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.
Principal
Financial Group's Board of Directors unanimously voted to demutualize
Principal Mutual Holding Co. on March 31, 2001. 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.
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