10-Q 1 a13-7339_110q.htm 10-Q

Table of Contents

 

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 


 

x      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2013

 

OR

 

o         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 


 

1-16725

(Commission file number)

 

PRINCIPAL FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

42-1520346

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

711 High Street, Des Moines, Iowa 50392

(Address of principal executive offices)

 

(515) 247-5111

(Registrant’s telephone number, including area code)

 


 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer x

 

Accelerated filer o

 

Non-accelerated filer o

 

Smaller reporting company o

 

 

 

 

(Do not check if a smaller

 

 

 

 

 

 

reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

 

The total number of shares of the registrant’s Common Stock, $0.01 par value, outstanding as of April 24, 2013, was 293,420,211.

 

 

 



Table of Contents

 

PRINCIPAL FINANCIAL GROUP, INC.

 

TABLE OF CONTENTS

 

 

 

Page

Part I - FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

3

 

 

 

 

Consolidated Statements of Financial Position at March 31, 2013 (Unaudited) and December 31, 2012

3

 

 

 

 

Unaudited Consolidated Statements of Operations for the three months ended March 31, 2013 and 2012

4

 

 

 

 

Unaudited Consolidated Statements of Comprehensive Income for the three months ended March 31, 2013 and 2012

5

 

 

 

 

Unaudited Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2013 and 2012

6

 

 

 

 

Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2013 and 2012

7

 

 

 

 

Notes to Unaudited Consolidated Financial Statements — March 31, 2013

8

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

89

 

 

 

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

122

 

 

 

Item 4.

Controls and Procedures

128

 

 

 

Part II — OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

129

 

 

 

Item 1A.

Risk Factors

129

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

129

 

 

 

Item 6.

Exhibits

130

 

 

 

Signature

 

131

 

2



Table of Contents

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Principal Financial Group, Inc.

Consolidated Statements of Financial Position

 

 

 

March 31, 2013

 

December 31,
2012

 

 

 

(Unaudited)

 

(As adjusted)

 

 

 

(in millions)

 

Assets

 

 

 

 

 

Fixed maturities, available-for-sale (2013 and 2012 include $220.3 million and $194.6 million related to consolidated variable interest entities)

 

$

51,084.1

 

$

50,939.3

 

Fixed maturities, trading (2013 and 2012 both include $110.4 million related to consolidated variable interest entities)

 

628.9

 

626.7

 

Equity securities, available-for-sale

 

147.0

 

136.5

 

Equity securities, trading

 

732.2

 

252.8

 

Mortgage loans

 

11,577.9

 

11,519.7

 

Real estate

 

1,202.0

 

1,180.3

 

Policy loans

 

866.5

 

864.9

 

Other investments (2013 and 2012 include $77.2 million and $80.3 million related to consolidated variable interest entities and $110.9 million and $113.9 million measured at fair value under the fair value option)

 

3,187.2

 

3,291.1

 

Total investments

 

69,425.8

 

68,811.3

 

Cash and cash equivalents

 

1,661.2

 

4,177.2

 

Accrued investment income

 

584.5

 

584.4

 

Premiums due and other receivables

 

1,175.2

 

1,084.4

 

Deferred acquisition costs

 

2,715.5

 

2,590.0

 

Property and equipment

 

472.6

 

464.2

 

Goodwill

 

1,197.4

 

543.4

 

Other intangibles

 

1,590.3

 

914.7

 

Separate account assets (2013 includes $33,892.2 million related to consolidated variable interest entities)

 

120,906.1

 

81,653.8

 

Other assets

 

1,034.3

 

1,006.8

 

Total assets

 

$

200,762.9

 

$

161,830.2

 

Liabilities

 

 

 

 

 

Contractholder funds

 

$

36,701.6

 

$

37,786.5

 

Future policy benefits and claims

 

22,689.5

 

22,436.2

 

Other policyholder funds

 

811.2

 

716.4

 

Short-term debt

 

46.5

 

40.8

 

Long-term debt

 

2,790.5

 

2,671.3

 

Income taxes currently payable

 

9.8

 

15.3

 

Deferred income taxes

 

791.4

 

600.0

 

Separate account liabilities (2013 includes $33,892.2 million related to consolidated variable interest entities)

 

120,906.1

 

81,653.8

 

Other liabilities (2013 and 2012 include $318.3 million and $302.9 million related to consolidated variable interest entities, of which $96.5 million and $85.0 million are measured at fair value under the fair value option)

 

6,130.8

 

6,146.1

 

Total liabilities

 

190,877.4

 

152,066.4

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

58.9

 

60.4

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Series A preferred stock, par value $.01 per share with liquidation preference of $100 per share — 3.0 million shares authorized, issued and outstanding in 2013 and 2012

 

 

 

Series B preferred stock, par value $.01 per share with liquidation preference of $25 per share — 10.0 million shares authorized, issued and outstanding in 2013 and 2012

 

0.1

 

0.1

 

Common stock, par value $.01 per share — 2,500.0 million shares authorized, 455.9 million and 453.5 million shares issued, and 293.3 million and 293.8 million shares outstanding in 2013 and 2012

 

4.6

 

4.5

 

Additional paid-in capital

 

9,771.5

 

9,730.9

 

Retained earnings

 

4,971.7

 

4,862.0

 

Accumulated other comprehensive income

 

621.0

 

640.3

 

Treasury stock, at cost (162.6 million and 159.7 million shares in 2013 and 2012)

 

(5,645.3

)

(5,554.4

)

Total stockholders’ equity attributable to Principal Financial Group, Inc.

 

9,723.6

 

9,683.4

 

Noncontrolling interest

 

103.0

 

20.0

 

Total stockholders’ equity

 

9,826.6

 

9,703.4

 

Total liabilities and stockholders’ equity

 

$

200,762.9

 

$

161,830.2

 

 

See accompanying notes.

 

3



Table of Contents

 

Principal Financial Group, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

For the three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

(in millions, except per share data)

 

Revenues

 

 

 

 

 

Premiums and other considerations

 

$

694.7

 

$

679.8

 

Fees and other revenues

 

733.6

 

598.0

 

Net investment income

 

789.3

 

824.8

 

Net realized capital gains (losses), excluding impairment losses on available-for-sale securities

 

(26.4

)

22.1

 

Total other-than-temporary impairment losses on available-for-sale securities

 

(44.7

)

(33.7

)

Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income

 

20.2

 

4.9

 

Net impairment losses on available-for-sale securities

 

(24.5

)

(28.8

)

Net realized capital losses

 

(50.9

)

(6.7

)

Total revenues

 

2,166.7

 

2,095.9

 

Expenses

 

 

 

 

 

Benefits, claims and settlement expenses

 

1,094.5

 

1,212.5

 

Dividends to policyholders

 

48.3

 

50.3

 

Operating expenses

 

795.7

 

555.1

 

Total expenses

 

1,938.5

 

1,817.9

 

Income before income taxes

 

228.2

 

278.0

 

Income taxes

 

38.2

 

56.7

 

Net income

 

190.0

 

221.3

 

Net income attributable to noncontrolling interest

 

3.5

 

9.2

 

Net income attributable to Principal Financial Group, Inc.

 

186.5

 

212.1

 

Preferred stock dividends

 

8.2

 

8.2

 

Net income available to common stockholders

 

$

178.3

 

$

203.9

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

Basic earnings per common share

 

$

0.61

 

$

0.68

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.61

 

$

0.68

 

 

See accompanying notes.

 

4



Table of Contents

 

Principal Financial Group, Inc.

Consolidated Statements of Comprehensive Income

(Unaudited)

 

 

 

For the three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

(in millions)

 

 

 

 

 

 

 

Net income

 

$

190.0

 

$

221.3

 

Other comprehensive income (loss), net:

 

 

 

 

 

Net unrealized gains (losses) on available-for-sale securities

 

(99.3

)

161.3

 

Noncredit component of impairment losses on fixed maturities, available-for-sale

 

(11.3

)

(0.9

)

Net unrealized gains (losses) on derivative instruments

 

22.0

 

(3.5

)

Foreign currency translation adjustment

 

54.4

 

59.6

 

Net unrecognized postretirement benefit obligation

 

13.8

 

8.7

 

Other comprehensive income (loss)

 

(20.4

)

225.2

 

Comprehensive income

 

169.6

 

446.5

 

Comprehensive income attributable to noncontrolling interest

 

2.4

 

10.0

 

Comprehensive income attributable to Principal Financial Group, Inc.

 

$

167.2

 

$

436.5

 

 

See accompanying notes.

 

5



Table of Contents

 

Principal Financial Group, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

Series A

 

Series B

 

 

 

Additional

 

 

 

other

 

 

 

 

 

Total

 

 

 

preferred

 

preferred

 

Common

 

paid-in

 

Retained

 

comprehensive

 

Treasury

 

Noncontrolling

 

stockholders’

 

 

 

stock

 

stock

 

stock

 

capital

 

earnings

 

income

 

stock

 

interest

 

equity

 

 

 

(in millions)

 

Balances at January 1, 2012 (as adjusted)

 

$

 

$

0.1

 

$

4.5

 

$

9,634.7

 

$

4,323.4

 

$

271.4

 

$

(5,281.7

)

$

353.8

 

$

9,306.2

 

Common stock issued

 

 

 

 

9.1

 

 

 

 

 

9.1

 

Stock-based compensation and additional related tax benefits

 

 

 

 

25.8

 

(1.0

)

 

 

 

24.8

 

Treasury stock acquired, common

 

 

 

 

 

 

 

(64.2

)

 

(64.2

)

Dividends to common stockholders

 

 

 

 

 

(54.3

)

 

 

 

(54.3

)

Dividends to preferred stockholders

 

 

 

 

 

(8.2

)

 

 

 

(8.2

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

(3.2

)

(3.2

)

Contributions from noncontrolling interest

 

 

 

 

 

 

 

 

4.2

 

4.2

 

Net income (excludes $0.2 million attributable to redeemable noncontrolling interest)

 

 

 

 

 

212.1

 

 

 

9.0

 

221.1

 

Other comprehensive income (excludes $0.7 million attributable to redeemable noncontrolling interest)

 

 

 

 

 

 

224.4

 

 

0.1

 

224.5

 

Balances at March 31, 2012

 

$

 

$

0.1

 

$

4.5

 

$

9,669.6

 

$

4,472.0

 

$

495.8

 

$

(5,345.9

)

$

363.9

 

$

9,660.0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2013

 

$

 

$

0.1

 

$

4.5

 

$

9,730.9

 

$

4,862.0

 

$

640.3

 

$

(5,554.4

)

$

20.0

 

$

9,703.4

 

Common stock issued

 

 

 

0.1

 

20.2

 

 

 

 

 

20.3

 

Stock-based compensation and additional related tax benefits

 

 

 

 

20.4

 

(1.0

)

 

 

 

19.4

 

Treasury stock acquired, common

 

 

 

 

 

 

 

(90.9

)

 

(90.9

)

Dividends to common stockholders

 

 

 

 

 

(67.6

)

 

 

 

(67.6

)

Dividends to preferred stockholders

 

 

 

 

 

(8.2

)

 

 

 

(8.2

)

Distributions to noncontrolling interest

 

 

 

 

 

 

 

 

(3.6

)

(3.6

)

Contributions from noncontrolling interest

 

 

 

 

 

 

 

 

113.9

 

113.9

 

Purchase of subsidiary shares from noncontrolling interest

 

 

 

 

 

 

 

 

(30.6

)

(30.6

)

Net income (excludes $0.1 million attributable to redeemable noncontrolling interest)

 

 

 

 

 

186.5

 

 

 

3.4

 

189.9

 

Other comprehensive loss (excludes $(1.0) million attributable to redeemable noncontrolling interest)

 

 

 

 

 

 

(19.3

)

 

(0.1

)

(19.4

)

Balances at March 31, 2013

 

$

 

$

0.1

 

$

4.6

 

$

9,771.5

 

$

4,971.7

 

$

621.0

 

$

(5,645.3

)

$

103.0

 

$

9,826.6

 

 

See accompanying notes.

 

6



Table of Contents

 

Principal Financial Group, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

For the three months ended

 

 

 

March 31,

 

 

 

2013

 

2012

 

 

 

(in millions)

 

Operating activities

 

 

 

 

 

Net income

 

$

190.0

 

$

221.3

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Amortization of deferred acquisition costs

 

55.6

 

(129.3

)

Additions to deferred acquisition costs

 

(124.2

)

(99.6

)

Accrued investment income

 

(0.1

)

(7.3

)

Net cash flows for trading securities

 

(122.1

)

7.0

 

Premiums due and other receivables

 

8.7

 

97.3

 

Contractholder and policyholder liabilities and dividends

 

133.1

 

521.9

 

Current and deferred income taxes (benefits)

 

136.5

 

(32.6

)

Net realized capital losses

 

50.9

 

6.7

 

Depreciation and amortization expense

 

34.9

 

32.8

 

Mortgage loans held for sale, acquired or originated

 

 

(22.0

)

Mortgage loans held for sale, sold or repaid, net of gain

 

 

24.0

 

Real estate acquired through operating activities

 

(16.7

)

(2.9

)

Real estate sold through operating activities

 

10.2

 

1.2

 

Stock-based compensation

 

19.4

 

25.1

 

Other

 

219.7

 

258.1

 

Net adjustments

 

405.9

 

680.4

 

Net cash provided by operating activities

 

595.9

 

901.7

 

Investing activities

 

 

 

 

 

Available-for-sale securities:

 

 

 

 

 

Purchases

 

(2,447.1

)

(2,060.5

)

Sales

 

503.1

 

428.5

 

Maturities

 

1,790.9

 

1,612.1

 

Mortgage loans acquired or originated

 

(610.9

)

(919.6

)

Mortgage loans sold or repaid

 

555.8

 

361.4

 

Real estate acquired

 

(23.4

)

(21.3

)

Net (purchases) sales of property and equipment

 

6.7

 

(17.3

)

Purchase of interests in subsidiaries, net of cash acquired

 

(1,268.3

)

 

Net change in other investments

 

(32.2

)

(73.8

)

Net cash used in investing activities

 

(1,525.4

)

(690.5

)

Financing activities

 

 

 

 

 

Issuance of common stock

 

20.3

 

9.1

 

Acquisition of treasury stock

 

(90.9

)

(64.2

)

Proceeds from financing element derivatives

 

14.3

 

20.4

 

Payments for financing element derivatives

 

(12.7

)

(16.2

)

Excess tax benefits from share-based payment arrangements

 

3.8

 

9.9

 

Purchase of subsidiary shares from noncontrolling interest

 

(30.6

)

 

Dividends to common stockholders

 

(67.6

)

(54.3

)

Dividends to preferred stockholders

 

 

(8.2

)

Issuance of long-term debt

 

3.5

 

1.0

 

Principal repayments of long-term debt

 

(0.4

)

(0.8

)

Net repayments of short-term borrowings

 

 

(7.5

)

Investment contract deposits

 

1,419.7

 

1,618.6

 

Investment contract withdrawals

 

(2,852.0

)

(2,885.9

)

Net increase (decrease) in banking operation deposits

 

6.9

 

(13.4

)

Other

 

(0.8

)

(1.7

)

Net cash used in financing activities

 

(1,586.5

)

(1,393.2

)

Net decrease in cash and cash equivalents

 

(2,516.0

)

(1,182.0

)

Cash and cash equivalents at beginning of period

 

4,177.2

 

2,833.9

 

Cash and cash equivalents at end of period

 

$

1,661.2

 

$

1,651.9

 

 

See accompanying notes.

 

7



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

1. Nature of Operations and Significant Accounting Policies

 

Basis of Presentation

 

The accompanying unaudited consolidated financial statements of Principal Financial Group, Inc. (“PFG”), its majority-owned subsidiaries and its consolidated variable interest entities (“VIEs”), have been prepared in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2013, are not necessarily indicative of the results that may be expected for the year ended December 31, 2013. These interim unaudited consolidated financial statements should be read in conjunction with our annual audited financial statements as of December 31, 2012, included in our Form 10-K for the year ended December 31, 2012, filed with the United States Securities and Exchange Commission (“SEC”). The accompanying consolidated statement of financial position as of December 31, 2012, has been derived from the audited consolidated statement of financial position but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

 

Reclassifications have been made to prior period financial statements to conform to the March 31, 2013, presentation.

 

Revisions of Previously Issued Financial Statements

 

In conjunction with our first quarter 2013 acquisition of AFP Cuprum S.A. (“Cuprum”) in Chile, we re-evaluated the accounting treatment for similar products offered in other foreign jurisdictions, including the AFORE retirement accumulation business in Mexico. As a result of this re-evaluation, we have concluded that the AFORE product, which was previously accounted for under Accounting Standards Codification 944, Financial Services — Insurance, should be accounted for as a long-term service contract, consistent with the accounting requirements for our recently acquired retirement accumulation business in Chile. The revision to the accounting treatment for the AFORE product in Mexico will result in the following changes:

 

(a)                                 Fewer acquisition costs are capitalized. Specifically, we expense as incurred salary and related costs associated with the successful efforts of our proprietary sales force and sales support staff. All direct and incremental costs such as commissions will continue to be deferred.

 

(b)                                 Deferred costs are amortized on a straight line basis over the expected contract life rather than based on estimated gross profits. The amortization method change also impacts purchased customer intangible assets.

 

We have revised our prior period consolidated financial statements accordinglyThese revisions, inclusive of any other potential adjustments, are not material in any prior period based on an analysis of quantitative and qualitative factors in accordance with SEC Staff Accounting Bulletin 108, and, as a result, amendment of previously filed periodic reports is not required. Rather, these revisions will be made the next time we file the prior period consolidated financial statements.

 

The following tables quantify the prior period impact of this revision.

 

8



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Financial Position

 

 

 

December 31, 2012

 

December 31, 2011

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions)

 

Assets

 

 

 

 

 

 

 

 

 

Fixed maturities, available-for-sale

 

$

50,939.3

 

$

50,939.3

 

$

49,006.7

 

$

49,006.7

 

Fixed maturities, trading

 

626.7

 

626.7

 

971.7

 

971.7

 

Equity securities, available-for-sale

 

136.5

 

136.5

 

77.1

 

77.1

 

Equity securities, trading

 

252.8

 

252.8

 

404.8

 

404.8

 

Mortgage loans

 

11,519.7

 

11,519.7

 

10,727.2

 

10,727.2

 

Real estate

 

1,180.3

 

1,180.3

 

1,092.9

 

1,092.9

 

Policy loans

 

864.9

 

864.9

 

885.1

 

885.1

 

Other investments

 

3,291.1

 

3,291.1

 

2,985.8

 

2,985.8

 

Total investments

 

68,811.3

 

68,811.3

 

66,151.3

 

66,151.3

 

Cash and cash equivalents

 

4,177.2

 

4,177.2

 

2,833.9

 

2,833.9

 

Accrued investment income

 

584.4

 

584.4

 

615.2

 

615.2

 

Premiums due and other receivables

 

1,084.4

 

1,084.4

 

1,196.5

 

1,196.5

 

Deferred acquisition costs

 

2,673.8

 

2,590.0

 

2,428.0

 

2,358.1

 

Property and equipment

 

464.2

 

464.2

 

457.2

 

457.2

 

Goodwill

 

543.4

 

543.4

 

482.3

 

482.3

 

Other intangibles

 

927.2

 

914.7

 

890.6

 

870.3

 

Separate account assets

 

81,653.8

 

81,653.8

 

71,364.4

 

71,364.4

 

Other assets

 

1,006.8

 

1,006.8

 

942.3

 

942.3

 

Total assets

 

$

161,926.5

 

$

161,830.2

 

$

147,361.7

 

$

147,271.5

 

Liabilities

 

 

 

 

 

 

 

 

 

Contractholder funds

 

$

37,786.5

 

$

37,786.5

 

$

37,676.4

 

$

37,676.4

 

Future policy benefits and claims

 

22,436.2

 

22,436.2

 

20,210.4

 

20,210.4

 

Other policyholder funds

 

716.4

 

716.4

 

548.6

 

548.6

 

Short-term debt

 

40.8

 

40.8

 

105.2

 

105.2

 

Long-term debt

 

2,671.3

 

2,671.3

 

1,564.8

 

1,564.8

 

Income taxes currently payable

 

15.3

 

15.3

 

3.1

 

3.1

 

Deferred income taxes

 

626.5

 

600.0

 

208.7

 

184.0

 

Separate account liabilities

 

81,653.8

 

81,653.8

 

71,364.4

 

71,364.4

 

Other liabilities

 

6,146.1

 

6,146.1

 

6,286.2

 

6,286.2

 

Total liabilities

 

152,092.9

 

152,066.4

 

137,967.8

 

137,943.1

 

 

 

 

 

 

 

 

 

 

 

Redeemable noncontrolling interest

 

60.4

 

60.4

 

22.2

 

22.2

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

 

Series A preferred stock, par value

 

 

 

 

 

Series B preferred stock, par value

 

0.1

 

0.1

 

0.1

 

0.1

 

Common stock, par value

 

4.5

 

4.5

 

4.5

 

4.5

 

Additional paid-in capital

 

9,730.9

 

9,730.9

 

9,634.7

 

9,634.7

 

Retained earnings

 

4,940.2

 

4,862.0

 

4,402.3

 

4,323.4

 

Accumulated other comprehensive income

 

631.9

 

640.3

 

258.0

 

271.4

 

Treasury stock, at cost

 

(5,554.4

)

(5,554.4

)

(5,281.7

)

(5,281.7

)

Total stockholders’ equity attributable to Principal Financial Group, Inc.

 

9,753.2

 

9,683.4

 

9,017.9

 

8,952.4

 

Noncontrolling interest

 

20.0

 

20.0

 

353.8

 

353.8

 

Total stockholders’ equity

 

9,773.2

 

9,703.4

 

9,371.7

 

9,306.2

 

Total liabilities and stockholders’ equity

 

$

161,926.5

 

$

161,830.2

 

$

147,361.7

 

$

147,271.5

 

 

9



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Operations

 

 

 

For the year ended

 

For the year ended

 

 

 

December 31, 2012

 

December 31, 2011

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions, except per share data)

 

Revenues

 

 

 

 

 

 

 

 

 

Premiums and other considerations

 

$

3,219.4

 

$

3,219.4

 

$

2,891.0

 

$

2,891.0

 

Fees and other revenues

 

2,626.7

 

2,626.7

 

2,526.7

 

2,526.7

 

Net investment income

 

3,254.9

 

3,254.9

 

3,375.3

 

3,375.3

 

Net realized capital gains, excluding impairment losses on available-for-sale securities

 

232.7

 

232.7

 

75.0

 

75.0

 

Total other-than-temporary impairment losses on available-for- sale securities

 

(135.9

)

(135.9

)

(147.6

)

(147.6

)

Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to (from) other comprehensive income

 

17.3

 

17.3

 

(49.7

)

(49.7

)

Net impairment losses on available-for-sale securities

 

(118.6

)

(118.6

)

(197.3

)

(197.3

)

Net realized capital gains (losses)

 

114.1

 

114.1

 

(122.3

)

(122.3

)

Total revenues

 

9,215.1

 

9,215.1

 

8,670.7

 

8,670.7

 

Expenses

 

 

 

 

 

 

 

 

 

Benefits, claims and settlement expenses

 

5,123.9

 

5,123.9

 

4,616.6

 

4,616.6

 

Dividends to policyholders

 

197.7

 

197.7

 

210.2

 

210.2

 

Operating expenses

 

2,934.1

 

2,933.5

 

2,950.8

 

2,971.1

 

Total expenses

 

8,255.7

 

8,255.1

 

7,777.6

 

7,797.9

 

Income before income taxes

 

959.4

 

960.0

 

893.1

 

872.8

 

Income taxes

 

134.7

 

134.6

 

204.2

 

198.3

 

Net income

 

824.7

 

825.4

 

688.9

 

674.5

 

Net income attributable to noncontrolling interest

 

18.8

 

18.8

 

36.2

 

36.2

 

Net income attributable to Principal Financial Group, Inc.

 

805.9

 

806.6

 

652.7

 

638.3

 

Preferred stock dividends

 

33.0

 

33.0

 

33.0

 

33.0

 

Net income available to common stockholders

 

$

772.9

 

$

773.6

 

$

619.7

 

$

605.3

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

2.60

 

$

2.60

 

$

1.97

 

$

1.92

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

2.57

 

$

2.58

 

$

1.95

 

$

1.91

 

 

10



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Operations

 

 

 

For the six months ended

 

For the nine months ended

 

 

 

June 30, 2012

 

September 30, 2012

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions, except per share data)

 

Revenues

 

 

 

 

 

 

 

 

 

Premiums and other considerations

 

$

1,361.1

 

$

1,361.1

 

$

2,519.3

 

$

2,519.3

 

Fees and other revenues

 

1,234.1

 

1,234.1

 

1,909.1

 

1,909.1

 

Net investment income

 

1,625.8

 

1,625.8

 

2,409.6

 

2,409.6

 

Net realized capital gains, excluding impairment losses on available-for-sale securities

 

54.3

 

54.3

 

176.4

 

176.4

 

Total other-than-temporary impairment losses on available-for- sale securities

 

(82.8

)

(82.8

)

(126.4

)

(126.4

)

Other-than-temporary impairment losses on fixed maturities, available-for-sale reclassified to other comprehensive income

 

22.0

 

22.0

 

31.2

 

31.2

 

Net impairment losses on available-for-sale securities

 

(60.8

)

(60.8

)

(95.2

)

(95.2

)

Net realized capital gains (losses)

 

(6.5

)

(6.5

)

81.2

 

81.2

 

Total revenues

 

4,214.5

 

4,214.5

 

6,919.2

 

6,919.2

 

Expenses

 

 

 

 

 

 

 

 

 

Benefits, claims and settlement expenses

 

2,322.5

 

2,322.5

 

3,969.5

 

3,969.5

 

Dividends to policyholders

 

99.8

 

99.8

 

149.5

 

149.5

 

Operating expenses

 

1,280.1

 

1,284.7

 

2,106.7

 

2,101.1

 

Total expenses

 

3,702.4

 

3,707.0

 

6,225.7

 

6,220.1

 

Income before income taxes

 

512.1

 

507.5

 

693.5

 

699.1

 

Income taxes

 

109.1

 

107.6

 

99.2

 

100.4

 

Net income

 

403.0

 

399.9

 

594.3

 

598.7

 

Net income attributable to noncontrolling interest

 

11.9

 

11.9

 

15.3

 

15.3

 

Net income attributable to Principal Financial Group, Inc.

 

391.1

 

388.0

 

579.0

 

583.4

 

Preferred stock dividends

 

16.5

 

16.5

 

24.7

 

24.7

 

Net income available to common stockholders

 

$

374.6

 

$

371.5

 

$

554.3

 

$

558.7

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

1.25

 

$

1.24

 

$

1.86

 

$

1.87

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

1.24

 

$

1.22

 

$

1.84

 

$

1.85

 

 

11



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Operations

 

 

 

For the three months ended

 

For the three months ended

 

For the three months ended

 

For the three months ended

 

 

 

March 31, 2012

 

June 30, 2012

 

September 30, 2012

 

December 31, 2012

 

 

 

As originally

 

 

 

As originally

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions, except per share data)

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Premiums and other considerations

 

$

679.8

 

$

679.8

 

$

681.3

 

$

681.3

 

$

1,158.2

 

$

1,158.2

 

$

700.1

 

$

700.1

 

Fees and other revenues

 

598.0

 

598.0

 

636.1

 

636.1

 

675.0

 

675.0

 

717.6

 

717.6

 

Net investment income

 

824.8

 

824.8

 

801.0

 

801.0

 

783.8

 

783.8

 

845.3

 

845.3

 

Net realized capital gains, excluding impairment losses on available-for-sale securities

 

22.1

 

22.1

 

32.2

 

32.2

 

122.1

 

122.1

 

56.3

 

56.3

 

Total other-than-temporary impairment losses on available-for-sale securities

 

(33.7

)

(33.7

)

(49.1

)

(49.1

)

(43.6

)

(43.6

)

(9.5

)

(9.5

)

Other-than-temporary impairment losses on fixed maturities, available-for- sale reclassified to (from) other comprehensive income

 

4.9

 

4.9

 

17.1

 

17.1

 

9.2

 

9.2

 

(13.9

)

(13.9

)

Net impairment losses on available-for-sale securities

 

(28.8

)

(28.8

)

(32.0

)

(32.0

)

(34.4

)

(34.4

)

(23.4

)

(23.4

)

Net realized capital gains (losses)

 

(6.7

)

(6.7

)

0.2

 

0.2

 

87.7

 

87.7

 

32.9

 

32.9

 

Total revenues

 

2,095.9

 

2,095.9

 

2,118.6

 

2,118.6

 

2,704.7

 

2,704.7

 

2,295.9

 

2,295.9

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Benefits, claims and settlement expenses

 

1,212.5

 

1,212.5

 

1,110.0

 

1,110.0

 

1,647.0

 

1,647.0

 

1,154.4

 

1,154.4

 

Dividends to policyholders

 

50.3

 

50.3

 

49.5

 

49.5

 

49.7

 

49.7

 

48.2

 

48.2

 

Operating expenses

 

556.0

 

555.1

 

724.1

 

729.6

 

826.6

 

816.4

 

827.4

 

832.4

 

Total expenses

 

1,818.8

 

1,817.9

 

1,883.6

 

1,889.1

 

2,523.3

 

2,513.1

 

2,030.0

 

2,035.0

 

Income before income taxes

 

277.1

 

278.0

 

235.0

 

229.5

 

181.4

 

191.6

 

265.9

 

260.9

 

Income taxes (benefits)

 

58.2

 

56.7

 

50.9

 

50.9

 

(9.9

)

(7.2

)

35.5

 

34.2

 

Net income

 

218.9

 

221.3

 

184.1

 

178.6

 

191.3

 

198.8

 

230.4

 

226.7

 

Net income attributable to noncontrolling interest

 

9.2

 

9.2

 

2.7

 

2.7

 

3.4

 

3.4

 

3.5

 

3.5

 

Net income attributable to Principal Financial Group, Inc.

 

209.7

 

212.1

 

181.4

 

175.9

 

187.9

 

195.4

 

226.9

 

223.2

 

Preferred stock dividends

 

8.2

 

8.2

 

8.3

 

8.3

 

8.2

 

8.2

 

8.3

 

8.3

 

Net income available to common stockholders

 

$

201.5

 

$

203.9

 

$

173.1

 

$

167.6

 

$

179.7

 

$

187.2

 

$

218.6

 

$

214.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings per common share

 

$

0.67

 

$

0.68

 

$

0.58

 

$

0.56

 

$

0.61

 

$

0.64

 

$

0.74

 

$

0.72

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted earnings per common share

 

$

0.66

 

$

0.68

 

$

0.58

 

$

0.56

 

$

0.60

 

$

0.63

 

$

0.74

 

$

0.72

 

 

12



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Comprehensive Income

 

 

 

For the year ended

 

For the year ended

 

 

 

December 31, 2012

 

December 31, 2011

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions)

 

Net income

 

$

824.7

 

$

825.4

 

$

688.9

 

$

674.5

 

Other comprehensive income (loss), net:

 

 

 

 

 

 

 

 

 

Net unrealized gains on available-for-sale securities

 

557.6

 

557.6

 

208.6

 

208.6

 

Noncredit component of impairment losses on fixed maturities, available-for-sale

 

(6.7

)

(6.7

)

31.0

 

31.0

 

Net unrealized gains (losses) on derivative instruments

 

(43.6

)

(43.6

)

23.6

 

23.6

 

Foreign currency translation adjustment

 

(4.8

)

(9.8

)

(139.5

)

(130.9

)

Net unrecognized postretirement benefit obligation

 

(127.4

)

(127.4

)

(172.9

)

(172.9

)

Other comprehensive income (loss)

 

375.1

 

370.1

 

(49.2

)

(40.6

)

Comprehensive income

 

1,199.8

 

1,195.5

 

639.7

 

633.9

 

Comprehensive income attributable to noncontrolling interest

 

20.0

 

20.0

 

35.7

 

35.7

 

Comprehensive income attributable to Principal Financial Group, Inc.

 

$

1,179.8

 

$

1,175.5

 

$

604.0

 

$

598.2

 

 

Principal Financial Group, Inc.

Consolidated Statements of Comprehensive Income

 

 

 

For the six months ended

 

For the nine months ended

 

 

 

June 30, 2012

 

September 30, 2012

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions)

 

Net income

 

$

403.0

 

$

399.9

 

$

594.3

 

$

598.7

 

Other comprehensive income, net:

 

 

 

 

 

 

 

 

 

Net unrealized gains on available-for-sale securities

 

262.0

 

262.0

 

558.0

 

558.0

 

Noncredit component of impairment losses on fixed maturities, available-for-sale

 

(10.8

)

(10.8

)

(14.8

)

(14.8

)

Net unrealized gains on derivative instruments

 

45.4

 

45.4

 

27.2

 

27.2

 

Foreign currency translation adjustment

 

(21.4

)

(23.9

)

27.2

 

21.5

 

Net unrecognized postretirement benefit obligation

 

17.5

 

17.5

 

26.2

 

26.2

 

Other comprehensive income

 

292.7

 

290.2

 

623.8

 

618.1

 

Comprehensive income

 

695.7

 

690.1

 

1,218.1

 

1,216.8

 

Comprehensive income attributable to noncontrolling interest

 

12.1

 

12.1

 

16.3

 

16.3

 

Comprehensive income attributable to Principal Financial Group, Inc.

 

$

683.6

 

$

678.0

 

$

1,201.8

 

$

1,200.5

 

 

13



Table of Contents

 

Principal Financial Group, Inc.
Notes to Consolidated Financial Statements

March 31, 2013
(Unaudited)

 

Principal Financial Group, Inc.

Consolidated Statements of Comprehensive Income

 

 

 

For the three months ended

 

For the three months ended

 

For the three months ended

 

For the three months ended

 

 

 

March 31, 2012

 

June 30, 2012

 

September 30, 2012

 

December 31, 2012

 

 

 

As originally

 

 

 

As originally

 

 

 

As originally

 

 

 

As originally

 

 

 

 

 

reported

 

As adjusted

 

reported

 

As adjusted

 

reported

 

As adjusted

 

reported

 

As adjusted

 

 

 

(in millions)

 

Net income

 

$

218.9

 

$

221.3

 

$

184.1

 

$

178.6

 

$

191.3

 

$

198.8

 

$

230.4

 

$

226.7

 

Other comprehensive income (loss) net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net unrealized gains (losses) on available-for-sale securities

 

161.3

 

161.3

 

100.7

 

100.7

 

296.0

 

296.0

 

(0.4

)

(0.4

)

Noncredit component of impairment losses on fixed maturities, available-for-sale

 

(0.9

)

(0.9

)

(9.9

)

(9.9

)

(4.0

)

(4.0

)

8.1

 

8.1

 

Net unrealized gains (losses) on derivative instruments

 

(3.5

)

(3.5

)

48.9

 

48.9

 

(18.2

)

(18.2

)

(70.8

)

(70.8

)

Foreign currency translation adjustment

 

65.3

 

59.6

 

(86.7

)

(83.5

)

48.6

 

45.4

 

(32.0

)

(31.3

)

Net unrecognized postretirement benefit obligation

 

8.7

 

8.7

 

8.8

 

8.8

 

8.7

 

8.7

 

(153.6

)

(153.6

)

Other comprehensive income (loss)

 

230.9

 

225.2

 

61.8

 

65.0

 

331.1

 

327.9

 

(248.7

)

(248.0

)

Comprehensive income (loss)