Principal Financial Group eyes demutualization

Principal Financial Group plans to convert from a mutual holding company into a publicly traded stock company.

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"Demutualization provides the greatest flexibility to access capital efficiently."

Based in Des Moines, Iowa, Principal Financial sells life and health insurance, retirement and investment services, and mortgage banking.

The company's board of directors voted to create a demutualization plan on Aug. 22, but does not expect to adopt the plan until the first half of 2001. Demutualization is a process in which a mutual company owned by policyholders is converted to a publicly traded stock company.

"Our study of structural alternatives made it clear that demutualization provides the greatest flexibility to access capital efficiently," says J. Barry Griswell, president and CEO of Principal Financial.

In 1998, Principal Financial converted to a mutual holding company and became a parent company to Principal Financial Group, Principal Financial Services and Principal Life Insurance Co. Traditionally, a mutual holding company serves as a parent company to a number of subsidiaries. Ownership of the subsidiaries, in turn, is generally split between the mutual holding company and outside investors, with the mutual holding company always maintaining majority control — usually just over 50 percent.

After the board of directors approves of the plan, a two-thirds vote by policyholders and approval from the Iowa Department of Insurance is needed prior to an initial public offering (IPO).

Through the demutualization plan, Jeff Rader, a spokesperson for Principal Financial, says that between 800,000 and 900,000 policyholders in the United States will be eligible for compensation. Rader would not speculate when policyholders might receive more information about the plan, but said it would not happen until after the board of directors approves a demutualization plan.

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