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Principal IPO brings in $1.8 billion

In spite of concerns about a weak stock market in the aftermath of the Sept. 11 terrorist attacks, Principal Financial Group made its debut as a stockholder-owned company with an initial public offering (IPO) that raised $1.8 billion.

"While we are deeply saddened by the terrorist attacks, we [were] compelled to move forward because that is what we all must do as part of the rebuilding process."

The Oct. 23 IPO consisted of 100 million shares of stock at $18.50 per share — in the middle of the company's $17 to $20 predicted range.

After the first day of trading the newly christened ticker symbol PFG closed at $21 per share, up $2.50 per share, or 13.5 percent.

Principal's IPO marks the end of the company's conversion from a mutual insurance company, owned by the insurance policyholders, to a publicly traded company, owned by shareholders.

Principal plans to use some of the funds generated by the IPO to compensate its policyholders in the form of cash and insurance policy credits for their loss of ownership in the company. Principal also plans to distribute an additional 260 million shares of stock to its policyholders.

Of the approximately 800,000 policyholders eligible for compensation through the demutualization process, 82 percent will receive stock, 12 percent will be paid in cash, and the remaining 6 percent chose to be compensated in the form of policy credits. The insurer hopes to have completed the payout by Dec. 26, 2001 — 60 days after the completion of the demutualization.

"While we are deeply saddened by the terrorist attacks, we [were] compelled to move forward because that is what we all must do as part of the rebuilding process," says J. Barry Griswell, president and chief executive officer of Principal.

Principal still faces a lawsuit, which seeks nationwide class action status, that challenges the constitutionality of its demutualization and the way policyholders are compensated for their loss of ownership in the company.

The $1.8 billion Principal IPO makes it the second-largest insurance demutualization — eclipsing the $1.73 billion raised by John Hancock in January 2000, but falling short of the $2.9 billion of MetLife's April 2000 IPO. In what is expected to be the largest demutualization ever, Prudential Insurance Co. of America plans to go public before the end of 2001.

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