Stiff Tax Chops Profits For Principal Financial But Company’s Premiums, Assets Climb To Record High

The Principal Financial Group said Wednesday its premiums and assets reached new highs but that an unusually stiff tax on mutual companies caused profits to drop 28 percent in 1994.

The Des Moines-based insurance company also said its nationwide employment climbed by 2,000, up to 16,275 in 1994, including the addition of 1,013 workers in Iowa, bringing the state total to 9,384.

“The story between 1993 and 1994 was that there was a large, one-time tax impact last year,” said chairman and CEO Dave Drury. “As a result, our after-tax income was down $80 million.”

He said the tax on mutual companies is based on a formula that worked to the disadvantage of mutuals last year.

The group’s largest member, the Principal Life Insurance Co., announced gains from operations of $184 million in 1994, which was $80 million less than the year before. Net income of $152 million was 28 percent below a year ago.

The life insurance company reported total assets of $44.1 billion, up from $40.1 billion a year ago, including assets of Hamilton Investments of Chicago, which the company bought last August.

The company is the 10th largest in the nation in terms of assets. Principal announced in January that it will open a pension office this year in Spokane.

Principal also reported a surplus of investment reserves, called the customer safety margin, of $2.7 billion, an 18 percent increase over year-earlier levels. The ratio of customer safety margin to general account assets is 7.8 percent.

In addition, the company said that at the end of the year, 99.7 percent of its bond investments were making timely payments, as were 98.5 percent of commercial real estate loans.

Premium income was $12.7 billion, nearly four times the $3.3 billion in 1984, the company said.