DES MOINES, Iowa, Sep 30, 2010 (BUSINESS WIRE) --
Principal Financial Group, Inc. (NYSE: PFG) today announced the company will exit the medical insurance business (insured and self-insured) and has entered into an agreement with UnitedHealthcare, a UnitedHealth Group Company (NYSE: UNH), to renew medical insurance coverage for customers of The Principal(R) as the business transitions within the next 36 months. The decision does not impact other businesses including retirement, asset management, life insurance, wellness, disability, dental and vision.
Larry D. Zimpleman, chairman, president and chief executive officer, said, "While a difficult decision, this is the right strategic decision for The Principal. While performing well financially, our medical business has been declining in relative size for a number of years, thanks to strong growth from our retirement and asset management businesses. The medical business continues to be one that undergoes rapid change, which would mean investing additional capital into the business to be able to offer competitive products. For us, that just does not make sense."
According to Dan Houston, president - Retirement, Insurance & Financial Services, "UnitedHealthcare provides a broad range of coverage options to meet customers' needs. By working with UnitedHealthcare, a proven leader and long-term player in the business with an extensive local and national network, we will ensure a smooth transition for customers and brokers."
Sales will cease and the renewal process with UnitedHealthcare will begin immediately to be completed within 36 months, subject to applicable requirements of federal and state law. Employees will be needed throughout that period to continue to serve customers during the transition. As the business transfers, positions will be eliminated. As much as possible the company will place qualified employees in open positions that become available through attrition and growth in other businesses, Houston said. There are approximately 1,500 employees in the medical insurance area. Initially, approximately 150 (of the 1,500) positions will be impacted as some functions cease more quickly. Impacted employees will be considered for other positions and will be given severance and outplacement assistance if they are unable to find a position within the company.
"By making this decision, we are positioned to focus our capital and our resources on the strategic opportunities in the asset accumulation and asset management businesses, both domestically and internationally," Zimpleman said. "And it allows us to continue the growth in our risk businesses, which is important to our overall diversification as well as maintaining our leadership among small- and medium-sized businesses."
The Principal estimates this action will negatively impact third quarter 2010 EPS operating results by $0.03-$0.04 and full-year 2010 EPS operating results by $0.18-$0.20 due to the exclusion of the business from operating earnings. However, the company expects to release between $100 million and $120 million of capital (which primarily reflects the capital allocated to the medical insurance business less a reduction in the diversification benefit that will result from the exit of this business) over the next 36 months as a result of this change.
About the Principal Financial Group
The Principal Financial Group 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 banking through its diverse family of financial services companies. A member of the Fortune 500, the Principal Financial Group has $284.7 billion in assets under management2and serves some 18.9 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.