SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: August 4, 2003
(Date of earliest event reported)
PRINCIPAL FINANCIAL GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 1-16725 42-1520346
(State or other jurisdiction Commission file number (I.R.S. Employer
of incorporation) Identification Number)
711 High Street, Des Moines, Iowa 50392
(Address of principal executive offices)
(Registrant's telephone number, including area code)
(515) 247-5111
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1
ITEM 7. EXHIBITS
99.1 Second Quarter 2003 Earnings Release
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On August 4, 2003, Principal Financial Group, Inc. publicly announced
information regarding its results of operations and financial condition for the
quarter ended June 30, 2003. The text of the announcement is included herewith
as Exhibit 99.1.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRINCIPAL FINANCIAL GROUP, INC.
By: /S/ MICHAEL H. GERSIE
----------------------------------------
Name: Michael H. Gersie
Title: Executive Vice President and
Chief Financial Officer
Date: August 4, 2003
2
Exhibit 99.1
RELEASE: On receipt August 4, 2003
MEDIA CONTACTS: Tina Marchetti, 515-248-0065,
MARCHETTI.TINA@PRINCIPAL.COM
Jeff Rader, 515-247-7883,
RADER.JEFF@PRINCIPAL.COM
INVESTOR RELATIONS CONTACT: TOM GRAF, 515-235-9500,
INVESTOR-RELATIONS@PRINCIPAL.COM
PRINCIPAL FINANCIAL GROUP, INC. REPORTS SECOND QUARTER RESULTS
Des Moines, IA (August 4, 2003) -- Principal Financial Group, Inc. (NYSE: PFG)
today announced quarterly net income for the three months ended June 30, 2003,
of $202.2 million, or $0.62 per diluted share compared to net income of $120.2
million, or $0.34 per diluted share for the three months ended June 30, 2002.
The company reported record operating earnings of $217.9 million for second
quarter 2003, up 17 percent compared to $186.5 million for second quarter 2002.
Operating earnings per diluted share for second quarter 2003 increased 29
percent to a record $0.67 compared to $0.52 for the same period in 2002.
Operating revenues for second quarter 2003 were $2,430.1 million, down $0.1
million compared to the same period last year.1
"The Principal had another outstanding quarter, as we continue to build a track
record of solid and dependable growth," said J. Barry Griswell, chairman,
president and chief executive officer. "Earnings per share improved 29 percent,
driven by record operating earnings of $217.9 million. Mortgage banking was a
key growth driver, but our three other operating segments - U.S. Asset
Management and Accumulation, International Asset Management and Accumulation,
and Life and Health Insurance - each delivered record earnings.
"Reflecting healthy retirement sales over the past several quarters, coupled
with excellent retention, total company assets under management reached a record
$128 billion. Pension account values also reached record levels, up 14 percent
from a year ago to nearly $71 billion," said Griswell. "While the S&P 500
improved significantly during the second quarter, gains only partially offset
declines over the three prior quarters. The S&P daily average was actually still
3
down 12 percent compared to second quarter 2002. So importantly, we achieved
this growth despite the lingering effect of previous equity market declines.
"Sales of pension full service accumulation, our key retirement product, were
very solid -- $928 million during the quarter, and up more than $1 billion
year-to-date," said Griswell. "While second quarter sales were down from recent
quarters, this reflects our aggressive first quarter efforts to close out
KeyCorp cases, which reduced our sales pipeline activities. Importantly, our
recent pipeline building activities have strengthened, and the pipeline for the
remainder of the year is strong.
"We again added to our portfolio of customer-driven retirement solutions,
including our launch of The Principal Rollover Choice IRA, which was designed to
simplify IRA rollovers for retirees and job changers," said Griswell. "Our
efforts, and strong customer commitment continue to be recognized in the
marketplace - during the quarter we won Defined Contribution News' "Bundled
Provider of the Year" for our support of the American worker and the small-and
medium sized retirement plan sponsor, and we received the 2003 Insurance
Innovators award for use of the internet to improve customer relations."
Assets under management were $128.0 billion as of June 30, 2003, an increase of
$11.7 billion, or 10 percent, compared to March 31, 2003, and an increase of
$8.4 billion, or 7 percent, compared to June 30, 2002. (The sale of
substantially all of BT Financial Group closed in the fourth quarter of 2002.
Therefore, BT's assets under management are included for the period ending June
30, 2002. Excluding BT, assets under management increased $24.0 billion, or 23
percent, compared to June 30, 2002.)
For the six months ended June 30, 2003:
o Net income increased to $357.9 million, or $1.09 per diluted share,
compared to $85.3 million, or $0.24 per diluted share, during the same
period a year ago. Net income for the six months ended June 30, 2002,
includes an after-tax goodwill write-down of $280.9 million ($255.4 million
related to BT Financial Group).
o Operating earnings increased 16 percent to $428.4 million, compared to
$369.0 million in the year earlier period.
o Operating earnings per share increased 26 percent to $1.30 per diluted
share compared to $1.03 per diluted share in the year earlier period.
o Operating revenues increased 5 percent to $4,809.0 million from $4,565.9
million during the same period a year ago.
SEGMENT HIGHLIGHTS
U.S. ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for second quarter 2003 were a record $108.2 million,
compared to $102.1 million for the same period in 2002. The improvement was
driven by record operating earnings in the pension business of $83.9 million, a
4
7 percent increase compared to the same period a year ago. Reflecting strong
sales over the past several quarters, and excellent retention, the asset
accumulation businesses achieved net cash flows of $1.6 billion during the
second quarter, compared to $1.0 billion in the year earlier period.
Operating revenues for the second quarter decreased to $869.0 million compared
to $1,135.7 million for the same period in 2002. This decrease was the result of
lower sales of single premium group annuities. The single premium product, which
is typically used to fund defined benefit plan terminations, can generate large
premiums from a few customers and therefore tends to vary from period to period.
Excluding this product, revenues for the segment increased 7 percent.
Segment assets under management continued to increase, reaching $107.6
billion as of June 30, 2003, up 10 percent from $97.5 billion as of March 31,
2003, and up 28 percent from $84.2 billion as of June 30, 2002.
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION
Segment operating earnings for second quarter 2003 were a record $12.1 million,
compared to $3.9 million for the same period in 2002. (For the quarter ended
June 30, 2002, segment results include a loss of $0.7 million for BT Financial
Group.2) Principal International, which consists of the company's asset
accumulation businesses outside the U.S., had second quarter operating earnings
of $12.1 million, compared to $4.6 million for the same period in 2002.
Principal International's earnings growth primarily reflects increased earnings
from its Mexico AFORE and Brazil operations.
Operating revenues for the segment were $113.0 million for second quarter 2003,
compared to $93.6 million for the same period last year.
Assets under management for the segment were $5.8 billion as of June 30, 2003,
compared to $4.9 billion as of March 31, 2003, and compared to $22.8 billion as
of June 30, 2002. An $18.6 billion decrease from second quarter 2002 is
attributable to the sale of substantially all of BT Financial Group. Assets
under management for Principal International increased 38 percent compared to
June 30, 2002.
5
LIFE AND HEALTH INSURANCE
Operating earnings for second quarter 2003 were a record $62.9 million, compared
to $61.7 million for the same period in 2002. This increase was largely the
result of improved loss ratios within group medical and dental/vision
businesses.
Operating revenues were $1,001.8 million for the quarter, compared to $984.5
million for the same period in 2002, largely as a result of increases within the
group disability and group medical operations. As expected, operating revenues
were relatively flat in the life business, as the company has shifted marketing
emphasis in recent years from traditional premium-based products to fee-based
universal life and variable universal life products. Unlike traditional
premium-based products, universal life and variable universal life premium is
not reported as GAAP revenue.
MORTGAGE BANKING
Operating earnings for second quarter 2003 were $45.1 million compared to $24.8
million for the same period in 2002. Production earnings continued to be very
strong during the second quarter at $133.8 million, compared to $11.4 million
for the same period in 2002, due to increased mortgage loan production volume
and higher margins. Servicing generated a loss of $88.7 million during the
second quarter, compared to earnings of $13.4 million for the same period in
2002. The second quarter 2003 loss from servicing reflects: a $48.7 million loss
6
from model refinements impacting the mortgage servicing rights valuation; a
$59.1 million loss from other impairments of mortgage servicing rights (net of
hedges); and $19.1 million of earnings from servicing operations, which includes
$6.8 million after-tax from the sale of servicing.
Mortgage loan production was a record $17.1 billion in the second quarter 2003
compared to $9.1 billion in the year earlier period. At $115.4 billion as of
June 30, 2003, the servicing portfolio also continued to grow at a solid pace
during the quarter, up $2.1 billion from March 31, 2003, and up $18.9 billion
compared to June 30, 2002.
Operating revenues increased 116 percent to a record $452.5 million for the
quarter, compared to $209.7 million for the same period last year. Production
revenues increased $212.5 million, or 372 percent, and servicing revenues
increased $30.3 million, or 20 percent, from the same quarter a year ago.
7
CORPORATE AND OTHER
Operating losses for second quarter 2003 were $10.4 million, compared to
operating losses of $6.0 million for the same period in 2002. The decline was
primarily the result of lower investment yields in second quarter 2003 compared
to the same period a year ago.
FORWARD LOOKING AND CAUTIONARY STATEMENTS
This press release contains forward-looking statements, including, without
limitation, statements as to sales targets, sales and earnings trends, and
management's beliefs, expectations, goals and opinions. These statements are
based on a number of assumptions concerning future conditions that may
ultimately prove to be inaccurate. Future events and their effects on the
company may not be those anticipated, and actual results may differ materially
from the results anticipated in these forward-looking statements. The risks,
uncertainties and factors that could cause or contribute to such material
differences are discussed in the company's annual report on Form 10-K for the
year ended December 31, 2002, and in the company's quarterly report on Form 10-Q
for the quarter ended March 31, 2003, filed by the company with the Securities
and Exchange Commission. These risks and uncertainties include, without
limitation: competitive factors; volatility of financial markets; decrease in
ratings; interest rate changes; inability to attract and retain sales
representatives; international business risks; foreign currency exchange rate
fluctuations; and investment portfolio risks.
OUTLOOK FOR THIRD QUARTER AND FULL YEAR 2003
Based on estimated net realized capital losses of $30 million after-tax in the
third quarter and of $130 million for 2003, the company expects third quarter
2003 net income to range from $0.50 to $0.53 per diluted share and 2003 net
income to range from $2.05 to $2.10 per diluted share. Other items that we are
unable to predict could significantly affect net income, such as changes to
laws, regulations, or accounting standards, or gains or losses from discontinued
operations. The company expects third quarter 2003 operating earnings to range
from $0.59 to $0.62 per diluted share and 2003 operating earnings to range from
$2.45 to $2.50 per diluted share. These estimates include the impact of
expensing employee stock options and the employee stock purchase plan of
approximately 5 cents a share in 2003 and additional pension benefit expense of
approximately 11 cents a share in 2003. These expectations are based on certain
assumptions, including domestic equity market performance improvement, from June
30, 2003, of roughly two percent per quarter for the remainder of the year.
SHARE REPURCHASES
In November 2002, the board of directors authorized a repurchase program of up
to $300 million of our outstanding common stock. During the first six months of
2003, the company repurchased approximately 10.3 million shares for $300 million
at an average price per share repurchased of $29.14. As of June 23, 2003, we had
completed this program. In May 2003, the board of directors authorized a new
repurchase program of up to $300 million of our outstanding common stock. No
shares were repurchased during second quarter 2003 under this new program.
STOCK OPTIONS
As communicated in the third quarter 2002 earnings release, The Principal began
expensing employee stock options and the employee stock purchase plan,
retroactive to January 1, 2002. This resulted in an after-tax expense of $4.7
million for the three months ended June 30, 2003, and $7.4 million for the six
months ended June 30, 2003, with no corresponding expense during the same
periods of 2002.
8
EARNINGS CONFERENCE CALL
At 9:00 A.M. (CST) tomorrow, Chairman, President and CEO J. Barry Griswell and
Executive Vice President and CFO Mike Gersie will lead a discussion during a
live conference call. Parties interested in listening to the conference call
live may access the call by accessing the webcast on the Principal Financial
Group Investor Relations (IR) website (www.principal.com/investor) or by dialing
(800) 374-1609 (US callers) or (706) 643-7701 (International callers)
approximately 10 minutes prior to the start of the call. To access the call,
leader name is Tom Graf. Listeners can access an audio replay of the call on the
IR website, or by calling (800) 642-1687 (US callers) or (706) 645-9291
(International callers). The access code for the replay is 1449098. Replays will
be available through August 12, 2003. The financial supplement is currently
available on our website and will be referred to during the conference call.
ABOUT THE PRINCIPAL FINANCIAL GROUP
The Principal Financial Group(R) (The Principal (R))3 is a leader in offering
businesses, individuals and institutional clients a wide range of financial
products and services, including retirement and investment services, life and
health insurance and mortgage banking through its diverse family of financial
services companies. More employers choose the Principal Financial Group for
their 401(k) plans than any other bank, mutual fund, or insurance company in the
United States4. A member of the Fortune 500, the Principal Financial Group has
$128.0 billion in assets under management5 and serves some 13 million customers
worldwide from offices in Asia, Australia, Europe, Latin America and the United
States. Principal Financial Group, Inc. is traded on the New York Stock Exchange
under the ticker symbol PFG. For more information, visit WWW.PRINCIPAL.COM.
# # #
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SUMMARY OF SEGMENT AND PRINCIPAL FINANCIAL GROUP, INC. RESULTS
OPERATING EARNINGS* (LOSS) IN MILLIONS
SEGMENT
---------------------------------------------------- ------------------------------ ------------------------------
THREE MONTHS ENDED, SIX MONTHS ENDED,
------------------------------ ------------------------------
6/30/03 6/30/02 6/30/03 6/30/02
---------------------------------------------------- --------------- -------------- -------------- ---------------
U.S. ASSET MANAGEMENT AND ACCUMULATION $108.2 $102.1 $205.7 $202.3
---------------------------------------------------- --------------- -------------- -------------- ---------------
INTERNATIONAL ASSET MANAGEMENT AND ACCUMULATION
12.1 3.9 18.7 5.1
---------------------------------------------------- --------------- -------------- -------------- ---------------
LIFE AND HEALTH INSURANCE 62.9 61.7 122.0 116.0
---------------------------------------------------- --------------- -------------- -------------- ---------------
MORTGAGE BANKING 45.1 24.8 97.4 51.3
---------------------------------------------------- --------------- -------------- -------------- ---------------
CORPORATE AND OTHER (10.4) (6.0) (15.4) (5.7)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OPERATING EARNINGS (NET INCOME EXCLUDING NET
REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES) AS ADJUSTED AND
OTHER AFTER-TAX ADJUSTMENTS) 217.9 186.5 428.4 369.0
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED (15.3) (70.1) (69.4) (6.9)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS (0.4) 3.8 (1.1) (276.8)
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME** $202.2 $120.2 $357.9 $ 85.3
------------------------------------------------------------------------------------------------------------------
PER DILUTED SHARE
------------------------------ ------------------------------
THREE MONTHS ENDED, SIX MONTHS ENDED,
---------------------------------------------------- --------------- -------------- -------------- ---------------
6/30/03 6/30/02 6/30/03 6/30/02
---------------------------------------------------- --------------- -------------- -------------- ---------------
OPERATING EARNINGS (NET INCOME EXCLUDING NET
REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES) AS ADJUSTED AND
OTHER AFTER-TAX ADJUSTMENTS) $0.67 $ 0.52 $1.30 $1.03
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET REALIZED/UNREALIZED CAPITAL
GAINS (LOSSES), AS ADJUSTED (0.05) (0.18) (0.21) (0.02)
---------------------------------------------------- --------------- -------------- -------------- ---------------
OTHER AFTER-TAX ADJUSTMENTS - - - (0.77)
---------------------------------------------------- --------------- -------------- -------------- ---------------
NET INCOME $0.62 $ 0.34 $1.09 $0.24
---------------------------------------------------- --------------- -------------- -------------- ---------------
WEIGHTED-AVERAGE DILUTED SHARES OUTSTANDING
327.4 357.3 329.6 359.0
---------------------------------------------------- --------------- -------------- -------------- ---------------
*OPERATING EARNINGS VERSUS U.S. GAAP (GAAP) NET INCOME
Management uses operating earnings, which excludes the effect of net
realized/unrealized capital gains and losses, as adjusted, and other after-tax
adjustments, for goal setting, determining employee compensation, and evaluating
performance on a basis comparable to that used by securities analysts. Segment
operating earnings are determined by adjusting U.S. GAAP net income for net
realized/unrealized capital gains and losses, as adjusted, and other after-tax
adjustments we believe are not indicative of overall operating trends. Note:
after-tax adjustments have occurred in the past and could recur in future
reporting periods. While these items may be significant components in
understanding and assessing our consolidated financial performance, we believe
the presentation of segment operating earnings enhances the understanding of our
results of operations by highlighting earnings attributable to the normal,
ongoing operations of our businesses.
** Net income for the three months ended June 30, 2003 reflects net
realized/unrealized capital losses of $15.3 million, which includes $23.5
million in credit losses stemming from impairments and credit impaired sales, as
well as $(0.4) million in other after-tax adjustments from discontinued
operations. Net income for the three months ended June 30, 2002 reflects net
10
realized capital losses of $70.1 million, primarily made up of credit losses
stemming from impairments and credit impaired sales of $111.7 million, as well
as $3.8 million in other after-tax adjustments from discontinued operations.
11
PRINCIPAL FINANCIAL GROUP, INC.
RESULTS OF OPERATIONS
(IN MILLIONS)
--------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
---------------- --------------- --------------- ---------------
6/30/03 6/30/02 6/30/03 6/30/02
---------------- --------------- --------------- ---------------
Premiums and other considerations $ 876.6 $ 1,166.6 $ 1,782.1 $ 2,052.3
Fees and other revenues 689.0 437.2 1,321.0 870.1
Net investment income 857.7 823.2 1,693.7 1,634.3
Net realized/unrealized capital gains (10.9) (91.5) (87.6) 6.6
(losses) ---------------- --------------- --------------- ---------------
TOTAL REVENUES 2,412.4 2,335.5 4,709.2 4,563.3
---------------- --------------- --------------- ---------------
Benefits, claims, and settlement expenses 1,187.8 1,507.9 2,383.0 2,711.1
Dividends to policyholders 73.9 79.5 154.0 161.9
Operating expenses 865.6 599.8 1,664.9 1,192.0
---------------- --------------- --------------- ---------------
TOTAL EXPENSES 2,127.3 2,187.2 4,201.9 4,065.0
---------------- --------------- --------------- ---------------
Income from continuing operations before
income taxes 285.1 148.3 507.3 498.3
Income taxes 82.5 31.9 148.3 138.2
---------------- --------------- --------------- ---------------
Income from continuing operations, net of
taxes 202.6 116.4 359.0 360.1
Income (loss) from discontinued operations,
net of taxes (0.4) 3.8 (1.1) 6.1
---------------- --------------- --------------- ---------------
Income before cumulative effect of
accounting change 202.2 120.2 357.9 366.2
Cumulative effect of accounting change, net
of taxes - - - (280.9)
---------------- --------------- --------------- ---------------
NET INCOME $ 202.2 $ 120.2 $ 357.9 $ 85.3
Less:
Net realized/unrealized capital gains
(losses), as adjusted (15.3) (70.1) (69.4) (6.9)
Other after-tax adjustments (0.4) 3.8 (1.1) (276.8)
---------------- --------------- --------------- ---------------
OPERATING EARNINGS $ 217.9 $ 186.5 $ 428.4 $ 369.0
================ =============== =============== ===============
SELECTED BALANCE SHEET STATISTICS
PERIOD ENDED
------------------------------------------------------------
6/30/03 12/31/02 6/30/02
--------------------- -------------------- -----------------
Total assets (in billions) $ 98.6 $ 89.9 $ 90.2
Total equity (in millions) $ 7,539.0 $ 6,657.2 $ 6,670.1
Total equity excluding accumulated other
comprehensive income (in millions) $ 6,118.4 $ 6,021.4 $ 6,507.1
End of period shares outstanding (in millions) 325.1 334.4 351.4
Book value per share $ 23.19 $ 19.91 $ 18.98
Book value per share excluding accumulated other
comprehensive income $ 18.82 $ 18.01 $ 18.52
12
PRINCIPAL FINANCIAL GROUP, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES TO U.S. GAAP
(IN MILLIONS, EXCEPT AS INDICATED)
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------------- -----------------------
6/30/03 6/30/02 6/30/03 6/30/02
-------------- -------------- ------------- -------------
DILUTED EARNINGS PER SHARE:
Operating Earnings 0.67 0.52 1.30 1.03
Net realized/unrealized capital gains/(losses) (0.05) (0.18) (0.21) (0.02)
Other after-tax adjustments - - - (0.77)
-------------- -------------- ------------- -------------
Net income 0.62 0.34 1.09 0.24
============== ============== ============= =============
BOOK VALUE EXCLUDING OTHER COMPREHENSIVE INCOME:
Book value excluding other comprehensive income 18.82 18.52 18.82 18.52
Net unrealized capital gains/(losses) 4.83 1.22 4.83 1.22
Foreign currency translation (0.46) (0.76) (0.46) (0.76)
-------------- -------------- ------------- -------------
Book value including other comprehensive income 23.19 18.98 23.19 18.98
============== ============== ============= =============
OPERATING REVENUES:
USAMA 869.0 1,135.7 1,755.0 1,997.8
IAMA 113.0 93.6 189.8 169.5
Life and Health 1,001.8 984.5 2,014.1 1,963.0
Mortgage Banking 452.5 209.7 857.0 418.4
Corporate and Other (6.2) 6.7 (6.9) 17.2
-------------- -------------- ------------- -------------
Total operating revenues 2,430.1 2,430.2 4,809.0 4,565.9
Net realized/unrealized capital gains (losses) (17.7) (94.7) (99.8) (2.6)
-------------- -------------- ------------- -------------
Total GAAP revenues 2,412.4 2,335.5 4,709.2 4,563.3
============== ============== ============= =============
OPERATING EARNINGS:
USAMA 108.2 102.1 205.7 202.3
IAMA 12.1 3.9 18.7 5.1
Life and Health 62.9 61.7 122.0 116.0
Mortgage Banking 45.1 24.8 97.4 51.3
Corporate and Other (10.4) (6.0) (15.4) (5.7)
-------------- -------------- ------------- -------------
Total operating earnings 217.9 186.5 428.4 369.0
Net realized/unrealized capital gains (losses) (15.3) (70.1) (69.4) (6.9)
Other after-tax adjustments (0.4) 3.8 (1.1) (276.8)
-------------- -------------- ------------- -------------
Net income 202.2 120.2 357.9 85.3
============== ============== ============= =============
13
NET REALIZED/UNREALIZED CAPITAL GAINS (LOSSES):
Total net realized/unrealized capital gains (losses) (15.3) (70.1) (69.4) (6.9)
Add:
Amortization of DPAC 0.4 (1.4) (3.3) (12.3)
Capital gains distributed 3.5 21.8 1.9 21.8
Tax impacts (5.9) (45.0) (28.7) (5.2)
Minority interest capital losses (0.4) - (0.3) -
Less:
Unearned front-end fee income (0.1) 1.4 4.3 4.0
Certain market value adjustments to fee revenues (6.7) (4.6) (16.5) (13.2)
-------------- -------------- ------------- -------------
GAAP net realized/unrealized capital gains (losses) (10.9) (91.5) (87.6) 6.6
============== ============== ============= =============
OTHER AFTER TAX ADJUSTMENTS:
Demutualization expenses - - - (2.0)
SFAS142 implementation - - - (280.9)
Discontinued operations (0.4) 3.8 (1.1) 6.1
-------------- -------------- ------------- -------------
Total other after-tax adjustments (0.4) 3.8 (1.1) (276.8)
============== ============== ============= =============
--------
1 We use a number of non-GAAP financial measures that management believes are
useful to investors because they illustrate the performance of our normal,
ongoing operations, which is important in understanding and evaluating our
financial condition and results of operations. While such measures are
consistent with measures utilized by investors to evaluate performance, they are
not a substitute for U.S. GAAP financial measures. Therefore, we have provided
reconciliations of the non-GAAP financial measures, including consolidated
operating earnings and consolidated operating revenues, to the most directly
comparable U.S. GAAP financial measure at the end of the release. We adjust U.S.
GAAP financial measures for items not directly related to ongoing operations.
However, it is possible that these adjusting items have occurred in the past and
could recur in the future. Management also uses non-GAAP financial measures for
goal setting, determining employee and senior management awards and
compensation, and evaluating performance on a basis comparable to that used by
securities analysts.
2 As a result of the sale of substantially all of BT Financial Group, which
closed on October 31, 2002, the operating earnings of BT reflect only the
corporate overhead expenses allocated to BT. This treatment is pursuant to
Statement of Accounting Standard No. 144, ACCOUNTING FOR THE IMPAIRMENT OR
DISPOSAL OF LONG-LIVED ASSETS ("SFAS 144"). Under SFAS 144, all revenues and
expenses (excluding allocated corporate overhead) are reported as discontinued
operations. Therefore, second quarter 2002 results for BT reflect three months
of allocated expenses with no corresponding activity in 2003.
3 "The Principal Financial Group" and "The Principal" are registered trademarks
referring to Principal Financial Group, Inc.
4 CFO Magazine, April/May 2003, based on total plans served in 2002 by insurance
companies, banks and investment firms.
5 As of June 30, 2003
14