses narrowed to $65.7 million from $354.8 million.
  4. Additional $141.3 million impairment charge on mortgage servicing rights in December 2003 pushed operating expenses to $3,281.3 million.
  5. Total assets grew to $107,754.4 million, while long-term debt rose to $2,767.3 million, reflecting FIN 46 consolidation of variable interest entities.
  6. Annual dividend increased to $0.45 per share; 15.0 million shares repurchased for $453.0 million in 2003.
  7. Principal Life's ratings were A+ (A.M. Best), AA (Fitch), Aa3 (Moody's) and AA (S&P), all with stable outlooks.

03—Questions

Frequently Asked Questions

  1. What drove the increase in net income in 2003?

    Net income rose to $746.3 million from $142.3 million. Key contributors were lower net realized/unrealized capital losses ($65.7 million versus $354.8 million), a $21.8 million after-tax gain from discontinued operations related to the BT Financial Group sale, and the absence of the $280.9 million cumulative effect of accounting change recorded in 2002.

  2. What were the main risks highlighted in the mortgage banking business?

    The Mortgage Banking segment recorded a $141.3 million additional impairment charge on mortgage servicing rights in December 2003, and operating expenses in the segment rose by $404.3 million. The filing notes the lack of an active servicing market and the segment's exposure to interest rate changes, which it seeks to hedge.

  3. How much did the company return to shareholders in 2003?

    PFG paid $145.3 million in dividends ($0.45 per share) and repurchased 15.0 million shares at an aggregate cost of $453.0 million. As of December 31, 2003, $147.0 million remained under the existing share repurchase authorization.

  4. What limits Principal Financial Group's ability to receive dividends from its insurance subsidiary?

    Under Iowa law, Principal Life may pay stockholder dividends only from earned surplus and above statutory limits requires approval of the Iowa Insurance Commissioner. Based on 2003 statutory results, Principal Life could pay approximately $701.2 million in dividends in 2004 without exceeding the limitation.

  5. Does the company face any notable contingent liabilities?

    Yes. In connection with the 2002 sale of BT Financial Group to Westpac, PFG agreed to indemnify the purchaser for certain costs related to late filings in New Zealand, up to A$250.0 million (approximately U.S. $190.0 million). The company does not believe this would have a material adverse effect, though it could affect net income in a particular period.

04—Continue

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