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+ (Superior) and Long-Term Issuer Credit Ratings of 'aa' (Superior) for Principal Life Insurance Company and Principal National Life Insurance Company, both operating under Principal Financial Group, Inc. (PFG). The ratings reflect Principal's very strong balance sheet, strong operating performance, and robust risk management. Risk-adjusted capitalization is rated very strong, though limited capital growth due to parent company dividends is noted. The outlook remains stable despite potential political and macroeconomic risks in international markets.

Positive

• Affirmed Financial Strength Rating of A+ (Superior) and Long-Term ICR of 'aa' (Superior).
• Very strong balance sheet strength and strong operating performance.
• Diverse lines of business and favorable growth trends reported.

Negative

• Limited capital growth due to dividends to the parent company.
• Higher allocations to commercial mortgages compared to peers may present risk.
• Political and macroeconomic risks in international markets could negatively affect the holding company.

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 capital growth has been limited by dividends to the parent company. The company has lowered its product risk with divestitures in 2022 of retail fixed annuity and universal life insurance with secondary guarantee (ULSG) blocks. The balance sheet strength assessment also benefits from historically favorable financial flexibility, liquidity profiles and access to capital markets at the holding company level. AM Best’s view of the company’s capital is somewhat tempered by Principal’s higher allocations to commercial mortgages in comparison with the group’s peers and usage of its captive reinsurers.

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 its overall business strategy, which have driven recent major business decisions. AM Best will continue to monitor how risk management practices impact Principal’s asset to liability profile amid this changing interest rate environment.

The following Long-Term IRs have been assigned with stable outlooks:

Principal Financial Group, Inc.—
— “a” (Excellent) on $300 million 5.5% senior unsecured notes, due March 15, 2053
— “a” (Excellent) on $400 million 5.375% senior unsecured notes, due March 15, 2033

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

Principal Financial Group, Inc –
— “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

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 a stable outlook:

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 © 2023 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/20230316005504/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

Al Slavin

Senior Public Relations Specialist

+1 908 439 2200, ext. 5098

al.slavin@ambest.com

Source: AM Best

FAQ

What did AM Best affirm for Principal Financial Group, Inc. (PFG) in 2023?

AM Best affirmed the Financial Strength Rating of A+ (Superior) and Long-Term Issuer Credit Ratings of 'aa' (Superior) for Principal Life Insurance Company and Principal National Life Insurance Company.

What are the key ratings for Principal Financial Group, Inc. (PFG)?

The key ratings for PFG include A+ (Superior) for Financial Strength and 'aa' (Superior) for Long-Term Issuer Credit Ratings.

What are the outlooks for Principal Financial Group's ratings?

The outlook for all affirmed ratings for Principal Financial Group, Inc. is stable.

What are the risks noted by AM Best for Principal Financial Group, Inc. (PFG)?

AM Best noted potential political and macroeconomic risks in Principal’s key international markets as possible negatives.