AM Best Affirms Credit Ratings of Principal Financial Group, Inc. and Its Subsidiaries

Rhea-AI Summary

AM Best has affirmed the Financial Strength Rating of A+ and the Long-Term Issuer Credit Ratings of 'aa' for Principal Life Insurance Company and Principal National Life Insurance Company, the life insurance arms of Principal Financial Group, Inc. (PFG). The ratings reflect Principal's very strong balance sheet strength and strong operating performance. While risk-adjusted capitalization is strong, it is somewhat constrained by dividends to the parent company. Growth in international markets is noted, though political risks may affect future performance.

Positive

• Affirmed A+ Financial Strength Rating reflects very strong balance sheet strength.
• Strong operating performance and favorable growth trends reported.
• Positive impact expected from divestitures on risk-adjusted capitalization.

Negative

• Risk-adjusted capitalization growth constrained by dividends to the parent company.
• Political and macroeconomic risks in international markets could negatively affect performance.

OLDWICK, N.J.--(BUSINESS WIRE)-- AM Best has affirmed the Financial Strength Rating of A+ (Superior) and the Long-Term Issuer Credit Ratings (Long-Term ICR) of “aa” (Superior) of Principal Life Insurance Company and Principal National Life Insurance Company. Both are life insurance operating companies of Principal Financial Group, Inc. (PFG) [NASDAQ: PFG] and collectively are referred to as Principal. Concurrently, AM Best has affirmed the Long-Term ICRs of “a” (Excellent) of Principal Financial Services, Inc. and PFG, as well as the group’s Long-Term Issue Credit Ratings (Long-Term IR). The outlook of these Credit Ratings (ratings) is stable. AM Best also has affirmed the group’s Short-Term Issue Credit Rating (Short-Term IR). (Please see below for a detailed listing of the Long- and Short-Term IRs.) All companies are headquartered in Des Moines, IA.

The ratings reflect Principal’s balance sheet strength, which AM Best assesses as very strong, as well as its strong operating performance, favorable business profile and very strong enterprise risk management.

AM Best views Principal’s risk-adjusted capitalization as very strong, as measured by Best’s Capital Adequacy Ratio (BCAR), although growth in capital has been constrained by dividends to the parent company. The balance sheet strength assessment also benefits from favorable financial flexibility and liquidity profiles, as well as a high quality investment portfolio. This is partially offset by Principal’s higher allocations to commercial mortgages in comparison with the group’s peers and usage of its captive reinsurers.

AM Best expects the divestitures of the retail fixed annuity and universal life insurance with secondary guarantee (ULSG) blocks, announced in January 2022 and expected to close in the second quarter of 2022, to have a neutral to positive impact on the company’s risk-adjusted capitalization levels in the intermediate term.

The company continues to report favorable growth trends and profitability metrics, benefiting from its diverse lines of business, distribution channels and leading market positions. An increasing presence internationally provides additional earnings diversity. However, AM Best notes that political and macroeconomic risks in Principal’s key international markets could have negative effects on the holding company going forward.

Principal has demonstrated strong risk management capabilities through continued enhancements to its risk modeling and stress-testing capabilities to support the overall business strategy, driving major business decisions, and continuing to increase coordination between the business units and centralized risk management functions.

The following Long-Term IRs have been affirmed with stable outlook:

Principal Financial Group, Inc –
-- “a” (Excellent) on $300 million 3.30% senior unsecured notes, due 2022
-- “a” (Excellent) on $300 million 3.125% senior unsecured notes, due 2023
-- “a” (Excellent) on $400 million 3.40% senior unsecured notes, due 2025
-- “a” (Excellent) on $350 million 3.10% senior unsecured notes, due 2026
-- “a” (Excellent) on $500 million 3.70% senior unsecured notes, due 2029
-- “a” (Excellent) on $600 million 2.125% senior secured notes, due 2030
-- “a” (Excellent) on $505.6 million 6.05% senior unsecured notes, due 2036
-- “a” (Excellent) on $300 million 4.625% senior unsecured notes, due 2042
-- “a” (Excellent) on $300 million 4.35% senior unsecured notes, due 2043
-- “a” (Excellent) on $300 million 4.30% senior unsecured notes, due 2046
-- “a-” (Excellent) on $400 million 4.70% junior subordinated notes, due 2055

Principal Life Global Funding I—“aa” (Superior) on program rating
-- “aa” (Superior) on all outstanding notes issued under the program

Principal Life Global Funding II—“aa” (Superior) on program rating
-- “aa” (Superior) on all outstanding notes issued under the program

Principal Financial Global Funding, LLC—“aa” (Superior) on program rating
-- “aa” (Superior) on all outstanding notes issued under the program

Principal Financial Global Funding II LLC—“aa” (Superior) on program rating

Principal Life Income Funding Trusts—“aa” (Superior) on program rating

The following Short-Term IR has been affirmed:

Principal Life Insurance Company—
-- AMB-1+ (Strongest) commercial paper rating

The following indicative Long-Term IRs on securities available under universal shelf registration have been affirmed with stable outlooks:

Principal Financial Group, Inc.—
-- “a” (Excellent) on senior unsecured debt
-- “a-”(Excellent) on subordinated debt
-- “bbb+”(Good) on preferred stock

Principal Capital I, II and III—
-- “aa” (Superior) on preferred securities

This press release relates to Credit Ratings that have been published on AM Best’s website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see AM Best’s Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Guide to Best's Credit Ratings. For information on the proper use of Best’s Credit Ratings, Best’s Performance Assessments, Best’s Preliminary Credit Assessments and AM Best press releases, please view Guide to Proper Use of Best’s Ratings & Assessments.

AM Best is a global credit rating agency, news publisher and data analytics provider specializing in the insurance industry. Headquartered in the United States, the company does business in over 100 countries with regional offices in London, Amsterdam, Dubai, Hong Kong, Singapore and Mexico City. For more information, visit www.ambest.com.

Copyright © 2022 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220302005958/en/

Louis Silvers

Senior Financial Analyst

+1 908 439 2200, ext. 5802

louis.silvers@ambest.com

Christopher Sharkey

Manager, Public Relations

+1 908 439 2200, ext. 5159

christopher.sharkey@ambest.com

Jacqalene Lentz

Director

+1 908 439 2200, ext. 5762

jacqalene.lentz@ambest.com

Jim Peavy

Director, Communications

+1 908 439 2200, ext. 5644

james.peavy@ambest.com

Source: AM Best

FAQ

What is the latest rating for Principal Financial Group (PFG)?

AM Best has affirmed an A+ Financial Strength Rating and 'aa' Long-Term Issuer Credit Ratings for Principal Financial Group (PFG).

What does the A+ rating from AM Best signify for PFG?

The A+ rating signifies a superior financial strength and ability to meet obligations.

Are there any risks reported for Principal Financial Group (PFG)?

Yes, political and macroeconomic risks in international markets could negatively impact PFG's performance.

How will the divestitures affect PFG's financial standing?

The divestitures are expected to have a neutral to positive impact on PFG's risk-adjusted capitalization.