Principal Agrees To Sell 68-Year-Old Mortgage Unit

Although Principal Residential is still profitable, and Principal bills itself as a company that started out in 1936 "making farm and ranch loans on horseback," an industrywide slump in mortgage lending has cut the mortgage unit's revenue. Principal says it now wants to focus on selling retirement plans and employee benefits to small and midsize companies.

Principal hopes to invest $710 million in after-tax net proceeds from the deal in "strategic acquisitions" as well as in expansion of its remaining operations, the company says.

"Principal Residential Mortgage has been an important part of our history, and we greatly value the contributions made by the people and the business," says Principal Chairman J. Barry Griswell. "While this was not an easy decision to make, we are now better-positioned to focus our resources on our core growth businesses, and to achieve our longer-term financial objectives."

Carl Levinson, chairman of Citigroup's CitiMortgage Inc. unit, says the Principal Residential deal will help his company reach its goal of expanding its mortgage loan servicing portfolio and customer base.