13. Stockholders' Equity

Common Stock Dividends


	For the year ended December 31,
	2018		2017		2016
Dividends declared per common share	$	2.10	$	1.87	$	1.61

Reconciliation of Outstanding Common Shares


	For the year ended December 31,
	2018	2017	2016
	(in millions)
Beginning balance	289.0	287.7	291.4
Shares issued	2.6	4.9	3.0
Treasury stock acquired	(12.1)	(3.6)	(6.7)
Ending balance	279.5	289.0	287.7

In October 2015, our Board of Directors authorized a share repurchase program of up to $150.0 million of our outstanding common stock, which was completed in March 2016. In February 2016, our Board of Directors authorized a share repurchase program of up to $400.0 million of our outstanding common stock, which was completed in February 2018. In May 2017, our Board of Directors authorized a share repurchase program of up to $250.0 million of our outstanding common stock, which was completed in April 2018. In May 2018, our Board of Directors authorized a share repurchase program of up to $300.0 million of our outstanding common stock, which was completed in December 2018. In November 2018, our Board of Directors authorized a share repurchase program of up to $500.0 million of our outstanding common stock, which has no expiration. Shares repurchased under these programs are accounted for as treasury stock, carried at cost and reflected as a reduction to stockholders’ equity.

Other Comprehensive Income (Loss)


	For the year ended December 31, 2018
	Pre-Tax		Tax		After-Tax
	(in millions)

Net unrealized losses on available-for-sale securities during the period	$	(2,517.5)	$	515.4	$	(2,002.1)
Reclassification adjustment for losses included in net income (1)		56.4		(5.3)		51.1
Adjustments for assumed changes in amortization patterns		185.9		(39.1)		146.8
Adjustments for assumed changes in policyholder liabilities		346.9		(72.3)		274.6
Net unrealized losses on available-for-sale securities		(1,928.3)		398.7		(1,529.6)

Noncredit component of impairment losses on fixed maturities, available-for-sale during the period		39.7		(8.4)		31.3
Adjustments for assumed changes in amortization patterns		(5.3)		1.1		(4.2)
Adjustments for assumed changes in policyholder liabilities		(0.8)		0.1		(0.7)
Noncredit component of impairment losses on fixed maturities, available-for-sale (2)		33.6		(7.2)		26.4

Net unrealized gains on derivative instruments during the period		50.4		(3.4)		47.0
Reclassification adjustment for gains included in net income (3)		(40.1)		4.2		(35.9)
Adjustments for assumed changes in amortization patterns		0.3		(0.1)		0.2
Adjustments for assumed changes in policyholder liabilities		5.7		(1.0)		4.7
Net unrealized gains on derivative instruments		16.3		(0.3)		16.0

Foreign currency translation adjustment		(303.9)		16.3		(287.6)

Unrecognized postretirement benefit obligation during the period		(125.3)		29.4		(95.9)
Amortization of amounts included in net periodic benefit cost (5)		49.0		(14.0)		35.0
Net unrecognized postretirement benefit obligation		(76.3)		15.4		(60.9)

Other comprehensive loss	$	(2,258.6)	$	422.9	$	(1,835.7)


	For the year ended December 31, 2017
	Pre-Tax		Tax		After-Tax
	(in millions)
Net unrealized gains on available-for-sale securities during the period	$	1,074.2	$	(341.6)	$	732.6
Reclassification adjustment for losses included in net income (1)		67.8		(23.5)		44.3
Adjustments for assumed changes in amortization patterns		(26.2)		9.3		(16.9)
Adjustments for assumed changes in policyholder liabilities		(184.6)		64.1		(120.5)
Net unrealized gains on available-for-sale securities		931.2		(291.7)		639.5

Noncredit component of impairment losses on fixed maturities, available-for-sale during the period		53.1		(17.0)		36.1
Adjustments for assumed changes in amortization patterns		(6.4)		2.3		(4.1)
Adjustments for assumed changes in policyholder liabilities		(1.3)		0.5		(0.8)
Noncredit component of impairment losses on fixed maturities, available-for-sale (2)		45.4		(14.2)		31.2

Net unrealized losses on derivative instruments during the period		(46.7)		16.0		(30.7)
Reclassification adjustment for gains included in net income (3)		(31.6)		10.8		(20.8)
Adjustments for assumed changes in amortization patterns		3.9		(1.3)		2.6
Adjustments for assumed changes in policyholder liabilities		9.6		(3.3)		6.3
Net unrealized losses on derivative instruments		(64.8)		22.2		(42.6)

Foreign currency translation adjustment during the period		171.6		4.7		176.3
Reclassification adjustment for losses included in net income (4)		2.6		—		2.6
Foreign currency translation adjustment		174.2		4.7		178.9

Unrecognized postretirement benefit obligation during the period		24.0		(3.8)		20.2
Amortization of amounts included in net periodic benefit cost (5)		31.1		(14.0)		17.1
Net unrecognized postretirement benefit obligation		55.1		(17.8)		37.3

Other comprehensive income	$	1,141.1	$	(296.8)	$	844.3


	For the year ended December 31, 2016
	Pre-Tax		Tax		After-Tax
	(in millions)
Net unrealized gains on available-for-sale securities during the period	$	254.6	$	(78.1)	$	176.5
Reclassification adjustment for losses included in net income (1)		67.9		(23.5)		44.4
Adjustments for assumed changes in amortization patterns		5.6		(2.0)		3.6
Adjustments for assumed changes in policyholder liabilities		(177.2)		51.8		(125.4)
Net unrealized gains on available-for-sale securities		150.9		(51.8)		99.1

Noncredit component of impairment losses on fixed maturities, available-for-sale during the period		(0.3)		(1.5)		(1.8)
Adjustments for assumed changes in amortization patterns		(3.4)		1.2		(2.2)
Adjustments for assumed changes in policyholder liabilities		0.8		(0.3)		0.5
Noncredit component of impairment losses on fixed maturities, available-for-sale (2)		(2.9)		(0.6)		(3.5)

Net unrealized gains on derivative instruments during the period		32.6		(7.6)		25.0
Reclassification adjustment for gains included in net income (3)		(27.7)		5.4		(22.3)
Adjustments for assumed changes in amortization patterns		2.9		(1.0)		1.9
Adjustments for assumed changes in policyholder liabilities		16.9		(6.0)		10.9
Net unrealized gains on derivative instruments		24.7		(9.2)		15.5

Foreign currency translation adjustment		75.6		(7.5)		68.1

Unrecognized postretirement benefit obligation during the period		20.2		(6.8)		13.4
Amortization of amounts included in net periodic benefit cost (5)		49.1		(20.7)		28.4
Net unrecognized postretirement benefit obligation		69.3		(27.5)		41.8

Other comprehensive income	$	317.6	$	(96.6)	$	221.0

(1)

Pre-tax reclassification adjustments relating to available-for-sale securities are reported in net realized capital gains (losses) on the consolidated statements of operations.

(2)

Represents the net impact of (1) unrealized gains resulting from reclassification of previously recognized noncredit impairment losses from OCI to net realized capital gains (losses) for fixed maturities with bifurcated OTTI that had additional credit losses or fixed maturities that previously had bifurcated OTTI that have now been sold or are intended to be sold and (2) unrealized losses resulting from reclassification of noncredit impairment losses for fixed maturities with bifurcated OTTI from net realized capital gains (losses) to OCI.

(3)

See Note 5, Derivative Financial Instruments – Cash Flow Hedges, for further details.

(4)

Pre-tax reclassification adjustments relating to deconsolidated sponsored investment funds are reported in net realized capital gains (losses) on the consolidated statements of operations. $2.0 million of this reclassification relates to noncontrolling interest and is reported in net income attributable to noncontrolling interest on the consolidated statements of operations.

(5)

Amount is comprised of amortization of prior service cost (benefit) and recognized net actuarial (gain) loss, which is reported in operating expenses on the consolidated statements of operations. See Note 11, Employee and Agent Benefits – Components of Net Periodic Benefit Cost, for further details.

Accumulated Other Comprehensive Income (Loss)


			Noncredit
	Net unrealized		component of		Net unrealized		Foreign		Unrecognized		Accumulated
	gains on		impairment losses		gains		currency		postretirement		other
	available-for-sale		on fixed maturities		on derivative		translation		benefit		comprehensive
	securities		available-for-sale		instruments		adjustment		obligation		income (loss)
	(in millions)
Balances as of January 1, 2016	$	732.1	$	(86.0)	$	69.8	$	(1,148.2)	$	(450.2)	$	(882.5)
Other comprehensive income during the period, net of adjustments		54.7		(3.5)		37.8		63.7		13.4		166.1
Amounts reclassified from AOCI		44.4		—		(22.3)		—		28.4		50.5
Other comprehensive income		99.1		(3.5)		15.5		63.7		41.8		216.6
Purchase of subsidiary shares from noncontrolling interest		—		—		—		(9.3)		—		(9.3)
Balances as of December 31, 2016		831.2		(89.5)		85.3		(1,093.8)		(408.4)		(675.2)
Other comprehensive income during the period, net of adjustments		595.2		—		(21.8)		174.7		20.2		768.3
Amounts reclassified from AOCI		44.3		31.2		(20.8)		0.6		17.1		72.4
Other comprehensive income		639.5		31.2		(42.6)		175.3		37.3		840.7
Balances as of December 31, 2017		1,470.7		(58.3)		42.7		(918.5)		(371.1)		165.5
Other comprehensive loss during the period, net of adjustments		(1,580.6)		—		51.9		(283.2)		(95.9)		(1,907.8)
Amounts reclassified from AOCI		51.1		26.4		(35.9)		—		35.0		76.6
Other comprehensive loss		(1,529.5)		26.4		16.0		(283.2)		(60.9)		(1,831.2)
Purchase of subsidiary shares from noncontrolling interest		—		—		—		(1.6)		—		(1.6)
Effects of implementation of accounting change related to equity investments, net		(1.0)		—		—		—		—		(1.0)
Effects of implementation of accounting change accounting change related to revenue recognition, net		—		—		—		25.6		—		25.6
Effects of implementation of accounting change related to the reclassification of certain tax effects, net		249.8		(15.2)		5.7		(81.8)		(80.9)		77.6
Balances as of December 31, 2018	$	190.0	$	(47.1)	$	64.4	$	(1,259.5)	$	(512.9)	$	(1,565.1)

Noncontrolling Interest

Interests held by unaffiliated parties in consolidated entities are reflected in noncontrolling interest, which represents the noncontrolling partners’ share of the underlying net assets of our consolidated subsidiaries. Noncontrolling interest that is not redeemable is reported in the equity section of the consolidated statements of financial position.

The noncontrolling interest holders in certain of our consolidated entities maintain an equity interest that is redeemable at the option of the holder, which may be exercised on varying dates. Since redemption of the noncontrolling interest is outside of our control, this interest is excluded from stockholders’ equity and reported separately as redeemable noncontrolling interest on the consolidated statements of financial position. Our redeemable noncontrolling interest primarily relates to consolidated sponsored investment funds for which interests are redeemed at fair value from the net assets of the funds.

For our redeemable noncontrolling interest related to other consolidated subsidiaries, redemptions are required to be purchased at fair value or a value based on a formula that management intended to reasonably approximate fair value based on a fixed multiple of earnings over a measurement period. The carrying value of the redeemable noncontrolling interest is compared to the redemption value at each reporting period. Any adjustments to the carrying amount of the redeemable noncontrolling interest for changes in redemption value prior to exercise of the redemption option are determined after the attribution of net income or loss of the subsidiary and are recognized in the redemption value as they occur. Adjustments to the carrying value of redeemable noncontrolling interest result in adjustments to additional paid-in capital and/or retained earnings. Adjustments are recorded in retained earnings to the extent the redemption value of the redeemable noncontrolling interest exceeds its fair value and will impact the numerator in our earnings per share calculations. All other adjustments to the redeemable noncontrolling interest are recorded in additional paid-in capital.

Following is a reconciliation of the changes in the redeemable noncontrolling interest (in millions):


	For the year ended December 31,
	2018		2017		2016
	(in millions)
Beginning balance	$	101.3	$	97.5	$	85.7
Net income (loss) attributable to redeemable noncontrolling interest		(2.1)		7.0		16.8
Redeemable noncontrolling interest of newly consolidated entities (1)		—		—		179.5
Redeemable noncontrolling interest of deconsolidated entities (2)		(10.6)		(61.1)		(261.5)
Contributions from redeemable noncontrolling interest		355.0		94.1		135.1
Distributions to redeemable noncontrolling interest		(36.8)		(39.0)		(57.4)
Purchase of subsidiary shares from redeemable noncontrolling interest		(7.1)		(4.4)		(8.2)
Change in redemption value of redeemable noncontrolling interest		(7.0)		5.9		4.2
Stock-based compensation attributable to redeemable noncontrolling interest		0.1		—		—
Other comprehensive income (loss) attributable to redeemable noncontrolling interest		(1.6)		1.3		3.3
Ending balance	$	391.2	$	101.3	$	97.5

(1)

Effective January 1, 2016, certain sponsored investment funds were consolidated as a result of the implementation of new accounting guidance.

(2)

We deconsolidated certain sponsored investment funds as they no longer met the requirements for consolidation.

Dividend Limitations

The declaration and payment of our common stock dividends is subject to the discretion of our Board of Directors and will depend on our overall financial condition, results of operations, capital levels, cash requirements, future prospects, receipt of dividends from Principal Life (as described below), risk management considerations and other factors deemed relevant by the Board. No significant restrictions limit the payment of dividends by us, except those generally applicable to corporations incorporated in Delaware.

Under Iowa law, we may pay dividends only from the earned surplus arising from our business and must receive the prior approval of the Commissioner of Insurance of the State of Iowa (“the Commissioner”) to pay stockholder dividends or make any other distribution if such distribution would exceed certain statutory limitations. Iowa law gives the Commissioner discretion to disapprove requests for distributions in excess of these limitations. Extraordinary dividends include those made, together with dividends and other distributions, within the preceding twelve months that exceed the greater of (i) 10% of our statutory policyholder surplus as of the previous year-end or (ii) the statutory net gain from operations from the previous calendar year, not to exceed earned surplus. Based on this limitation and 2018 statutory results, Principal Life could pay approximately $1,085.7 million in ordinary stockholder dividends in 2019 without prior regulatory approval. However, because the dividend test is based on dividends previously paid over rolling 12-month periods, if paid before a specified date during 2019, some or all of such dividends may be extraordinary and require regulatory approval.

On May 1, 2017, Principal Life sold its ownership interest in Principal Global Investors, LLC to Principal Life's direct parent, Principal Financial Services, Inc. in connection with a corporate reorganization designed to better utilize and allocate capital internally. Subsequent to the sale, Principal Life paid an extraordinary dividend of $1,068.4 million to its parent, which was approved by the Commissioner, primarily from proceeds received from the sale.