Editor's note: A completed demutualization plan was submitted to the Iowa Department of Insurance on May 29, 2001, and includes details on distributing 100 percent of the pre-IPO value of the company to eligible policyholders. If a policyholder does not opt for cash, stock, or, in some cases, policy credits, they will receive stock. Informational packets will be mailed by the end of June.

Insurance company demutualization means that a mutual company, which is owned by its policyholders, converts to a publicly traded stock company. Policyholders are usually compensated with stock, cash, or additional insurance coverage, in exchange for their ownership shares in the mutual company.

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

If Principal's plan for demutualization is approved by two-thirds of its 900,000 eligible policyholders and the Iowa Department of Insurance, the company will hold an initial public offering (IPO). Policyholders eligible for compensation are those who owned Principal policies on or before March 31, 2000 (one year prior to the Board's vote), provided they still own those policies on the IPO date. They will receive stock, cash, or policy add-ons.

"Conversion of our mutual holding company to a stock company affords us greater access to the capital markets. This increases our opportunities for growth, both globally and domestically," says Principal CEO J. Barry Griswell.

Principal expects to file its demutualization plan with the Iowa DOI, and mail copies to eligible policyholders, by July 2001. The company will hold a "members' meeting" prior to the policyholder vote, and the DOI will hold a hearing to discuss the demutualization process.

In 1998, Principal Financial converted from a mutual insurer to a mutual holding company. The mutual holding company 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.